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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT, made this 8th day of December, 1997, by and
among ▇▇▇▇ BROS. TRANSPORTATION INC., a Delaware corporation ("▇▇▇▇"), W.T.
ACQUISITION CORP., an Alabama corporation (the "▇▇▇▇ Sub"), ▇▇▇▇▇▇▇ TRANSPORT,
INC., an Alabama corporation (the "Acquired Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇ (together, the "Shareholders");
W I T N E S S E T H:
WHEREAS, the Shareholders own all of the outstanding capital stock of
the Acquired Company; and
WHEREAS, the parties hereto desire to enter into this Acquisition
Agreement pursuant to which ▇▇▇▇ will acquire all of the issued and outstanding
shares of capital stock of the Acquired Company pursuant to a merger of the
Acquired Company with and into ▇▇▇▇ Sub, a wholly owned subsidiary of ▇▇▇▇, upon
the terms and subject to the conditions set forth herein;
WHEREAS, upon the effective date of the merger of the Acquired Company
with and into ▇▇▇▇ Sub, all of the shares of common stock of the Acquired
Company issued and outstanding immediately prior thereto will be exchanged for
shares of common stock of ▇▇▇▇ and certain cash consideration described below;
and
WHEREAS, the parties contemplate that the transactions herein shall
constitute a reorganization within the meanings of Sections 368(a)(1)(A) and
(a)(2)(D) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, agreements, representations, warranties and covenants hereinafter set
forth, and the sum of ten dollars and other good and valuable consideration, the
receipt and sufficiency of which is hereby specifically agreed to and
acknowledged, the parties hereto agree as follows:
I. DEFINITIONS.
As used herein, the following terms shall have the following meanings
unless the context otherwise requires:
1.1 "Acquired Company" shall mean ▇▇▇▇▇▇▇ Transport, Inc., an Alabama
corporation.
1.2 "Acquired Company Software" shall have the meaning set forth in
Section 3.15.2.
1.3 "Actual Closing Balance Sheet" shall have the meaning set forth in
Section 2.1.7.2.
1.4 "Actual Profit and Loss Statement" shall have the meaning set forth
in Section 2.1.8.2.
1.5 "Agreement" shall mean this Acquisition Agreement.
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1.6 "Association" shall mean the American Arbitration Association.
1.7 "Benefit Plans" shall have the meaning set forth in Section 3.17.
1.8 "▇▇▇▇" shall mean ▇▇▇▇ Bros. Transportation Inc., a Delaware
corporation.
1.9 "▇▇▇▇ Common Stock" shall mean common stock, $.001 par value, of
▇▇▇▇.
1.10 "▇▇▇▇ Reports" shall have the meaning set forth in Section 5.7.
1.11 "▇▇▇▇ Sub" shall mean W.T. Acquisition Corp., an Alabama
corporation.
1.12 "Business" shall mean the operations currently conducted by the
Acquired Company as a flatbed and van truckload carrier for hire.
1.13 "Buy-Sell Agreement" shall mean the agreement described in Section
2.11.
1.14 "Cash Consideration Note" shall have the meaning set forth in
Section 2.1.3.
1.15 "CERCLA" shall have the meaning set forth in Section 3.19.
1.16 "Closing" shall mean the consummation of the transactions provided
for in this Agreement.
1.17 "Closing Date" shall mean the date on which the Closing occurs
pursuant to Section 6.1 hereof.
1.18 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.19 "Covenants Not To Compete" shall mean the Covenant Not to Compete
among ▇▇▇▇, the ▇▇▇▇ Sub and each Shareholder, substantially in the form
attached as Exhibit 2.9, each of which may be individually referred to as a
Covenant Not to Compete.
1.20 "Direct Claim" shall have the meaning set forth in Section 7.6.2.
1.21 "Dispute" shall have the meaning set forth in Section 7.6.3.
1.22 "Effective Time" shall have the meaning set forth in Section
2.1.2.
1.23 "Employment Agreement" shall mean the employment agreements
between each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇, substantially in the
form attached as Exhibits 2.8.1 and 2.8.2.
1.24 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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1.25 "ERISA Plan" shall have the meaning set forth in Section 3.17.1.
1.26 "Escrow Agent" shall mean AmSouth Bank, as escrow agent under the
Escrow Agreement.
1.27 "Escrow Agreement" shall mean the Escrow Agreement attached hereto
as Exhibit 2.1.6.
1.28 "Escrow Cash" shall have the meaning set forth in Section 2.1.6.
1.29 "Escrow Cash Note" shall have the meaning set forth in Section
2.1.6.
1.30 "Escrow Shares" shall have the meaning set forth in Section 2.1.6.
1.31 "Estimated Closing Balance Sheet" shall have the meaning set forth
in Section 2.1.7.1.
1.32 "Exchange Act" shall have the meaning set forth in Section 5.7.
1.33 "GAAP" shall have the meaning set forth in Section 2.1.6.
1.34 "Hazardous Substance" shall have the meaning set forth in Section
3.19.
1.35 "Historically Classified" shall have the meaning set forth in
Section 2.1.7.1.
1.36 "Improvements" shall mean, collectively, any and all improvements
located on the Real Property.
1.37 "Indemnifying Party" shall have the meaning set forth in Section
7.6.1.1.
1.38 "Indemnitee" shall have the meaning set forth in Section 7.6.1.1.
1.39 "Interim Financial Statement" shall have the meaning set forth in
Section 3.5.1.
1.40 "Licensed Software" shall have the meaning set forth in Section
3.15.2.
1.41 "Loss" shall have the meaning set forth in Section 7.1.
1.42 "Maximum Aggregate Liability Amount" shall have the meaning set
forth in Section 7.3.
1.43 "Merger Consideration" shall have the meaning set forth in Section
2.1.3.
1.44 "Minimum Aggregate Liability Amount" shall have the meaning set
forth in Section 7.4.
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1.45 "Net Operating Results" shall have the meaning set forth in
Section 2.1.8.1.
1.46 "Net Worth" shall have the meaning set forth in Section 2.1.7.1.
1.47 "Notice of Settlement" shall have the meaning set forth in Section
7.6.1.2.
1.48 "Notice to Contest" shall have the meaning set forth in Section
7.6.1.2.
1.49 "Notice to Defend" shall have the meaning set forth in Section
7.6.1.1.
1.50 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.51 "1995 and 1996 Financial Statements" shall have the meaning set
forth in Section 3.5.1.
1.52 "Owned Software" shall have the meaning set forth in Section
3.15.2.
1.53 "Per Share Minimum Price" shall have the meaning set forth in
Section 4.5.
1.54 "Permits" shall mean all licenses, registrations, certificates,
approvals, and permits issued by governmental authorities and quasi-governmental
authorities in regard to the Real Property, the Improvements, or any portion or
component of either of them.
1.55 "Plan of Merger" shall mean the Plan of Merger attached hereto as
Exhibit 2.1.1.
1.56 "Preliminary Profit and Loss Statement" shall have the meaning set
forth in Section 2.1.8.1.
1.57 "Property" shall have the meaning set forth in Section 3.19.
1.58 "Real Estate Lease Agreements" shall mean the Real Estate Lease
Agreement substantially in the form of Exhibit 2.10.
1.59 "Real Property" shall mean [that] [those] certain tract[s] of land
described on Exhibit 3.7.2.2.
1.60 "Representative" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or in the event that
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ resigns, dies or is physically unable to act as the
"representative," then the "Representative" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇. In the
event that ▇▇▇▇▇ ▇▇▇▇▇▇ resigns, dies or is physically unable to act as the
"Representative," then the "Representative" shall mean that individual selected
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or his guardian if one has been appointed, or the executor or
his administrator of his estate if he has died.
1.61 "Restricted Period" shall have the meaning set forth in Section
4.5.1.
1.62 "SEC" shall mean the Securities and Exchange Commission.
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1.63 "Shareholders" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇.
1.64 "Shareholder Agreement" shall mean the agreement attached hereto
as Exhibit 6.2.2(k).
1.65 "Stock Consideration" shall have the meaning set forth in Section
2.1.3.
1.66 "Third Party Claim" shall have the meaning set forth in Section
7.6.1.1.
II. COVENANTS AND UNDERTAKINGS.
2.1 Agreement to Merge.
2.1.1 Merger. Subject to the terms and conditions hereinafter
set forth and in accordance with the applicable laws of the State of Alabama,
the parties to this Agreement agree to effect a merger of the Acquired Company
with and into the ▇▇▇▇ Sub, with the ▇▇▇▇ Sub as the surviving corporation in
such merger, in accordance with the Plan of Merger attached hereto as Exhibit
2.1.1.
2.1.2 Effective Time of Merger. The merger of the Acquired
Company with and into ▇▇▇▇ Sub shall become effective as provided under the
applicable provisions of the Alabama Business Corporation Code at the start of
business on the later of (i) the day of the filing of Articles of Merger and/or
such other documents as may be required by applicable law and the payment of all
fees therefor and the issuance by the Secretary of State of Alabama of a
certificate of merger, or (ii) December 1, 1997 (the time such merger becomes
effective being referred to herein as the "Effective Time"). Such filing and
payment of fees shall take place on the Closing Date or as soon as is reasonably
practicable thereafter.
2.1.3 Effect of Merger. At the Effective Time, the separate
existence of the Acquired Company shall cease, the ▇▇▇▇ Sub shall be the
corporation surviving the merger and shall continue its corporate existence
under the name "▇▇▇▇▇▇▇ Transport, Inc." The Articles of Incorporation and
By-laws of the ▇▇▇▇ Sub, as amended to reflect such name change, will be the
Articles of Incorporation and By-laws of the surviving corporation. At the
Effective Time, all of the shares of common stock of the Acquired Company then
issued and outstanding shall, in accordance with the Plan of Merger, be
automatically converted into (i) Three Hundred Ninety-Three Thousand Nine
Hundred Forty (393,940) shares of ▇▇▇▇ Common Stock (the "Stock Consideration"),
with such ▇▇▇▇ Common Stock being allocated among the Shareholders in accordance
with the Plan of Merger, (ii) a promissory note in the amount of Two Million
Eight Hundred Seventy Five Thousand Dollars ($2,875,000.00) in the form attached
hereto as Exhibit 2.1.3(a) (the "Cash Consideration Note "; and (iii) a
promissory note in the amount of Three Hundred Seventy-Five Thousand Dollars
($375,000.00) payable in accordance with the terms of Section 2.1.6 hereof (the
"Escrow Cash Note") in the form attached as Exhibit 2.1.3(b) the Cash
Consideration Note, the Stock Consideration and the Escrow Cash Note referred to
together as the "Merger Consideration"). All treasury shares of the Acquired
Company, if any, shall be canceled and cease to exist as of the Effective Time.
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2.1.4 Antidilution. In the event that, subsequent to the date
of this Agreement, the outstanding shares of ▇▇▇▇ Common Stock shall have been,
without consideration, increased, decreased, changed into, or exchanged for a
different number or kind of shares of securities through recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
like changes in ▇▇▇▇'▇ capitalization, then an appropriate and proportionate
adjustment shall be made (i) to the Escrow Shares described in Section 2.1.6 of
this Agreement and (ii) to the Per Share Minimum Price described in Section
4.5.1 of this Agreement.
2.1.5 Shareholder Meeting. As soon as practicable following
the execution of this Agreement, the Acquired Company will submit the Plan of
Merger, and such other agreements, documents and instruments evidencing the
transactions contemplated hereby as may be necessary or appropriate, to a
special meeting of its shareholders and will recommend their approval and use
its best efforts to obtain such approval. Each Shareholder hereby covenants and
agrees that at such meeting such Shareholder will vote all of the shares of the
Acquired Company held by such Shareholder in favor of the approval of the Plan
of Merger, and in favor of the approval of all other agreements, documents and
instruments which are contemplated by this Agreement. Prior to the Closing Date,
the ▇▇▇▇ Sub will cause to be submitted the Plan of Merger, and such other
agreements, documents and instruments evidencing the transactions contemplated
hereby as may be appropriate or necessary, to a special meeting of its sole
shareholder, ▇▇▇▇. ▇▇▇▇ hereby covenants and agrees that at such meeting it will
vote all of the shares of the ▇▇▇▇ Sub held by it in favor of the approval of
the Plan of Merger, and in favor of the approval of all other agreements,
documents and instruments which are contemplated by this Agreement. Any board of
directors, or shareholders, action contemplated above may be taken by unanimous
written consent in lieu of a meeting.
2.1.6 Escrow of Merger Consideration; Escrow Agreement; Escrow
Cash Note. The parties hereto agree that, at the Closing, ▇▇▇▇, the Shareholders
and the Escrow Agent will enter into an Escrow Agreement substantially in the
form attached hereto as Exhibit 2.1.6 (a). ▇▇▇▇ shall deliver to the Escrow
Agent Three Hundred Seventy-Five Thousand Dollars ($375,000.00) (the "Escrow
Cash"), which will both serve as security for payment under the Escrow Cash Note
and that may also be used by ▇▇▇▇ to satisfy claims for indemnification of ▇▇▇▇
or the ▇▇▇▇ Sub as provided in Section 7.1 hereof (with a commensurate reduction
in amounts due under the Escrow Cash Note, as provided below). ▇▇▇▇ and the
Shareholders shall also deliver to the Escrow Agent a certificate or
certificates representing Forty-Five Thousand Four Hundred Fifty-Four and 55/100
(45,454.55) shares of ▇▇▇▇ Common Stock (the "Escrow Shares") (along with five
executed in blank stock transfers, with signatures guaranteed, for each
certificate), that may be used by ▇▇▇▇ to satisfy claims for indemnification of
▇▇▇▇ or the ▇▇▇▇ Sub as provided in Section 7.1. After the Closing, the
Shareholders shall deliver to the Escrow Agent additional executed in blank
stock transfers, with signatures guaranteed, if requested to do so by ▇▇▇▇. The
Escrow Shares are to be allocated among the Shareholders in proportion to the
total stock consideration received by all Shareholders hereunder. The Escrow
Cash and payment under the Escrow Cash Note is to be allocated among the
Shareholders in proportion to the respective amounts to which each Shareholder
is entitled under the Cash Consideration Note. The Escrow Shares and Escrow Cash
will be held by the Escrow Agent and distributed pursuant to the terms of the
Escrow Agreement.
2.1.6.1 The parties hereto agree that, at the
Closing, ▇▇▇▇ will deliver the Escrow Cash Note payable to the Shareholders with
▇▇▇▇ as obligor, in the form attached hereto as Exhibit
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2.1.6(b). Payments of interest on the Escrow Cash Note shall be made in cash at
the same time that Escrow Cash is delivered from escrow and shall be equal to
earnings received on the Escrow Cash. Payment of principal on the Escrow Cash
Note shall be due in one lump sum on the first anniversary of the Closing Date.
The principal amount due under the Escrow Cash Note shall be automatically
reduced by the amount that any Escrow Cash is delivered to ▇▇▇▇ or the ▇▇▇▇ Sub
pursuant to the terms of the Escrow Agreement and Article 7 of this Agreement.
The Shareholders' sole recourse for payment under the Escrow Cash Note shall be
to seek payment from amounts remaining as Escrow Cash pursuant to the terms of
the Escrow Agreement.
2.1.7 Determination of Net Worth; Adjustment of Merger
Consideration.
2.1.7.1 After the Closing Date, ▇▇▇▇ shall cause an
independent certified public accountant to review the books and records of the
Acquired Company and determine the net worth of the Acquired Company as of the
Closing Date. By February 15, 1997, ▇▇▇▇ shall deliver to the Shareholders a
balance sheet of the Acquired Company (the "Estimated Closing Balance Sheet")
based upon such determination (which shall include an adjustment based upon the
Net Operating Results for December, 1997, as provided in Section 2.1.8.3). Net
Worth (the "Net Worth") of the Acquired Company shall mean the total assets
which have been "Historically Classified" on the Acquired Company's financial
statements as "Current Assets," "Fixed Assets" (including the reserve for
accumulated depreciation), "Other Assets" or "Notes Receivable," less Total
Liabilities which have been Historically Classified on the Acquired Company's
financial statements under the categories "Current Liabilities" and "Long Term
Liabilities." The Net Worth of the Acquired Company shall be determined in
accord with the manner in which the above assets and liabilities have been
"Historically Classified." "Historically Classified," for purposes of this
Agreement, shall mean in accord with Generally Accepted Accounting Principles
("GAAP") in a manner consistent with the 1995 and 1996 financial statements, and
the Interim Financial Statement, of the Acquired Company, to the extent such
statements (i) are in accordance with GAAP and (ii) as changed or modified by
the Acquired Company during 1995, 1996 and 1997, as set forth in Exhibit 2.1.7
attached hereto. In calculating the Net Worth, there shall be no consideration
for any adjustments made as a result of the transactions contemplated by this
Agreement, other than adjustments and accruals for Christmas and incentive
bonuses awarded to employees of the Acquired Company.
2.1.7.2 The Shareholders shall have ten (10) days
from the date of delivery by ▇▇▇▇ to the Shareholders of the Estimated Closing
Balance Sheet to review ▇▇▇▇'▇ determination of the Net Worth as set forth
therein. ▇▇▇▇ and the Shareholders shall use their reasonable best efforts to
resolve any objections with respect to the Estimated Closing Balance Sheet. If
any such objections cannot be resolved within ten (10) days following the
delivery by ▇▇▇▇ to the Shareholders of the Estimated Closing Balance Sheet,
▇▇▇▇ and the Shareholders shall jointly engage Ernst & Young LLP in a jointly
signed written engagement letter to resolve the disputed portions of the
Estimated Closing Balance Sheet in a manner consistent with the provisions of
this Section 2.1.7. ▇▇▇▇ and the Shareholders shall each have ten (10) days
after the date of such engagement to prepare their respective presentations to
Ernst & Young LLP. During such period, each of the parties shall cooperate with
the other parties to make reasonably available all pertinent documents and
records. At the end of such ten (10) day period, the parties shall make their
presentations to Ernst & Young LLP, which shall make its determination based
solely upon
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presentations by ▇▇▇▇ and the Shareholders and not by independent review, and
which shall make such determination as soon as practicable, but in any event
within (10) days from the date of the presentations by ▇▇▇▇ and the
Shareholders. The final determination of the Net Worth by the parties, or by
Ernst & Young LLP, as reflected in a final balance sheet (the "Actual Closing
Balance Sheet"), shall be final and binding upon the parties for all purposes.
Each party shall bear the expenses of its own accountant. The expenses of Ernst
& Young LLP incurred pursuant to the provisions of this Section 2.1.7.2 shall be
borne equally by ▇▇▇▇, on the one hand, and the Shareholders on the other.
2.1.7.3 In the event that the Net Worth, as
reflected in the Actual Closing Balance Sheet, is less than Four Million Dollars
($4,000,000.00), the Shareholders jointly and severally agree to return within
five (5) business days from the date of the final agreement or determination, as
the case may be, of the Actual Closing Balance Sheet (i) the number of shares of
▇▇▇▇ Common Stock, valued at $8.25 per share, which is equal in value to
one-half of the amount by which the Net Worth is less than $4,000,000.00 and
(ii) immediately available funds in an amount equal to one-half of the amount by
which the Net Worth is less than $4,000,000.00.
2.1.8 December Operating Results; Adjustment of Merger
Consideration.
2.1.8.1 ▇▇▇▇ shall cause an independent certified
public accountant to review the books and records of the Acquired Company and
determine the net operating results of the Acquired Company for the month of
December, 1997. Net operating results ("Net Operating Results") of the Acquired
Company shall mean that amount listed under "Net Income (Loss)" on the Acquired
Company's profit and loss statement for December, 1997, calculated by totaling
the amounts listed under "Total Revenue" and "Other Income" and subtracting from
such total the amount listed under "Total Expenses." The Net Operating Results
of the Acquired Company shall be determined in accordance with the manner in
which the above revenue, income and expenses have been Historically Classified.
Notwithstanding the foregoing, in calculating the Net Operating Results, there
shall be no consideration for any adjustments made as a result of the
extraordinary, nonrecurring gains or losses experienced by the Acquired Company
during December, 1997 as a result of transactions contemplated by this Agreement
or otherwise occurring during December, 1997. By February 15, 1998, ▇▇▇▇ shall
deliver to the Shareholders a profit and loss statement of the Acquired Company
for December, 1997 (the "Preliminary Profit and Loss Statement") based upon such
determination.
2.1.8.2 The Shareholders shall have ten (10) days
from the date of delivery by ▇▇▇▇ to the Shareholders of the Preliminary Profit
and Loss Statement to review ▇▇▇▇'▇ determination of the Net Operating Results
as set forth therein. ▇▇▇▇ and the Shareholders shall use their reasonable best
efforts to resolve any objections with respect to the Preliminary Profit and
Loss Statement. If any such objections cannot be resolved within ten (10) days
following the delivery by ▇▇▇▇ to the Shareholders of the Preliminary Profit and
Loss Statement, ▇▇▇▇ and the Shareholders shall jointly engage a Ernst & Young
LLP in a jointly signed written engagement letter to resolve the disputed
portions of the Preliminary Balance Sheet in a manner consistent with the
provisions of this Section 2.1.8. ▇▇▇▇ and the Shareholders shall each have ten
(10) days after the date of such engagement to prepare their respective
presentations to such Ernst & Young LLP. During such period, each of the parties
shall cooperate with the other parties to make reasonably available all
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pertinent documents and records. At the end of such ten (10) day period, the
parties shall make their presentations to Ernst & Young LLP, which shall make
its determination based solely upon presentations by ▇▇▇▇ and the Shareholders
and not by independent review, and which shall make such determination as soon
as practicable, but in any event within (10) days from the date of the
presentations by ▇▇▇▇ and the Shareholders. The final determination of the Net
Operating results by the parties, or by Ernst & Young LLP, as reflected in a
final balance sheet (the "Actual Profit and Loss Statement"), shall be final and
binding upon the parties for all purposes. Each party shall bear the expenses of
its own accountant. The expenses incurred pursuant to the provisions of this
Section 2.1.8.2 shall be borne equally by ▇▇▇▇, on the one hand, and the
Shareholders on the other.
2.1.8.3 In the event that the Net Operating
Results, as reflected in the Actual Profit and Loss Statement, show a net
operating loss of the Acquired Company for December, 1997, the Shareholders
jointly and severally agree to return within five (5) business days from the
date of the final agreement or determination, as the case may be, of the Actual
Profit and Loss Statement (i) the number of shares of ▇▇▇▇ Common Stock, valued
at $8.25 per share, which is equal in value to one-half of such net operating
loss and (ii) immediately available funds in an amount equal to one-half of such
net operating loss. In the event that the Net Operating Results, as reflected in
the Actual Profit and Loss Statement, show a net operating profit of the
Acquired Company for December, 1997, such profit shall be added to the Net Worth
of the Acquired Company for purposes of Section 2.1.7.3.
2.1.9 It is recognized that ▇▇▇▇ and ▇▇▇▇ Sub will be
required, for financial reporting and other purposes, to record the Merger
effective as of the Closing Date, and to record on the books of ▇▇▇▇ and ▇▇▇▇
Sub certain transaction expenses, charges, transitional entries and the results
of operation of the Acquired Company from the Closing Date through December 31,
1997. Sections 2.1.7, 2.1.8 and 2.3 do not restrict such actions by ▇▇▇▇ and
▇▇▇▇ Sub. Rather, Sections 2.1.7.1, 2.1.8.1 and 2.3 make it clear that such
matters and entries are not to be taken into consideration when calculating the
Net Worth or Net Operating Results for December, 1997, or when determining the
compliance of the Shareholders or the Acquired Company with any warranty,
representation or provision hereof.
2.1.10 Distribution of Stock Consideration. The parties
acknowledge and recognize that the Stock Consideration will be distributed,
subject to receipt of the investment letter described in Section 4.2, to the
Shareholders in accordance with the Plan of Merger (which shall provide that no
Shareholder will receive less than one-third of the Stock Consideration, with a
commensurate reduction in the amount of Cash Consideration such Shareholder may
receive, as necessary) and that the Shareholders shall have the price guarantees
described in Section 4.5.
2.1.11 Shareholder Acknowledgment. At the Closing, the
Acquired Company shall deliver to ▇▇▇▇ and the ▇▇▇▇ Sub a Shareholder
Acknowledgment, Consent and Power of Attorney in the form attached as Exhibit
2.1.11, executed by each Shareholder of the Acquired Company, pursuant to which
the Representative shall be given an irrevocable power of attorney to act
exclusively on behalf of the Shareholders with regard to the disposition of any
Third Party Claim and matters arising under the Escrow Agreement.
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2.2 Compliance with Securities Laws. In connection with the
transactions contemplated by this Agreement, the parties hereto agree to
cooperate with one another in complying with the provisions of the 1933 Act and
the General Rules and Regulations thereunder, and all other applicable federal
and state securities laws, and each of them agrees to furnish the other, or its
counsel, with such information and to take such actions, as may be reasonably
requested in respect of such compliance.
2.3 Conduct of the Business of the Acquired Company Between Closing and
December 31, 1997.
2.3.1 The parties have agreed to close this transaction on the
Closing Date, but have agreed, pursuant to Section 2.1.8, that (i) the
Shareholders will reimburse ▇▇▇▇ for net operating losses of the Acquired
Company incurred during the month of December, 1997 or (ii) that net operating
profits of the Acquired Company experienced during December, 1997 will be added
back to the calculation of Net Worth of the Acquired Company for purposes of
Section 2.1.7.3. ▇▇▇▇ agrees that the operation of the Acquired Company, and
accounting for the Acquired Company (for purposes of calculating the Net
Operating Results), shall continue for such month in the same manner as
historically conducted by the Acquired Company.
2.3.1.1 Except with the prior written consent of
the Shareholders, ▇▇▇▇ and the ▇▇▇▇ Sub will, until January 1, 1998 conduct the
business of the Acquired Company in the ordinary course, and will use its best
efforts to (a) preserve the organization of the Acquired Company intact, keeping
available the services of the present employees of the Acquired Company and
preserving the goodwill of customers, suppliers and others having business
relations with the Acquired Company and (b) maintain the properties of the
Acquired Company in the same working order and condition as such properties are
in as of the date of this Agreement, reasonable wear and tear excepted, and to
not liquidate the assets of the Acquired Company to cash except in the ordinary
course of business.
2.4 Resignation. The Acquired Company and the Shareholders covenant to
cause to be delivered at the Closing the resignation of each of the directors
and officers of the Acquired Company and each noninstitutional trustee under any
Benefit Plan maintained by the Acquired Company, such resignations to be
effective immediately following the Closing.
2.5 Consent Waivers and Approvals. The Acquired Company and the
Shareholders agree to use their best efforts to obtain the waiver, consent and
approval of all persons whose waiver, consent or approval (i) is required in
order to consummate the transactions contemplated by this Agreement, or (ii) is
required by any agreement, lease, instrument, arrangement, judgment, decree,
order or license to which the Acquired Company or any of the Shareholders is a
party or subject on the Closing Date, and (a) which would prohibit, or require
the waiver, consent or approval of any person to such transactions or (b) under
which, without such waiver, consent or approval, such transactions would
constitute an occurrence of default under the provisions thereof, result in the
acceleration of any obligation thereunder, or give rise to a right of any party
thereto to terminate its obligations thereunder. All written waivers, consents
and final approvals shall be produced at Closing in form and content reasonably
satisfactory to ▇▇▇▇ and the ▇▇▇▇ Sub.
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2.6 Repayment of Loans and Advances. Prior to or at the Closing, all
loans and advances made by the Acquired Company to the Shareholders or any
entity controlled by any of them, including without limitation those described
on Exhibit 2.6 attached hereto, shall be repaid along with all accrued interest
and as of the Closing, no outstanding amounts shall be due to the Acquired
Company from the Shareholders or any such controlled entity. The Acquired
Company shall not forgive any such indebtedness nor shall it disburse funds by
way of bonus or otherwise to the Shareholders for the direct or indirect purpose
of providing funds to repay such loans or advances.
2.7 Amounts Due Shareholders by the Acquired Company. On or prior to
the Closing Date, the Shareholders shall cause to be contributed to the capital
of the Acquired Company, the full amount of any loans, advances, or other like
amounts, including any interest due thereon, from any Shareholder or any
affiliate of any Shareholder to the Acquired Company. As of the Closing Date,
the Acquired Company shall not owe amounts to any such entity for loans,
advances, management fees, corporate overhead or otherwise. Prior to Closing, no
such loans, advances or other like amounts (including interest thereon) shall be
paid or retired from the assets of the Acquired Company.
2.8 Employment Agreements.
2.8.1 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall enter into at the Closing an
Employment Agreement substantially in the form set forth in Exhibit 2.8.1.
2.8.2 ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall enter into at the Closing an
Employment Agreement substantially in the form set forth in Exhibit 2.8.2.
2.9 Covenants Not to Compete. Each Shareholder shall enter into at the
Closing into a Covenant Not to Compete substantially in the form attached hereto
as Exhibit 2.9.
2.10 Real Estate Lease Agreements. Each of the parties to this
Agreement shall enter into at the Closing a Real Estate Lease Agreement,
substantially in the form set forth in Exhibit 2.10.
2.11 Buy-Sell Agreement. Each of the Shareholders shall at Closing
terminate that certain Amended and Restated Stock Transfer Restrictions and
Buy-Out Agreement between the Shareholders with respect to shares of the
Acquired Company's capital stock.
III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED
COMPANY AND THE SHAREHOLDERS.
The Acquired Company and the Shareholders' jointly and severally,
represent and warrant to, and for the benefit of, ▇▇▇▇ and the ▇▇▇▇ Sub as
follows:
3.1 Organization and Standing. The Acquired Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Alabama, and has the full power and authority (corporate and otherwise)
to carry on its business in the places and as it is now being conducted and to
own and lease the properties and assets which it now owns or leases. The
Acquired Company is now, and will be at Closing, duly qualified and/or licensed
to transact business and in
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good standing as a foreign corporation in all jurisdictions listed in Exhibit
3.1 hereto, and the character of the property owned or leased by the Acquired
Company and the nature of the Business conducted by it do not require such
qualification and/or licensing in any other jurisdiction.
3.2 Authority and Status. Each of the Shareholders and the Acquired
Company has the capacity and authority to execute and deliver this Agreement, to
perform hereunder, and to consummate the transactions contemplated hereby
without the necessity of any act or consent of any other person whomsoever. The
execution, delivery and performance by the Acquired Company and the Shareholders
of this Agreement and each and every agreement, document and instrument provided
for herein have been duly authorized and approved by the Board of Directors of
the Acquired Company and the Shareholders. This Agreement and each and every
agreement, document and instrument to be executed, delivered and performed by
the Acquired Company or the Shareholders in connection herewith, constitute or
will, when executed and delivered, constitute the valid and legally binding
obligations of the Acquired Company and the Shareholders, as the case may be,
enforceable against each of them in accordance with their respective terms,
except as enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally.
Attached hereto as Exhibit 3.2 are true, correct and complete copies of the
Articles of Incorporation and Bylaws of the Acquired Company.
3.3 Capitalization. The entire authorized capital stock of the Acquired
Company consists of one-thousand (1,000) shares of $1.00 par value common stock,
of which one-hundred (100) shares are issued and outstanding and no shares are
held in treasury. The Acquired Company has no other shares of capital stock
authorized, issued or outstanding. All of the issued and outstanding shares of
the Acquired Company have been validly issued and are fully paid and
non-assessable and are owned by the Shareholders, free and clear of all liens,
claims, charges and encumbrances of any nature whatsoever. Except for the
requisite affirmative vote of the Shareholders of the Acquired Company pursuant
to Alabama law, the authorization or consent of no other person or entity is
required in order to consummate the transactions contemplated herein by virtue
of any such person or entity having an equitable or beneficial interest in the
Acquired Company or the capital stock of the Acquired Company. There are no
outstanding options, warrants, calls, commitments, or plans by the Acquired
Company to issue any additional shares of its capital stock, or to pay any
dividends on such shares, or to purchase, redeem, or retire any outstanding
shares of its capital stock, nor are there outstanding shares of its capital
stock, nor are there outstanding any securities or obligations which are
convertible into or exchangeable for any shares of capital stock of the Acquired
Company.
3.4 Absence of Equity Investment. Except as described in Exhibit 3.4
hereto, neither the Shareholders nor the Acquired Company, directly or
indirectly, owns of record or beneficially any shares or other equity interests
in any corporation (except as a stockholder holding less than one percent (1%)
interest in a corporation whose shares are traded on a national or regional
securities exchange or in the over-the-counter market), partnership, limited
partnership, joint venture, trust, limited liability company or other business
entity, all or any portion of the business of which is competitive with that of
the Acquired Company.
3.5 Liabilities and Obligations of the Acquired Company.
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3.5.1 Attached hereto as Exhibit 3.5.1 are true, correct and
complete copies of the Acquired Company's unaudited balance sheets as of
December 31, 1995 and December 31, 1996 and the related statements of earnings
and cash flows for the years then ended (the "1995 and 1996 Financial
Statements"). Also attached hereto to Exhibit 3.5.1 is a true, correct and
complete copy of the Acquired Company's unaudited balance sheet as of September
30, 1997, and the related income statement for the period then ended (the
"Interim Financial Statement"). Except as set forth on Exhibit 3.5.1, the 1995
and 1996 Financial Statements and Interim Financial Statements have been
prepared from and are in complete accordance with the books and records of the
Acquired Company, are true and complete statements of the financial position of
the Acquired Company as of their respective dates, have been prepared in
accordance with generally accepted accounting principles consistently applied,
fairly and accurately present the financial position and results of operations
of the Acquired Company as of the respective dates thereof, and disclose all
liabilities of the Acquired Company, whether absolute, contingent, accrued or
otherwise, existing as of the respective dates thereof.
3.5.2 The Acquired Company has no liability or obligation
(whether accrued, absolute, contingent or otherwise) which is of a nature
required to be reflected in financial statements prepared in accordance with
generally accepted accounting principles, consistently applied, including,
without limitation, any liability which might result from an audit of its tax
returns by any appropriate authority, except for (i) the liabilities and
obligations of the Acquired Company which are disclosed and reserved against in
the Interim Financial Statements or Exhibit 3.5.2 hereto, to the extent and in
the amounts so disclosed and reserved against, and (ii) liabilities incurred or
accrued in the ordinary course of business since September 30, 1997. There is no
basis for any assertion against the Acquired Company as of September 30, 1997 of
any liability of any nature or in any amount not fully accrued and appearing on
the balance sheet as of that date.
3.5.3 Except as disclosed in the Interim Financial Statements
or Exhibit 3.5.2, the Acquired Company is not in default with respect to any
liabilities or obligations, and all such liabilities or obligations shown and
reflected in the Interim Financial Statements or Exhibit 3.5.2, and such
liabilities incurred or accrued subsequent to June 30, 1997, have been, or are
being, paid or discharged as they become due, and all such liabilities and
obligations were incurred in the ordinary course of business, except as
indicated in Exhibit 3.5.2.
3.6 Taxes.
3.6.1 The Acquired Company has, as of the date hereof, and
will have prior to Closing, timely and accurately filed all federal, state,
foreign and local tax returns and reports required to be filed by it prior to
such dates and has timely paid, or will timely pay prior to Closing, all taxes
shown on such returns as owed for the periods of such returns, including all
withholding or other payroll related taxes shown on such returns. Except for
adjustments resulting from the conversion of the Acquired Company from a cash
basis to an accrual basis taxpayer, the tax basis of all assets of the Acquired
Company as reflected on its books and records is correct and accurate for use in
tax periods ending after Closing, assuming that no change in applicable federal
or state tax laws or generally accepted accounting principles occurs subsequent
to Closing. Except as described on Exhibit 3.6, the Acquired Company is not, nor
will it become, subject to any additional taxes, interest, penalties or other
similar charges as of a result of the failure to file timely or accurately, as
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required by applicable law, any such tax return or to pay timely any amount
shown to be due thereon, including, without limitation, any such taxes,
interest, penalties or charges resulting from the obtaining of an extension of
time to file any return or to pay any tax. No assessments or notices of
deficiency or other communications have been received by the Acquired Company
with respect to any such tax return which has not been paid, discharged or fully
reserved against in the Interim Financial Statements or Exhibit 3.6 hereto, and
no amendments or applications for refund have been filed or are planned with
respect to any such return. There are no agreements between the Acquired Company
and any taxing authority, including, without limitation, the Internal Revenue
Service, waiving or extending any statute of limitations with respect to any tax
return, and the Acquired Company has not filed any consent or election under the
Code, including, without limitation, any election under Section 341(f) of the
Code, other than such consents and elections, if any, reflected in the Acquired
Company's tax return for its taxable year ended December 31, 1996. True and
complete copies of the Acquired Company's tax returns for its 1994, 1995 and
1996 taxable years are attached as Exhibit 3.6. The Acquired Company's federal
income tax returns have never been audited by the Internal Revenue Service and
the only taxable years which are open for audit are 1994, 1995, 1996 and 1997.
3.6.2 For all taxable periods not closed by the applicable
statute of limitations, the Acquired Company has been a "small business
corporation" as that term is defined in Section 1361(b) of the Code, it has had
in effect an election under Section 1362(a) of the Code to be treated as an S
corporation, and it has filed all of the federal income tax returns (and all
state income tax returns in those states permitting the equivalent of an S
corporation election) consistently with S corporation status. The Acquired
Company has not incurred and will not, with respect to any taxable period ending
on or prior to the Closing Date or, with respect to any taxable period ending
after the Closing Date, that portion of such period ending on the Closing Date,
incur any taxable income or liability for taxes under or by reason of Sections
1363(d), 1371(d), 1374 or 1375 of the Code.
3.7 Ownership of Assets and Leases.
3.7.1 Other than with respect to the Real Property and
Improvements:
3.7.1.1 Exhibit 3.7.1.1 attached hereto contains a
list of all fixed assets owned by the Acquired Company, including, but not
limited to, all machinery and equipment, office furniture and equipment and all
vehicles owned by the Acquired Company, and depreciation schedules of the assets
shown thereon.
3.7.1.2 The Acquired Company has good and
marketable title to all of the assets shown on Exhibit 3.7.1.1 subject to no
mortgage, pledge, lien, security interest, conditional sale agreement,
encumbrance, charge or adverse claim whatsoever, except as specifically shown on
Exhibit 3.8.
3.7.1.3 Except as shown on Exhibit 3.7.1.3, none of
the properties or assets used by the Acquired Company are held under any lease,
or as conditional vendee under any conditional sale or other title retention
agreement. Exhibit 3.7.1.3 includes a list of all leases of all machinery and
equipment of which the Acquired Company is a lessee, including respective
expiration dates and monthly rentals.
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3.7.1.4 Each of the leases and agreements described
in Exhibit 3.7.1.3 is in full force and effect and constitutes a legal, valid
and binding obligation of the Acquired Company and the other respective parties
thereto and is enforceable in accordance with its terms, and there is not under
any of such leases or agreements existing any default of the Acquired Company or
of any other parties thereto (or event or condition which, with notice or lapse
of time, or both, would constitute a default). The Acquired Company has not
received any payment from a lessor in connection with or as inducement for
entering into any such lease except as set forth on Exhibit 3.7.1.3.
3.7.1.5 None of the property of the Acquired
Company shown on Exhibits 3.7.1.1 or 3.7.1.3 is leased by the Acquired Company
to any other person or entity.
3.7.1.6 There are no items of machinery and
equipment or vehicles employed or used by the Acquired Company which are not
described in Exhibits 3.7.1.1 or 3.7.1.3. The Acquired Company either owns or
leases all assets which are necessary to conduct its business. All machinery and
equipment owned or leased by the Acquired Company are usable and operable in its
business and are in good operating condition and reasonable state of repair,
subject only to ordinary wear and tear.
3.7.1.7 Except as set forth on Exhibit 3.7.1.7, all
inventories owned by the Acquired Company consist only of items of a quality and
quantity readily usable or readily salable, at prices equal to the values at
which such items are reflected in the Acquired Company's books, in the normal
course of its business and are valued so as to reflect the normal valuation
policy of the Acquired Company, all in accordance with generally accepted
accounting principles, applied on a basis consistent with prior years, but not
in excess of the lower of cost or net realizable market value.
3.7.1.8 Except as set forth on Exhibit 3.7.1.8, the
Acquired Company is not a party to any contract or obligation whereby there has
been granted to anyone an absolute or contingent right to purchase, obtain or
acquire any rights in any of the assets, properties or operations which are
owned by the Acquired Company.
3.7.1.9 A list of all accounts, safe deposit boxes
(and the contents thereof) and powers of attorney of the Acquired Company and of
all persons authorized to act with respect thereto is attached hereto as Exhibit
3.7.1.9.
3.7.2 With respect to the Real Property and Improvements:
3.7.2.1 The Acquired Company does not own any Real
Property, nor does it own any Improvements thereto.
3.7.2.2 The parcels of property described in
Exhibit 3.7.2.2 as the leased Real Property are the only real estate leased by
the Acquired Company. Exhibit 3.7.2.2 includes a list of all leases of real
estate of which the Acquired Company is a lessee, including respective
expiration dates and monthly rentals. Each of the leases described in Exhibit
3.7.2.2 is in full force and effect and constitutes a legal, valid and binding
obligation of the Acquired Company and the
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other respective parties thereto and is enforceable in accordance with its
terms, and there is not under any of such leases existing any default of the
Acquired Company or of any other party thereto (or event or condition which,
with notice or lapse of time, or both, would constitute a default). The Acquired
Company has not received any payment from a lessor in connection with or as
inducement for entry into any such lease except as set forth on Exhibit 3.7.2.2.
3.7.2.3 None of the property shown on Exhibit
3.7.2.2 is leased by the Acquired Company to any other person or entity.
3.7.2.4 There is no real estate used by the
Acquired Company which is not described in Exhibit 3.7.2.2. The Acquired Company
either owns or leases all real estate which is necessary to conduct its
business.
3.7.2.5 All water, sewer, gas, electric, telephone
and drainage facilities and all other utilities required by law or by the normal
use and operation of the Real Property and the Improvements currently service
the Real Property and the Improvements in such capacities as are required by law
or by the normal use and operation of the Real Property and the Improvements.
3.7.2.6 The Real Property and the Improvements are
usable and operable in the Business and the Improvements are in good operating
condition and reasonable state of repair, subject only to ordinary wear and
tear.
3.7.2.7 The Acquired Company has obtained and
maintained in full force and effect to the date hereof all Permits required for
the normal use and operation of the Real Property and the Improvements as
currently operated. A complete and correct list of all such Permits is set forth
on Exhibit 3.7.2.7. The Acquired Company has delivered to ▇▇▇▇ and the ▇▇▇▇ Sub
complete and accurate photocopies of all Permits. The Acquired Company has
complied in all respects with all such Permits and has not received any notice
that any such Permits will not be renewed upon expiration or of any conditions
which will be imposed in order to receive any such renewal. Except as described
on Exhibit 3.7.2.7, all of the Permits will remain in full force and effect, and
will inure to the benefit of the ▇▇▇▇ Sub, after the consummation of the
transactions contemplated by this Agreement.
3.7.2.8 The zoning classification of the various
tracts comprising the Real Property permits the use of all or any part of the
Real Property for the purposes and in the manner in which the Real Property is
currently used. The Acquired Company has not received notice of any pending or
contemplated changes in the status of the zoning for the Real Property. None of
the Acquired Company, nor any predecessor in title to the Real Property, has any
agreement currently in effect with any county or township in which a tract is
located, or any other entity, public or private, which would be binding and
would prevent the use of the Real Property for any of the uses allowed by the
current zoning of the Real Property.
3.7.2.9 The Real Property abuts a public
right-of-way and the rights of ingress and egress to and from the Real Property
and adjoining public ways are not restricted or limited in any manner.
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3.8 Indebtedness of the Acquired Company. Attached hereto as Exhibit
3.8 is a list of all instruments, agreements or arrangements pursuant to which
the Acquired Company has borrowed any money, incurred any indebtedness, or
established any line of credit, which represents a liability of the Acquired
Company on the date hereof. The Acquired Company has performed all the
obligations required to be performed by it to the date hereof pursuant to the
obligations listed on Exhibit 3.8 and the Acquired Company is not in default
under any mortgage, indenture, note or other obligation for, or relating to,
borrowed money to which the Acquired Company is a party, or to which any
property or assets belonging to, or used by, the Acquired Company is subject,
and there has not occurred any event which, but for the passage of time or
giving of notice, or both, would constitute a default.
3.9 Accounts Receivable and Notes Receivable.
3.9.1 Attached hereto as Exhibit 3.9 is a true and complete
list of all of the accounts receivable of the Acquired Company as of September
30, 1997 and all of the notes receivable of the Acquired Company as of such
date. All sales and services made or provided on credit between September 30,
1997 and the Closing have been or will have been (as applicable) properly
recorded on the books of the Acquired Company in the ordinary course of
business.
3.9.2 All of the accounts receivable (net of the bad debt
reserve established in the Actual Closing Balance Sheet described in Section
2.1.7.2, as may be modified pursuant to Section 3.9.3) will be paid when due in
accordance with their terms (and, in any event, by June 1, 1998) and the notes
receivable will be paid when due and in accordance with their terms. If any of
the said notes receivable are not paid in full when due, ▇▇▇▇ may offset, on an
equal basis, the amounts held as Escrow Shares and Escrow Cash for any such
unpaid note receivable, with an automatic reduction in the principal amount due
under the Escrow Cash Note equal to any such reduction in the Escrow Cash. If
any of the accounts receivable are not paid in full by June 1, 1998, (net of the
bad debt reserve established in the Actual Closing Balance Sheet described in
Section 2.1.7.2, as may be modified pursuant to Section 3.9.3), ▇▇▇▇ may tender
at any time prior to June 30, 1998 to the Shareholders any account receivable
which remains uncollected (net of the bad debt reserve, as may be modified
pursuant to Section 3.9.3). The Shareholders agree to repurchase such accounts
receivable by authorizing a draw by ▇▇▇▇ from the escrow account upon, on an
equal basis, the amounts held for Escrow Shares and Escrow Cash, in an amount
equal to the face amount of the Account Receivable, with an automatic reduction
in the principal amount due under the Escrow Cash Note equal to any such
reduction in the Escrow Cash. ▇▇▇▇ agrees to promptly pay over to the
Representative any amounts paid to ▇▇▇▇ with respect to any account receivable
repurchased by the Shareholders pursuant to this Section 3.9.2.
3.9.3 If, and to the extent that, on June 1, 1998, the Accrued
Damages Reserve provided for in the Actual Closing Balance Sheet described in
Section 2.1.7 hereof is found to be overstated based upon claims experienced up
to such time and the reasonable expectation of further claims for periods prior
to Closing, then the bad debt reserve provided for in such Actual Closing
Balance Sheet shall be increased, and the Shareholders shall be obligated to
repurchase uncollected accounts receivable net of the bad debt reserve as so
increased. If, and to the extent that, on June 1, 1998, such Accrued Damages
Reserve is so found to be understated based upon claims experienced up to such
time and the reasonable expectation of further claims for periods prior to
Closing, then
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the bad debt reserve provided for in the Actual Closing Balance Sheet shall be
decreased, and the Shareholders shall be obligated to repurchase uncollected
accounts receivable net of the bad debt reserve as so decreased.
3.10 Agreement Does Not Violate Other Instruments. Except as listed in
Exhibit 3.10, the execution and delivery of this Agreement by the Acquired
Company or the Shareholders do not, and the consummation of the transactions
contemplated hereby will not, violate any provision of the Articles of
Incorporation, as amended, or Bylaws, as amended, of the Acquired Company or
violate or constitute an occurrence of default under any provision of, or
conflict with, or result in acceleration of any obligation under, or give rise
to a right by any party to terminate its obligations under, any mortgage, deed
of trust, conveyance to secure debt, note, loan, lien, lease, agreement,
instrument, or any order, judgment, decree or other arrangement to which the
Acquired Company or any of the Shareholders is a party or is bound or by which
the Acquired Company's assets are affected. Except as listed or described on
Exhibit 3.10 attached hereto, no consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental entity is required
to be obtained or made by or with respect to the Acquired Company, the
Shareholders, or any of the assets, properties or operations of the Acquired
Company or the Shareholders, in connection with the execution and delivery by
the Acquired Company or the Shareholders of this Agreement or any of the
agreements, certificates or other documents delivered or to be delivered on or
after the date hereof and at or prior to the Closing in connection with the
transactions contemplated hereby.
3.11 Absence of Changes. Since September 30, 1997, the Acquired Company
has not, except as disclosed on Exhibit 3.11 attached hereto:
3.11.1 Transferred, assigned, conveyed or liquidated any of
its assets or business or entered into any transaction or incurred any liability
or obligation, other than in the ordinary course of its business;
3.11.2 Suffered any material adverse change in its business,
operations, or financial condition and neither the Acquired Company nor any of
the Shareholders has become aware of any event or state of facts which may
result in any such material adverse change;
3.11.3 Suffered any destruction, damage or loss, not covered
by insurance;
3.11.4 Suffered, permitted or incurred the imposition of any
lien, charge, encumbrance (which as used herein includes, without limitation,
any mortgage, deed of trust, conveyance to secure debt or security interest) or
claim upon any of its assets, except for any current year lien with respect to
personal or real property taxes not yet due and payable;
3.11.5 Committed, suffered, permitted or incurred any default
in any liability or obligation;
3.11.6 Made or agreed to any adverse change in the terms of
any contract or instrument to which it is a party;
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3.11.7 Waived, canceled, sold or otherwise disposed of, for
less than the face amount thereof, any claim or right which it has against
others;
3.11.8 Declared, promised or made any distribution or other
payment to its Shareholders (other than reasonable compensation for services
actually rendered) or issued any additional shares or rights, options or calls
with respect to the capital stock of the Acquired Company, or redeemed,
purchased or otherwise acquired any of the capital stock of the Acquired
Company, or made any change whatsoever in the Acquired Company's capital
structure (if such action would affect the ability of the Acquired Company to
consummate the transactions contemplated in this Agreement or would cause the
necessity of obtaining the consent of any individual or entity not disclosed in
Exhibit 3.10);
3.11.9 Paid, agreed to pay or incurred any obligation for any
payment for, any contribution or other amount to, or with respect to, any
employee benefit plan, or paid any bonus to, or granted any increase in the
compensation of, the Acquired Company's officers, agents or employees (unless
made at times and in amounts consistent with the historical practices of the
Acquired Company), or made any increase in the pension, retirement or other
benefits of the Acquired Company's directors, officers, agents, field
representatives or other employees;
3.11.10 Committed, suffered, permitted or incurred any
transaction or event which would increase the Acquired Company's tax liability
for any prior taxable year;
3.11.11 Incurred any other liability or obligation or entered
into any transaction other than in the ordinary course of business;
3.11.12 Received any notices indicating, and neither the
Acquired Company nor any of the Shareholders has reason to believe, that any
supplier has taken or contemplates any steps which could disrupt the business
relationship of the Acquired Company with said supplier or could result in the
diminution in the value of the Acquired Company as a going concern;
3.11.13 Paid, agreed to pay or incurred any obligation for any
payment of any indebtedness except current liabilities incurred in the ordinary
course of business and except for payments as they become due pursuant to
governing agreements disclosed on Exhibit 3.8; or
3.11.14 Delayed or postponed the payment of any liabilities,
whether current or long term, or failed to pay in the ordinary course of
business any liability on a timely basis consistent with prior practice.
3.12 Litigation. Except as otherwise set forth in Exhibit 3.12 hereto,
there is no suit, action, proceeding, claim or investigation pending or
threatened against, or affecting, the Acquired Company and there exists no basis
or grounds for any such suit, action, proceedings, claim or investigation. None
of the items described in Exhibit 3.12, singly or in the aggregate, if pursued
and/or resulting in a judgment would have an adverse effect on the assets, the
business, goodwill or financial condition of the Acquired Company, or the right
of the Acquired Company or the Shareholders to consummate the transactions
contemplated hereby.
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3.13 Licenses and Permits; Compliance With Law. The Acquired Company
holds all licenses, certificates, permits, franchises and rights from all
appropriate federal, state or other public authorities necessary for the conduct
of its business and the use of its assets. All such licenses, certificates,
permits, franchises and rights are listed on Exhibit 3.13. Except as noted in
Exhibit 3.13, the Acquired Company is presently conducting its business so as to
comply in all respects with all applicable statutes, ordinances, rules,
regulations and orders of any governmental authority. Further, the Acquired
Company neither is presently charged with nor is under governmental
investigation with respect to any actual or alleged violation of any statute,
ordinance, rule or regulation, nor is presently the subject of any pending or
threatened adverse proceeding by any regulatory authority having jurisdiction
over its business, properties or operations. Neither the execution nor delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will result in the termination of any such license, certificate, permit,
franchise or right held by the Acquired Company which is to be assigned pursuant
to this Agreement, and all such assigned licenses, certificates, permits,
franchises and rights will inure to the benefit of the ▇▇▇▇ Sub after the
transactions contemplated by this Agreement.
3.14 Contracts, Etc.
3.14.1 Exhibit 3.14 hereto consists of a true and complete
list of all contracts, agreements and other instruments relating to the
Business, except for those contracts, insurance policies and Benefit Plans
listed in Exhibits 3.7.1.3, 3.7.2.2, 3.8, 3.9, 3.13, 3.15.1, 3.15.2, 3.17, and
3.20, respectively, and except for those contracts with independent
owner-operator truck drivers (for which the Acquired Company's standard form of
contract shall be provided), contracts with customers other than contracts with
the twenty customers of the Acquired Company that have accounted for the
greatest portion of the Acquired Company's revenue within the preceding twelve
(12) months, and contracts which are both terminable by the Acquired Company
without premium or penalty upon thirty (30) days' notice to the other party, and
which provide for payments or obligations of less than $25,000.00 in the
aggregate. Contemporaneously with the delivery of the Exhibits to this
Agreement, the Acquired Company and the Shareholders have delivered a true and
complete copy of each such contract, agreement or instrument required to be
listed pursuant to this Agreement, certified as such by a duly authorized
officer of the Acquired Company and the Shareholders, including those listed in
Exhibits 3.7.1.3, 3.7.2.2, 3.8, 3.9, 3.13, 3.14, 3.15.1, 3.15.2, 3.17, and 3.20.
3.14.2 All of the contracts, agreements, policies of insurance
or instruments described in Exhibits 3.7.1.3, 3.7.2.2, 3.8, 3.9, 3.13, 3.14,
3.15.1, 3.15.2, 3.17, and 3.20 hereto are valid and binding upon the Acquired
Company and the other parties thereto and are in full force and effect and
enforceable in accordance with their terms, and none of the Acquired Company or
any other party to any such contract, commitment or arrangement has breached any
provision of, or is in default under, the terms thereof, and there are no
existing facts or circumstances which would prevent the work in process of the
Acquired Company or their contracts and agreements from maturing in due course
into fully collectible accounts receivable. Except for items specifically
described in Exhibit 3.14, neither the Acquired Company nor any of the
Shareholders has received any payment from any contracting party in connection
with or as an inducement for entering into any contract, agreement, policy or
instrument except for payment for actual services rendered or to be rendered by
the Acquired Company consistent with amounts historically charged for such
services.
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3.15 Intellectual Property; Computer Software.
3.15.1 Intellectual Property.
3.15.1.1 Exhibit 3.15.1 hereto sets forth a
complete and correct list and summary description of all trademarks, trade
names, service marks, service names, brand names, copyrights and patents,
registrations thereof and applications therefor, applicable to or used in the
business of the Acquired Company, together with a complete list of all licenses
granted by or to the Acquired Company with respect to any of the above. All such
trademarks, tradenames, service marks, service names, brand names, copyrights
and patents are owned by the Acquired Company, free and clear of all liens,
claims and encumbrances of any nature whatsoever. Neither the Acquired Company
nor any of the Shareholders is currently in receipt of any notice of any
violation of, and the Acquired Company is not violating, the rights of others in
any trademark, trade name, service ▇▇▇▇, copyright, patent, trade secret,
know-how or other intangible asset.
3.15.1.2 Attached hereto as Exhibit 3.15.1 are
copies of the Certificates of Registration issued by the United States Patent
and Trademark Office for the trademarks listed on Exhibit 3.15.1. The trademark
registrations specified in Section 3.15.1.(iii) below for the trademarks listed
on Exhibit 3.15.1 are owned exclusively by the Acquired Company, free and clear
of all liens, claims, security interests and encumbrances of any nature
whatsoever and the Acquired Company has the right to use the trade dress
currently used in connection therewith. Neither the Acquired Company nor any of
the Shareholders is currently in receipt of any notice of any violation of, and
the Acquired Company is not infringing on, the rights of any other party in any
trademark, trade name, or service ▇▇▇▇ used in connection with the business of
the Acquired Company.
3.15.1.3 The Acquired Company is the owner of
Federal Registrations in the U. S. Patent and Trademark Office as set forth on
Exhibit 3.15.1 for use in connection with the business of the Acquired Company,
and such registrations are in full force and effect. In addition, the Acquired
Company is the owner of an unregistered logo set forth on Exhibit 3.15.1.
3.15.1.4 The Acquired Company has the right to use
and transfer the trade dress currently used in connection with the packaging and
promotion of its products under these marks;
3.15.1.5 Except as set forth on Exhibit 3.15.1, the
Acquired Company has not granted any license, permits on or other authorization
to any other person or entity to use said marks or tradenames, or has made any
conveyance of any such rights.
3.15.1.6 There have been, and are, no past or
present disputes, demands, or litigation challenging or casting doubt on the
ownership by the Acquired Company or any predecessor of any of the said marks or
challenging the validity of any of the marks or the registration thereof.
3.15.1.7 There are no prior settlements,
agreements, or administrative or judicial decisions affecting ownership or
validity of the assigned marks or limiting the right of the Acquired Company or
any predecessor owner to use or register the marks or to grant this assignment.
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3.15.1.8 There are no other agreements, contracts
or licenses granting, limiting, encumbering or otherwise directly or indirectly
affecting ownership or use or right to use or assign the marks by the Acquired
Company.
3.15.1.9 There are no current infringements of the
said marks by any third party.
3.15.2 The Acquired Company has sole, full and clear title to
that computer software described as "Owned Software" on Exhibit 3.15.2 hereto
(the "Owned Software"), free of all claims, including claims or rights of
employees, agents, consultants or other parties involved in the development or
creation of such computer software. Except as set forth on Exhibit 3.15.2
hereto, the Acquired Company has the right and license to use that software
described as "Licensed Software" on Exhibit 3.15.2 free and clear of any
limitations or encumbrances except as may be set forth in any license agreements
listed in Exhibit 3.15.2. Exhibit 3.15.2 sets forth a list of all license fees,
rents, royalties or other charges that the Acquired Company is required or
obligated to pay with respect to Licensed Software. The Acquired Company is in
full compliance with all provisions of any license, lease or other similar
agreement pursuant to which it has rights to use the Licensed Software. Except
as disclosed on Exhibit 3.15.2, none of the Licensed Software has been
incorporated into or made a part of any Owned Software or any other Licensed
Software and none of the Owned Software is dependent on any Licensed Software in
order to freely operate in the manner in which it is intended. The Owned
Software and Licensed Software constitute all software used in the Business (the
"Acquired Company Software"). The Acquired Company is not infringing any
intellectual property rights of any other person or entity with respect to the
Acquired Company's Software, and no other person or entity is infringing any
intellectual property rights of the Acquired Company with respect to the
Acquired Company's Software which the Acquired Company leases or licenses to it.
3.16 Labor Matters. Exhibit 3.16 sets forth a list of all employees and
independent contractors of the Acquired Company, their current salaries or rates
and the Acquired Company's salary increase guidelines. Except as set forth on
Exhibit 3.16, within the last three (3) years the Acquired Company has not been
the subject of any union activity or labor dispute, nor has there been any
strike of any kind called or threatened to be called against it; and, except as
set forth on Exhibit 3.16, neither the Acquired Company nor any of the
Shareholders has violated any federal, state, or other governmental statutes,
regulations, or ordinances relating to employment and labor matters, including,
without limitation, the provisions of Title VII of the Civil Rights Act of 1964
(race, color, religion, sex, and national origin discrimination), 42 U.S.C. ss.
1981 (discrimination), 42 U.S.C. ▇▇.▇▇. 621-634 (the Age Discrimination in
Employment Act), 29 U.S.C. ss. 206 (equal pay), Executive Order 11246 (race,
color, religion, sex, and national origin discrimination), Executive Order 11141
(age discrimination), ss. 503 of the Rehabilitation Act of 1973 (handicap
discrimination), 42 U.S.C. ▇▇.▇▇. 12101-12213 (Americans with Disabilities Act),
29 U.S.C. ▇▇.▇▇. 2001-2654 (Family and Medical Leave Act), 29 U.S.C. ▇▇.▇▇.
651-678 (occupational safety and health) and requirements relating to the
documentation of the nationality of employees. There has not been, and, to the
best knowledge of the Acquired Company and the Shareholders, there will not be,
any adverse change in relations with employees and independent contractors of
the Acquired Company as a result of the transactions contemplated by this
Agreement. The staffing and employment levels of the Acquired Company are now,
and will be at Closing, sufficient to run the Business at levels of production,
sales, marketing
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and administration consistent with the levels of production, sales, marketing
and administration for the prior fiscal year.
3.17 Benefit Plans.
3.17.1 Exhibit 3.17 lists every pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, any other written or
unwritten employee program, arrangement, agreement or understanding, (whether
arrived at through collective bargaining or otherwise), any medical, vision,
dental or other health plan, any life insurance plan or any other employee
benefit plan or fringe benefit plan, including, without limitation, any
"employee benefit plan," as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 as amended ("ERISA") and any
multiemployer plan within the meaning of Section 3(37) of ERISA, currently or
previously adopted, maintained, sponsored in whole or in part or contributed to
by the Acquired Company or any current or former member of a commonly controlled
group of trades or businesses (as defined in Section 4001(b)(1) of ERISA)
including the Acquired Company for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
of the Acquired Company and under which employees, retirees, dependents,
spouses, directors, independent contractors or other beneficiaries of the
Acquired Company are eligible to participate or under or in connection with
which the Acquired Company has any contingent or noncontingent liability of any
kind whether or not probable of assertion (collectively, the "Benefit Plans").
Any of the Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, or an "employee welfare benefit plan"
as that term is defined in Section 3(1) of ERISA, is referred to herein as an
"ERISA Plan." No Benefit Plan is or has been a multiemployer plan within the
meaning of Section 3(37) of ERISA.
3.17.2 Exhibit 3.17 also lists: (a) all trust agreements or
other funding arrangements, including insurance contracts, and all amendments
thereto applicable to the Benefit Plans, (b) where applicable, with respect to
any such plan or plan amendments, the most recent determination letters issued
by the United States Internal Revenue Service, (c) all rulings, opinion letters,
information letters or advisory opinions issued by the United States Department
of Labor after December 31, 1974, with respect to each such Benefit Plan, (d)
annual reports or returns and audited or unaudited financial statements for the
most recent three plan years and any amendments thereto, and (e) the most recent
summary plan descriptions and any material modifications thereto with respect to
such Benefit Plans. Contemporaneously with the delivery of the Exhibits to this
Agreement, the Acquired Company and the Shareholders have delivered a true and
complete copy of each such Benefit Plan, agreements, letters, rulings, opinions,
letters, reports, returns, financial statements and/or summary descriptions
described in Sections 3.17.1 or 3.17.2 hereof, certified as such by a duly
authorized officer of the Acquired Company and by the Shareholders.
3.17.3 All the Benefit Plans and the related trusts subject to
ERISA comply with and have been administered in compliance with the provisions
of ERISA, all provisions of the Code relating to qualification and tax exemption
under Code Sections 401(a) and 501(a) or otherwise applicable to secure intended
tax consequences, all applicable state or federal securities laws and all other
applicable laws, rules and regulations and collective bargaining agreements, and
neither the Acquired Company nor any Shareholder has received any notice from
any governmental agency or
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instrumentality questioning or challenging such compliance. All necessary
governmental approvals for the Benefit Plans which have been obtained,
including, but not limited to, timely determination letters on the qualification
of the ERISA Plans and tax exemption of related trusts, as applicable, under the
Code and timely registration and disclosure under applicable securities laws,
and all such governmental approvals continue in full force and effect. No event
has occurred which will or could give rise to disqualification of any such plan
under Sections 401(a) or 501(a) of the Code or to a tax under Section 511 of the
Code.
3.17.4 None of the Acquired Company or any administrator or
fiduciary of any such Benefit Plan (or agent or delegate of any of the
foregoing) has engaged in any transaction or acted or failed to act in any
manner which could subject the Acquired Company to any direct or indirect
liability (by indemnity or otherwise) for a breach of any fiduciary,
co-fiduciary or other duty under ERISA. No oral or written representation or
communication with respect to any aspect of the Benefit Plans has been made to
employees of the Acquired Company prior to the Closing Date which is not in
accordance with the written or otherwise preexisting terms and provisions of
such Benefit Plans in effect immediately prior to the Closing Date. Except as
disclosed in Exhibit 3.17 there are no unresolved claims or disputes under the
terms of, or in connection with, the Benefit Plans, and no action, legal or
otherwise, has been commenced with respect to any claim.
3.17.5 All annual reports or returns, audited or unaudited
financial statements, actuarial valuations, summary annual reports and summary
plan descriptions issued with respect to the Benefit Plans are correct and
accurate as of the dates thereof, and there have been no amendments filed to any
of such reports, returns, statements, valuations or descriptions or required to
make the information therein true and accurate.
3.17.6 No "party in interest" (as defined in Section 3(14) of
ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of the Code)
of any Benefit Plan has engaged in any "prohibited transaction" (within the
meaning of Section 4975(c) of the Code or Section 406 of ERISA). There has been
no (a) "reportable event" (as defined in Section 4043 of ERISA), or event
described in Section 4062(f) or Section 4063(a) of ERISA or (b) termination or
partial termination, withdrawal or partial withdrawal with respect to any of the
ERISA Plans which the Acquired Company (or any member of a controlled group of
trades or businesses as defined in Section 4001(b) which has, since January 1,
1975, included the Acquired Company) maintains or contributes to or has
maintained or contributed to or was required to maintain or contribute to for
the benefit of employees of the Acquired Company or any subsidiaries now or
formerly in existence. With respect to any termination or withdrawal from any
such ERISA Plan, the Acquired Company has no direct or indirect liability to
said Plan or any beneficiary thereof.
3.17.7 For any ERISA Plan which is an employee pension benefit
plan as defined in ERISA Section 3(2), the fair market value of such Benefit
Plan's assets equals or exceeds the present value of all benefits (whether
vested or not) accrued to date by all present or former participants in such
Benefit Plan. For this purpose the assumptions prescribed by the Pension Benefit
Guaranty Corporation for valuing plan assets or liabilities upon plan
termination shall be applied and the term "benefits" shall include the value of
any early retirement or ancillary benefits (including shutdown benefits)
provided under any Benefit Plan.
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3.17.8 As of September 30, 1997, the Acquired Company had no
current or future liability under any Benefit Plan that was not reflected in the
Interim Financial Statements and the liability of the Acquired Company in
connection with any Benefit Plan as of Closing will be fully accrued against in
the determination of the Net Worth of the Acquired Company as determined under
Section 2.1.7 hereof.
3.17.9 The Acquired Company does not maintain any Benefit Plan
providing deferred or stock based compensation which is not reflected in the
Interim Financial Statements.
3.17.10 Except as disclosed on Exhibit 3.17, the Acquired
Company has not maintained, and does not now maintain, a Benefit Plan providing
welfare benefits (as defined in ERISA Section 3(l)) to employees after
retirement or other separation of service except to the extent required under
Part 6 of Title I of ERISA and Code Section 4980B.
3.17.11 Except as disclosed in Exhibit 3.17, the consummation
of the transactions contemplated by this Agreement will not (i) entitle any
current or former employee of the Acquired Company to severance pay,
unemployment compensation or any payment contingent upon a change in control or
ownership of the Acquired Company, or (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation due to any such employee or
former employee.
3.17.12 All Benefit Plans subject to section 4980B of the
Code, as amended from time to time, or Part 6 of Title I of ERISA or both have
been maintained in compliance with the requirements of such laws and any
regulations (proposed or otherwise) issued thereunder.
3.18 Customers and Brokers. Exhibit 3.18 attached hereto consists of a
true and correct list of all brokers utilized by the Acquired Company within the
preceding twelve months and the twenty (20) customers of the Acquired Company
that have accounted for the greatest portion of revenue of the Acquired Company
within the preceding twelve months, setting forth as to each customer and broker
its name, address, telephone number and principal person of contact where
available, and total payments by dollar amounts by each such customer and broker
within the preceding twelve months. Neither the Acquired Company nor any
Shareholder has received any notice, or has any knowledge that any such customer
or broker of the Acquired Company has taken or contemplates taking any steps
which could disrupt the business relationship of the Acquired Company with such
customer or broker or could result in the diminution in the value of the
business of the Acquired Company with such customer or broker or could result in
the diminution in the value of the business of the Acquired Company as a going
concern.
3.19 Environmental Matters. Except as set forth in Exhibit 3.19, no
real property now or previously used by the Acquired Company or now or
previously owned or leased by the Acquired Company (the "Property") has been
used by the Acquired Company or any other party for the handling, treatment,
storage or disposal into the environment of any Hazardous Substance (as
hereinafter defined). Except as set forth in Exhibit 3.19, no release,
discharge, spillage or disposal of any Hazardous Substance and no soil, water or
air contamination by any Hazardous Substance has occurred or is occurring in,
from or on the Property. Except as set forth in Exhibit 3.19, the Acquired
Company has complied with all reporting requirements under any applicable
federal, state or local environmental laws and permits, and there are no
existing violations by the Acquired
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Company of any such environmental laws or permits. Except as set forth in
Exhibit 3.19, there are no claims, actions, suits, proceedings or investigations
related to the presence, release, production, handling, discharge, spillage,
transportation or disposal of any Hazardous Substance or ambient air conditions
or contamination of soil, water or air by any Hazardous Substance pending or
threatened with respect to the Property or otherwise against the Acquired
Company in any court or before any state, federal or other governmental agency
or private arbitration tribunal and there is no basis for any such claim,
action, suit, proceeding or investigation. Acquired Company has not installed,
maintained or used any underground storage tanks, asbestos, or
asbestos-containing materials on the Property. For the purposes of this
Agreement, "Hazardous Substance" shall mean any hazardous or toxic substance or
waste as those terms are defined by any applicable federal, state or local law,
ordinance, regulation, policy, judgment, decision, order or decree including,
without limitations, the Comprehensive Environmental Recovery Compensation and
Liability Act, 42 U.S.C. 9601 et seq. ("CERCLA"), the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1801 et seq. and the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq. ("RCRA"), and petroleum, petroleum products
and oil.
3.20 Insurance. Set forth in Exhibit 3.20 is a complete list of all
insurance policies which the Acquired Company has maintained with respect to its
business, properties or employees within the preceding three years. Except as
set forth in Exhibit 3.20, such policies are in full force and effect and no
event has occurred which would give any insurance carrier a right to terminate
any such policy. Such policies, with respect to their amounts and types of
coverage, are adequate to insure fully against risks to which the Acquired
Company and its property and assets are exposed. Except as set forth in Exhibit
3.20, since January 1, 1996, there has not been any change in the Acquired
Company's relationship with its insurers or in the premiums payable pursuant to
such policies.
3.21 Related Party Relationships. Except as set forth in Exhibit 3.21,
no Shareholder or officer or director of the Acquired Company possesses,
directly or indirectly, any beneficial interest in, or is a director, officer or
employee of, any corporation, partnership, firm, association or business
organization which is a client, supplier, customer, lessor, lessee, lender,
creditor, borrower, debtor or contracting party with or of the Acquired Company
(except as a stockholder holding less than a one percent interest in a
corporation whose shares are traded on a national or regional securities
exchange or in the over-the-counter market).
3.22 Antitrust Matters. The Acquired Company has conducted and is
conducting the Business in compliance with all federal and state antitrust and
trade regulation laws, statutes, rules and regulations, including without
limitation, the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Act, the
Federal Trade Commission Act, state laws patterned after any of the above, all
laws forbidding price-fixing, collusion, or bid-rigging, and rules or
regulations issued pursuant to authority set forth in any of the above. With
respect to any of the foregoing, the Acquired Company is not presently directly
or indirectly involved with, charged with, or under any governmental
investigation with respect to, and there is no basis or grounds for, any charge,
claim, investigation, suit, action, proceeding or any actual or alleged
violation of any such law, statute, rule or regulation.
3.23 Suppliers. Attached hereto as Exhibit 3.23 is a complete and
correct list of all persons, partnerships, corporations, or entities from which
the Acquired Company has purchased any
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supplies relating to its business within the last six (6) months, along with
their respective addresses and telephone numbers.
3.24 Exhibits. All Exhibits attached hereto are true, correct and
complete as of the date of this Agreement, and will be true, correct and
complete as of the Closing, except to the extent that such Exhibits may be
untrue, incorrect or incomplete due to changes occurring due to the operation of
the Acquired Company in the ordinary course. Matters disclosed on each Exhibit
shall be deemed disclosed only for purposes of the matters to be disclosed in
such Exhibit and shall not be deemed to be disclosed for any other purpose
unless expressly provided therein.
3.25 Disclosure. No representation or statement contained herein or in
any certificate, schedule, list, exhibit or other instrument furnished to ▇▇▇▇
pursuant to the provisions hereof contains or will contain any untrue statement
of any material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
IV. SECURITIES LAWS.
4.1 No Registration Statement Required. The Shareholders represent that
they understand that the ▇▇▇▇ Common Stock, the Cash Consideration Note and the
Escrow Cash Note to be issued and delivered pursuant to the provisions of this
Agreement will not be registered under the 1933 Act, or under Alabama or any
other applicable "Blue-Sky" laws, in reliance upon the exemptions contained in
the 1933 Act and the General Rules and Regulations under the 1933 Act
promulgated by the SEC.
4.2 Investment Letter of Shareholders. Each of the Shareholders
represents, warrants and covenants to and with ▇▇▇▇ and the ▇▇▇▇ Sub that the
▇▇▇▇ Common Stock, the Cash Consideration Note and the Escrow Cash Note to be
issued and delivered pursuant to the provisions of this Agreement will be, when
issued and delivered, acquired by the Shareholder for investment for his or her
own account and not with a view to the subsequent resale or other distribution
thereof, except within the limitations prescribed under the Rules and
Regulations under the 1933 Act, or in some other manner which will not violate
the registration requirements of the 1933 Act or any applicable "Blue-Sky" laws,
and each Shareholder agrees to execute and deliver to ▇▇▇▇ and the ▇▇▇▇ Sub on
the Closing Date, a letter substantially in the form of Exhibit 4.2 attached
hereto, dated as of such Closing Date, to such effect.
4.3 Conditions Precedent to Transfer of ▇▇▇▇ Common Stock or Escrow
Cash Note. Each Shareholder understands, consents, and agrees that transfer of
the ▇▇▇▇ Common Stock, Cash Consideration Note and Escrow Cash Note received by
him or her under this Agreement, will be permitted or allowed only when:
4.3.1 such request for transfer is accompanied by an opinion
of counsel to ▇▇▇▇ and the ▇▇▇▇ Sub (prepared at the expense of ▇▇▇▇), to the
effect that neither the sale nor the proposed transfer results in a violation of
the 1933 Act or the Rules and Regulations thereunder or applicable "Blue-Sky"
laws, or
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4.3.2 such request for transfer is accompanied by a
"no-action" letter from the SEC and the applicable state securities regulatory
agency with respect to the proposed transfer, or
4.3.3 a Registration Statement under the 1933 Act and
applicable Blue-Sky laws is then in effect with respect to the ▇▇▇▇ Common Stock
Cash Consideration Note or Escrow Cash Note, as appropriate.
4.4 Legends on Certificates Representing Shares of ▇▇▇▇ Common Stock.
The ▇▇▇▇ Common Stock, the Cash Consideration Note and the Escrow Cash Note
issued and delivered to the Shareholders or the Representative under this
Agreement shall contain the following legend:
"THE SECURITIES ACT OF 1933 AND STATE SECURITIES LAWS
This Share of ▇▇▇▇ Bros. Transportation Inc. Common Stock
[promissory note] has not been registered under the Securities
Act of 1933, as amended, or under the securities laws of
Alabama or any other state and cannot be sold or transferred
unless (i) a Registration Statement under the Securities Act
of 1933, as amended, and any applicable state securities laws
is then in effect with respect to the [security]securities
represented hereby; or (ii) a written opinion from legal
counsel of the issuer is obtained to the effect that an
exemption from registration under the Securities Act of 1933,
as amended, and any applicable state securities laws is
available with respect to the proposed sale or transfer and
that no such registration is required; or (iii) a no action
letter or its then equivalent with respect to such sale or
transfer has been issued by the Staff of the Securities and
Exchange Commission and any applicable state securities
governmental body."
4.5 Resale Restrictions; Minimum Price Guarantees.
4.5.1 For a period of one (1) year from the Closing Date (the
"Restricted Period"), the shares of ▇▇▇▇ Common Stock held by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
shall not be voluntarily or involuntarily transferred, assigned, sold or
conveyed and the certificates representing such shares shall bear a legend to
that effect. The words "transfer, assign, sell or convey" as used in this
Section 4.5.1 shall include the grant of any proxy, the establishment of any
voting trust or any sale, hypothecation, pledge, assignment or other conveyance,
with or without consideration or incidence of ownership or title as to any share
of ▇▇▇▇ Common Stock owned of record or beneficially by the Shareholder,
regardless of whether record or beneficial title to such shares is thereby
transferred. After the Restricted Period, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ may not, during any one
calendar quarter, voluntarily or involuntarily transfer, assign, sell or convey
a number of shares of ▇▇▇▇ Common Stock which is greater than one percent of the
number of shares of ▇▇▇▇ Common Stock outstanding at the beginning of such
calendar quarter. In the event that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ sells shares of ▇▇▇▇ Common
Stock on the open market during the five (5) calendar quarters immediately
following the second anniversary of the Closing Date at a per share price which
is less than $6.50 per share (the "Per Share Minimum Price") (as the same may be
adjusted pursuant to Section 2.1.4 hereof), ▇▇▇▇ shall
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pay to ▇▇▇▇▇▇▇ the difference between the Per Share Minimum Price and the per
share price at which such shares were sold on the open market.
4.5.2 During the Restricted Period, the shares of ▇▇▇▇ Common
Stock held by ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall not be voluntarily or involuntarily
transferred, assigned, sold or conveyed and the certificates representing such
shares shall bear a legend to that effect. The words "transfer, assign, sell or
convey" shall have the meaning set forth in Section 4.5.1. After the Restricted
Period, ▇▇▇▇▇▇ ▇▇▇▇▇▇ may not, during any one (1) calendar quarter, voluntarily
or involuntarily transfer, assign, sell or convey a number of shares of ▇▇▇▇
Common Stock which is greater than one percent of the number of shares of ▇▇▇▇
Common Stock outstanding at the beginning of such calendar quarter. In the event
that during the five (5) calendar quarters immediately following the Restricted
Period ▇▇▇▇▇▇ ▇▇▇▇▇▇ sells shares of ▇▇▇▇ Common Stock on the open market at a
per share price which is less than the Per Share Minimum Price, Boyd shall pay
to ▇▇▇▇▇▇ the difference between the Per Share Minimum Price and the per share
price at which such shares were sold on the open market.
4.5.3 Notwithstanding the foregoing restrictions on transfer
of ▇▇▇▇ Common Stock set forth in Sections 4.5.1 and 4.5.2 hereof, each of the
Shareholders may (i) transfer shares of ▇▇▇▇ Common Stock pursuant to a pledge
or similar agreement to secure debt of such Shareholder (incurred in good faith
and not for the purpose of avoiding the restrictions set forth in this Section
4.5) owing to a bank or other bona fide financial institution, including,
without limitation, any such transfer upon the exercise by such bank or other
bona fide financial institution of its right under such pledge or similar
agreement to acquire beneficial or other ownership of the ▇▇▇▇ Common Stock
pledged thereunder and (ii) transfer shares of ▇▇▇▇ Common Stock to a spouse,
lineal ancestor, descendant or a trust for the benefit of any such individual;
provided, however, that transfers under this subsection 4.5.3 (ii) will be
permitted only if (a) such transferee executes and delivers to ▇▇▇▇ a letter
substantially in the form of Exhibit 4.5.3 attached hereto, (b) such transferee,
and such transferee's spouse (if any) if such transferee is a resident of a
"community property" state, executes and delivers to ▇▇▇▇ a Shareholder
Acknowledgment, Consent and Power of Attorney in the form attached as Exhibit
2.11 and (c) such transferee executes and delivers any agreements, documents and
instruments as may be requested by ▇▇▇▇ or its counsel to cause such transferee
to become bound by the terms of this Agreement (including, but not limited to,
the indemnification provisions herein) as if such transferee were a Shareholder
hereunder.
V. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇ AND ▇▇▇▇ SUB.
▇▇▇▇ and the ▇▇▇▇ Sub represent and warrant to, and for the benefit of,
the Acquired Company and the Shareholders as follows:
5.1 Organization and Standing. ▇▇▇▇ is a duly organized and validly
existing corporation in good standing under the laws of the State of Delaware
and the ▇▇▇▇ Sub is a duly organized and validly existing corporation in good
standing under the laws of the State of Alabama, and each has the full power and
authority (corporate and otherwise) to carry on its business in the places and
as it is now being conducted and to own and lease the properties and assets
which it now owns or leases.
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5.2 Corporate Power and Authority. Each of ▇▇▇▇ and the ▇▇▇▇ Sub has
the capacity and authority to execute and deliver this Agreement, to perform
hereunder, and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other person whomsoever. The execution,
delivery and performance by ▇▇▇▇ and the ▇▇▇▇ Sub of this Agreement and each and
every agreement, document and instrument provided for herein have been duly
authorized and approved by the respective Boards of Directors (or executive
committees thereof) of ▇▇▇▇ and the ▇▇▇▇ Sub. This Agreement, and each and every
other agreement, document and instrument to be executed, delivered and performed
by ▇▇▇▇ and the ▇▇▇▇ Sub in connection herewith, constitute or will, when
executed and delivered, constitute the valid and legally binding obligations of
▇▇▇▇ and the ▇▇▇▇ Sub, as the case may be, enforceable against each of them in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
5.3 Agreement Does Not Violate Other Instruments. The execution and
delivery of this Agreement by ▇▇▇▇ and the ▇▇▇▇ Sub do not, and the consummation
of the transactions contemplated hereby will not, violate any provisions of the
respective Articles of Incorporation, as amended, or respective Bylaws, as
amended, of ▇▇▇▇ and the ▇▇▇▇ Sub, or violate or constitute an occurrence of
default under any provision of, or conflict with, result in acceleration of any
obligation under, or give rise to a right by any party to terminate its
obligations under, any mortgage, deed of trust, conveyance to secure debt, note,
loan, lien, lease, agreement, instrument, or any order, judgment, decree or
other arrangement to which ▇▇▇▇ or the ▇▇▇▇ Sub is a party or is bound or by
which their assets are affected. Except as listed or described on Exhibit 5.3
attached hereto, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required to
be obtained or made by or with respect to the ▇▇▇▇ or the ▇▇▇▇ Sub, or any
assets, properties or operations of ▇▇▇▇ or the ▇▇▇▇ Sub, in connection with the
execution and delivery by ▇▇▇▇ or the ▇▇▇▇ Sub of this Agreement or the
consummation of the transactions contemplated hereby.
5.4 Ownership of ▇▇▇▇ Sub. ▇▇▇▇ owns beneficially and of record, free
and clear of any lien or other encumbrance, all of the issued and outstanding
shares of capital stock of the ▇▇▇▇ Sub.
5.5 Due Issuance of ▇▇▇▇ Stock; No Restrictions. The shares of ▇▇▇▇
Common Stock to be delivered to the Shareholders at the Closing will be, at the
time of such delivery, validly authorized and issued and fully paid and
nonassessable. Except as set forth in the Escrow Agreement, the shares of ▇▇▇▇
Common Stock to be delivered to the Shareholders at the Closing will have no
restrictions on their voting rights or their rights to receive dividends.
5.6 Litigation. There is no suit, action, proceeding, claim or
investigation pending or threatened against or affecting the right of ▇▇▇▇ or
the ▇▇▇▇ Sub to consummate the transactions contemplated hereby.
5.7 SEC Reports. Copies of all reports and other documents filed by
▇▇▇▇ pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since January 1, 1996 (the "▇▇▇▇ Reports") have been delivered by ▇▇▇▇ to
the Acquired Company and the Shareholders. The financial statements of ▇▇▇▇ in
its SEC Annual Report on Form 10-K for the fiscal year ended
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December 31, 1996 present fairly, in all material respects, the financial
position of ▇▇▇▇ at December 31, 1996, and the results of its operations and its
cash flows for the fiscal year ending December 31, 1996 in conformity with GAAP.
The unaudited financial statements in ▇▇▇▇'▇ SEC Quarterly Report on Form 10-Q
for the fiscal quarters ended March 31, 1997, June 30, 1997 and September 30,
1997 reflect all adjustments, including those of a normal recurring nature,
necessary to present fairly the operating results of ▇▇▇▇ as of March 31, 1997,
June 30, 1997 and September 30, 1997. As of their respective dates, the ▇▇▇▇
Reports (a) were in all material respects prepared in accordance with the
Exchange Act and the rules and regulations thereunder, (b) did not contain any
untrue statement of a material fact, and (c) did not omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since September 30, 1997, there has
not been any material adverse change in the business, financial conditions or
operations of ▇▇▇▇, taken as a whole, other than as disclosed in the ▇▇▇▇
Reports.
VI. CLOSING.
6.1 Time and Place of Closing and Effective Date.
6.1.1 The Closing shall be contemporaneous with the execution
of this document, which Closing shall be effected by mail with the offices of
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ as clearinghouse for signature pages of documents
delivery of which is required by Section 6.2 hereof. Upon receipt of such
signature pages and other documents required by Section 6.2, ▇▇▇▇▇, Day, ▇▇▇▇▇▇
& ▇▇▇▇▇ will (i) cause the Articles of Merger described in Section 2.1.2 to be
filed with the Secretary of State of Alabama,(ii) instruct ▇▇▇▇ to deliver the
Cash Consideration Note, (iii) upon surrender of all ▇▇▇▇▇▇▇ share certificates
in accordance with the Plan of Merger, instruct ▇▇▇▇ to deliver to the
Shareholders certificates representing the Stock Consideration (excluding the
Escrow Shares), (iv) instruct ▇▇▇▇ to effect transfer of the Escrow Cash to the
Escrow Agent pursuant to wire transfer instructions of the Escrow Agent and (v)
to deliver to the Escrow Agent certificates representing the Escrow Shares. On
the evening of the Closing, ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ will forward executed
originals of the documents described in Section 6.2 to each of the parties.
6.2 Transactions at Closing. At the Closing, each of the following
transactions shall occur:
6.2.1 The Acquired Company's and Shareholders' Performance. At
the Closing, the Acquired Company and the Shareholders shall deliver to ▇▇▇▇ and
the ▇▇▇▇ Sub, the following:
(a) all certificates representing shares of the
outstanding capital stock of the Acquired Company, duly endorsed for transfer or
accompanied by instruments of transfer reasonably satisfactory in form and
substance to ▇▇▇▇ and its counsel;
(b) copies of all consents, approvals,
acknowledgments and waivers described in Section 2.5 which have been obtained
prior to Closing;
(c) the approvals of all regulatory authorities
whose consent is required by law for the consummation of the transactions
contemplated by this Agreement;
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(d) certificates of compliance or certificates of
good standing of the Acquired Company, as of the most recent practicable date,
from the appropriate governmental authority of the jurisdiction of its
incorporation and any other jurisdiction which is set forth in Exhibit 3.1
hereto;
(e) certified copies of resolutions of the Board of
Directors of the Acquired Company approving the transactions set forth in this
Agreement and the Plan of Merger;
(f) certified copies of resolutions of the
Shareholders of the Acquired Company approving the transactions set forth in
this Agreement and the Plan of Merger;
(g) certificate of incumbency for the officers of
the Acquired Company who are executing this Agreement and the other documents
contemplated hereunder;
(h) resignations of each director and officer of
the Acquired Company and each noninstitutional trustee under any Benefit Plan
maintained by the Acquired Company;
(i) Employment Agreements executed by ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, substantially in the form of Exhibits 2.8.1 and
2.8.2, respectively;
(j) Covenants Not to Compete executed by the
Shareholders, substantially in the form of Exhibit 2.9;
(k) a favorable opinion of counsel of Rosen, Cook,
▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., counsel for the Acquired Company and the
Shareholders, substantially in the form and substance of the opinion attached
hereto as Exhibit 6.2.1(k);
(l) investment letter executed by the Shareholders,
substantially in the form of Exhibit 4.2;
(m) a duly executed Escrow Agreement, along with
five executed blank stock transfers, with signatures guaranteed, for each
Shareholder with regard to the Escrow Shares;
(n) executed Real Estate Lease Agreements
substantially in the form of Exhibit 2.10;
(o) evidence of termination of the Amended and
Restated Stock Transfer Restrictions and Buy-Out Agreement between the
Shareholders described in Section 2.11; and
(p) such other evidence of the performance of all
covenants and satisfaction of all conditions required of the Acquired Company
and the Shareholders
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by this Agreement, at or prior to the Closing, as ▇▇▇▇, the ▇▇▇▇ Sub or their
counsel may reasonably require.
6.2.2 Performance by ▇▇▇▇ and the ▇▇▇▇ Sub. At the Closing,
▇▇▇▇ and the ▇▇▇▇ Sub shall deliver to the Acquired Company and the Shareholders
the following:
(a) certificates representing the shares of ▇▇▇▇
Common Stock issuable to the Shareholders, the Cash Consideration Note and the
Escrow Cash Note as provided in Section 2.1 and the Plan of Merger, except for
the Escrow Shares, which shall be placed with the Escrow Agent along with the
executed blank stock transfers described in Section 2.1.6 pursuant to the terms
of this Agreement;
(b) a duly executed Escrow Agreement;
(c) the approvals of all regulatory authorities
whose consent is required by law for consummation of the transactions
contemplated by this Agreement;
(d) a favorable opinion of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ &
▇▇▇▇▇, counsel for ▇▇▇▇ and the ▇▇▇▇ Sub substantially in form and substance of
the opinion attached hereto as Exhibit 6.2.2(d);
(e) certificate of incumbency of the officers of
▇▇▇▇ and the ▇▇▇▇ Sub who are executing this Agreement and the other documents
contemplated hereunder;
(f) executed Employment Agreements, substantially
in the form of Exhibits 2.8.1 and 2.8.2;
(g) executed Covenants Not to Compete,
substantially in the form of Exhibit 2.9;
(h) certified copy of resolutions of the Boards of
Directors (or executive committees thereof) of ▇▇▇▇ and the ▇▇▇▇ Sub approving
the transactions set forth in this Agreement and the Plan of Merger;
(i) certified copies of resolutions of ▇▇▇▇ as sole
shareholder of ▇▇▇▇ Sub approving the Plan of Merger;
(j) executed Real Estate Lease Agreements
substantially in the form of Exhibit 2.10;
(k) executed Shareholders Agreement by and among
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the form attached hereto as
Exhibit 6.2.2(k); and
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(l) such other evidence of the performance of all
the covenants and satisfaction of all of the conditions required of ▇▇▇▇ and the
▇▇▇▇ Sub by this Agreement at or before the Closing as the Acquired Company, the
Shareholders or their counsel may reasonably require.
6.2.3 Performance by ▇▇▇▇, the Acquired Company and the
Shareholders.
6.2.3.1 Articles of Merger. At the Closing, the
Articles of Merger described in Section 2.1.2 shall be filed with the Secretary
of State of the State of Alabama.
6.2.3.2 Escrow Agreement; Execution and Delivery.
At the Closing, ▇▇▇▇, the Acquired Company, the Shareholders and the Escrow
Agent shall enter into the Escrow Agreement.
6.2.4 Post Closing Obligations.
6.2.4.1 Board of Directors. At the February, 1998
meeting of its Board of Directors, ▇▇▇▇ will recommend that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ be
appointed to the ▇▇▇▇ Board of Directors until its next annual stockholders'
meeting, and at such annual stockholders' meeting ▇▇▇▇ will recommend to its
stockholders that ▇▇▇▇▇▇▇ be elected to the Board for a full term.
6.2.4.2 Release of Shareholder Guaranties. Within
sixty (60) days from the date of Closing, ▇▇▇▇ will cause all personal
guaranties of indebtedness of the Acquired Company by the Shareholders to be
released. If ▇▇▇▇ is unable to obtain such releases, it will pay or refinance
the indebtedness, or take such other actions as are necessary to relieve the
Shareholders of personal liability therefor; provided, however, that, for
purposes of this Section 6.2.4.2, the provision by ▇▇▇▇ of a corporate guaranty
to the Shareholders of any such indebtedness shall not be considered sufficient
action of ▇▇▇▇ to relieve the Shareholders of personal liability for such
indebtedness.
VII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION.
7.1 Survival of Representations and Warranties of the Acquired Company
and the Shareholders. All representations, warranties, agreements, covenants and
obligations made or undertaken by the Acquired Company and the Shareholders in
this Agreement or in any document or instrument executed and delivered pursuant
hereto are material, have been relied upon by ▇▇▇▇ and the ▇▇▇▇ Sub and shall
survive the Closing hereunder for the periods set forth in Section 7.5 and shall
not merge in the performance of any obligation by any party hereto. Each
Shareholder jointly and severally agrees to and shall indemnify and hold
harmless ▇▇▇▇, the ▇▇▇▇ Sub or any assignee of ▇▇▇▇ or the ▇▇▇▇ Sub at all times
after the date of this Agreement from and against and in respect of, any
liability, claim, deficiency, loss, damage, or injury and all reasonable costs
and expenses (including reasonable counsel fees and costs of any suit related
thereto) suffered or incurred by ▇▇▇▇ or the ▇▇▇▇ Sub (collectively, a "Loss")
arising from (i) any misrepresentation, or breach of any covenant or warranty of
the Acquired Company or the Shareholders contained in this Agreement or any
exhibit, certificate or other instrument furnished or to be furnished by the
Acquired Company
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or the Shareholders hereunder (except for the Employment Agreements described in
Sections 2.8.1 and 2.8.2 and the Covenants Not to Compete described in Section
2.9), or any Third Party Claim (regardless of whether the claimant is ultimately
successful) which if true would be such a misrepresentation or breach, (ii) any
nonfulfillment of any agreement on the part of either of the Acquired Company or
any of the Shareholders under this Agreement or from any misrepresentation in or
omission from, any certificate or other instrument furnished or to be furnished
to ▇▇▇▇ or the ▇▇▇▇ Sub hereunder, (iii) any suit, action, proceeding, claim or
investigation pending or threatened against or affecting the Acquired Company
which arises from, which arose from, or which is based upon any matter or state
of facts existing prior to Closing, regardless of whether it is disclosed on
Exhibit 3.12, (iv) any matter regarding Hazardous Substances on any Real
Property or leased real property or regarding any applicable federal, state or
local environmental laws or permits pertaining to the Real Property or leased
real property, regardless of whether it has been disclosed in the Exhibits
hereto, (v) any claim against, or liability of, the Acquired Company that is of
a nature that, if known at Closing, would have been required to have been
disclosed pursuant to this Agreement or, (vi) any claim against or liability of
the Acquired Company, which accrued prior to the Closing Date, to the extent not
accrued or reserved against in the calculation of the Net Worth as reflected in
the balance sheet prepared pursuant to Section 2.1.7 of this Agreement,
regardless of whether such claim or liability is disclosed in the notes to the
financial statements prepared pursuant to Section 2.1.7. Notwithstanding the
immediately preceding sentence, the obligations of the Shareholders with respect
to breaches of covenants to perform acts after the Closing Date shall be several
and not joint. Furthermore, the parties hereto acknowledge that the Employment
Agreements described in Sections 2.8.1 and 2.8.2 and the Covenants Not to
Compete described in Section 2.9 are separate agreements from this Agreement and
that a breach under such Employment Agreements and Covenants Not to Compete
shall be subject to enforcement of applicable legal and equitable remedies and
shall not be governed by the provisions of this Article VII. Notwithstanding the
foregoing, the term "Loss" shall not include an award of punitive damages to be
paid by a party to this Agreement to any other party to this Agreement and, with
respect to a breach of the representations and warranties set forth in Section
3.9.2 hereof, ▇▇▇▇ and the ▇▇▇▇ Sub will not assert a claim other than to
enforce the remedies set forth in such section. Notwithstanding the foregoing,
the Shareholders shall not be required to indemnify ▇▇▇▇ for any liability,
loss, damage or injury to the extent ▇▇▇▇ receives proceeds from any of the
insurance policies identified in Exhibit 3.20 or from extended coverage with
respect to any of such policies which has been purchased by the Shareholders;
provided, however, that if an insurer denies payment of a claim under such an
insurance policy, ▇▇▇▇ shall be entitled to indemnification from the
Shareholders and shall be under no obligation to pursue any action against such
insurer. Since following the Closing, the Acquired Company will be merged into
the ▇▇▇▇ Sub and the ▇▇▇▇ Sub will be owned by ▇▇▇▇, the parties to this
Agreement agree that the Shareholders will have no right of reimbursement or
contribution against the Acquired Company or the ▇▇▇▇ Sub (including without
limitation, any rights of law), and any liability, loss, damage or injury and
reasonable costs and expenses (including reasonable counsel fees and costs of
any suit related thereto) suffered or incurred by the Acquired Company or the
▇▇▇▇ Sub against which ▇▇▇▇ is indemnified and held harmless as provided above
shall be deemed suffered by ▇▇▇▇, which shall, either independently or jointly
with the ▇▇▇▇ Sub, be entitled to enforce such indemnity.
To the extent that any deficiency for federal or state income taxes
which may be established against the Acquired Company for any taxable period
ending prior to the Closing is occasioned by
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a determination by the Internal Revenue Service or applicable state taxing
authority such that any increase in income for said period relates to a matter
which results in a reduction in income in a taxable period ending after the
Closing, the amount of the indemnifiable liability, loss, damage, or injury
shall be equal to (i) any tax liability resulting from the deficiency to the
extent it is not reduced in such a later taxable period; plus (ii) interest
(using a rate equal to the rate as established from time to time pursuant to
Section 6621 of the Internal Revenue Code of 1986, as amended) on the amount of
additional tax paid pursuant to such deficiency from the time such deficiency is
so paid until the last day of filing the Acquired Company's estimated quarterly
income tax returns (determined without extensions) for the taxable period or
periods in which the subsequent reductions may be claimed by adjustment in
filing such returns; plus (iii) the amount of any interest and penalties imposed
due to such deficiency.
Any examination, inspection or audit of the properties,
financial condition or other matters of the Acquired Company and its business
conducted by ▇▇▇▇ or the ▇▇▇▇ Sub pursuant to this Agreement shall in no way
limit, affect or impair the ability of ▇▇▇▇ or the ▇▇▇▇ Sub to rely upon the
representations, warranties, covenants and obligations of the Acquired Company
and the Shareholders set forth herein.
7.2 Survival of Representations and Warranties of ▇▇▇▇ and the ▇▇▇▇
Sub. All representations, warranties, agreements, covenants and obligations made
or undertaken by ▇▇▇▇ and the ▇▇▇▇ Sub in this Agreement or in any document or
instrument executed and delivered pursuant hereto are material, have been relied
upon by the Acquired Company and the Shareholders and shall survive the Closing
hereunder for the longest period available under applicable law (except for the
representations of ▇▇▇▇ and the ▇▇▇▇ Sub set forth in Sections 5.3, 5.6 and 5.7,
which shall survive for thirty months), and shall not merge in the performance
of any obligation by any party hereto. ▇▇▇▇ and the ▇▇▇▇ Sub, jointly and
severally, agree to and shall indemnify and hold harmless the Acquired Company
and the Shareholders at all times after the date of this Agreement from and
against and in respect of, any liability, claim, deficiency, loss, damage or
injury and all reasonable costs and expenses (including reasonable counsel fees
and costs of any suit related thereto) suffered or incurred by the Acquired
Company or the Shareholders arising from (i) any misrepresentation, or breach of
any covenant or warranty of ▇▇▇▇ and the ▇▇▇▇ Sub contained in this Agreement or
any exhibit, certificate or other instrument furnished or to be furnished by
▇▇▇▇ and the ▇▇▇▇ Sub hereunder, or any claim by a third party (regardless of
whether the claimant is ultimately successful) which if true would be such a
misrepresentation or breach, or (ii) any nonfulfillment of any agreement on the
part of ▇▇▇▇ and the ▇▇▇▇ Sub under this Agreement or from any misrepresentation
in or omission from, any certificate or other instrument furnished or to be
furnished to the Acquired Company or the Shareholders hereunder.
7.3 Maximum Aggregate Liability Amount. The maximum aggregate liability
of the Shareholders for indemnification under this Agreement (the "Maximum
Aggregate Liability Amount") shall be equal to Three Million Two Hundred Fifty
Thousand Dollars ($3,250,000.00) until the expiration of twenty-four months from
the Closing Date and, thereafter, shall be Two Million Dollars ($2,000,000.00),
and the obligation of the Shareholders for indemnification hereunder will
terminate when the Maximum Aggregate Liability Amount has been paid; provided,
however, that the Maximum Aggregate Liability Amount shall not be charged for or
reduced by, nor shall there be any Maximum Liability Amount for, any liability,
loss, damage, injury or claim
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resulting from a breach of the covenants, representations and warranties
contained in the provisions of Sections 3.1, 3.2, 3.3, 3.11.8, 3.11.9, 9.2 or
9.5, or from breach of the covenants contained in Section 2.3.1 to the extent it
pertains to the making of a payment described in Sections 3.11.8 and 3.11.9.
7.4 Minimum Aggregate Liability Amount. ▇▇▇▇ and the ▇▇▇▇ Sub agree not
to seek recourse against, and shall not recover from the Shareholders under this
Article VII on account of any liability, loss, damage, injury or claim until the
aggregate amount thereof exceeds Fifty Thousand Dollars ($50,000.00) (the
"Minimum Aggregate Liability Amount"), at which time claims may be asserted for
the Minimum Aggregate Liability Amount and amounts in excess of the Minimum
Aggregate Liability Amount. Notwithstanding the foregoing, there shall be no
Minimum Aggregate Liability Amount for, and the Minimum Aggregate Liability
Amount shall not be charged for or reduced by, any liability, loss, damage,
injury or claim resulting from the covenants, representations and warranties
contained in the provisions of Sections 3.1, 3.2, 3.3, 3.9.2, 3.11.8, 3.11.9,
9.2 or 9.5, or from a breach of the covenants contained in Section 2.3.1 to the
extent it pertains to the making of a payment described in Sections 3.11.8 and
3.11.9.
7.5 Survival Period for Claims Against Shareholders. A claim for
indemnification based on the covenants, representations and warranties contained
in the provisions of Sections 3.1, 3.2, 3.3, 3.11.8, 3.11.9, 3.19, 3.22, 9.2 or
9.5 or from a breach of the covenants contained in Section 2.3.1 to the extent
it pertains to the making of a payment described in Sections 3.11.8 and 3.11.9
shall survive for the longest period available under applicable laws and may be
made at any time. Except for such claims, a claim for indemnification hereunder
shall be forever barred unless made by notifying the Shareholders (a) in the
case of a claim based upon a tax liability of the Acquired Company (including,
without limitation, any claim based upon an assertion that any of the previously
filed tax returns of the Acquired Company are inaccurate or incomplete), within
the statutory period of limitations under the applicable tax statute, unless
such claim is raised by the taxing authority by way of an offset against any
claim or suit for refund or is allowed to be assessed after the expiration of
the applicable statute of limitations pursuant to a validly executed waiver or
extension thereof or pursuant to the mitigation provisions contained in the
Code, in which case a claim may be made within one year after such offset or
assessment, or (b) in all other cases, within thirty (30) months after the
Closing Date.
7.6 Notification and Defense of Claims.
7.6.1 Third Party Claims.
7.6.1.1 Notification and Defense Rights.
(i) If any party to this Agreement (an
"Indemnitee") receives written notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement (a "Third Party Claim") against or affecting such Indemnitee, and
if such assertion were presumed to be true (regardless of the actual outcome)
then the other party or parties could be obligated to provide indemnification
under this Agreement (an "Indemnifying Party"), then such Indemnitee will give
such Indemnifying Party reasonably prompt written notice thereof, but in any
event no later than thirty (30) calendar days after receipt of such
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written notice of such Third Party Claim. However, if it is reasonably
determined by the Indemnitee that immediate action is required to address a
condition giving rise to a Third Party Claim, the Indemnitee is authorized to
take immediate action without prior notice, and thereafter give notice to the
Indemnifying Party as soon as practicable. In such event the Indemnitee shall be
entitled to recover from the Indemnifying Party to the extent the Indemnifying
Party is liable for indemnification hereunder.
(ii) Failure of the Indemnitee to give the
notice described in subsection (i) above shall not relieve the Indemnifying
Party from any liability which it may have on account of indemnification or
otherwise, except to the extent that the Indemnifying Party is prejudiced
thereby.
(iii) If (a) the Indemnifying Party admits
in the Notice to Defend (defined below) its obligation to indemnify the
Indemnitee for the Third Party Claim, and (b) (i) the Indemnifying Party gives
the Indemnitee a bond from a bonding company rated A+ or better by A.M. Best and
Co. or from another bonding company otherwise acceptable to the Indemnitee or
gives the Indemnitee other security reasonably satisfactory to the Indemnitee
for the full amount of the asserted claim or if the independent certified public
accountant of the Indemnifying Party, which is regularly used by the
Indemnifying Party, certifies in writing to the Indemnitee that it would be
proper to reserve or accrue a lesser amount on the Indemnifying Party's
financial statements in accordance with generally accepted accounting
principles, then such bond or security will be for such lesser amount, (ii) or
in the case of where the Shareholder is the Indemnifying Party, the amount of
Escrow Shares equals or exceeds the full amount of the asserted claim and, with
respect to claims that are subject to the Maximum Aggregate Liability Amount,
such asserted claim is less than the remaining Maximum Aggregate Liability
Amount, and only in such event, the Indemnifying Party will have the sole right
to control the defense of such Third Party Claim at such Indemnifying Party's
sole expense by Indemnifying Party's own counsel (which counsel must be
reasonably satisfactory to the Indemnitee), by giving written notice to the
Indemnitee (the "Notice to Defend") no later than twenty (20) calendar days
after receipt of the above-described notice of such Third Party Claim.
(iv) In all circumstances other than that
described in subsection (iii) above, the Indemnifying Party may participate in
(but not control) the defense if it gives the Notice to Defend within such
twenty-day period, and the Indemnitee also will have the right to participate in
the defense of any Third Party Claim assisted by counsel of its own choosing;
provided, however, that the Indemnitee shall have the sole right to make any
significant decisions with respect to the defense of such Third Party Claim
except as to the settlement or compromise of such Third Party Claim which shall
be subject to the provisions of Section 7.6.1.2.
(v) During the period prior to receiving
the Notice to Defend, the Indemnitee can proceed to defend the claim, action or
proceeding and the Indemnitee shall be entitled to recover from the Indemnifying
Party to the extent the Indemnifying Party is liable for indemnification
hereunder.
(vi) Notwithstanding anything in this
Section 7.6.1.1 to the contrary, the Indemnifying Party shall not be entitled to
participate in, and the Indemnitee shall be entitled to sole and absolute
control over the defense, compromise or settlement of, any claim to the
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extent that the claim seeks an injunction or other similar equitable or
nonmonetary relief against the Indemnitee.
(vii) If the Indemnitee does not receive a
Notice to Defend with respect to a Third Party Claim within the twenty day
period described in subsection (iii) above, the Indemnitee may, at its option,
solely defend the Third Party Claim assisted by counsel of its own choosing, and
the Indemnifying Party will be liable for all costs and expenses, and all
settlement amounts (subject to and in accordance with Section 7.6.1.2), but only
to the extent the Indemnifying Party is liable for indemnification hereunder.
(viii) Notwithstanding the foregoing, in
the event that an insurer has assumed the defense of any Third Party Claim
pursuant to the terms of an insurance policy, then the parties agree, subject to
the terms of such policy, to let the counsel of such insurance company conduct
the defense of such Third Party Claim and both the Indemnifying Party and the
Indemnitee shall have the right to participate in the defense and (subject to
Section 7.6.1.1(vi)) hereof settlement of such Third Party Claim.
7.6.1.2 Settlement.
(i) In the circumstances described in
Section 7.6.1.1(iii) where the Indemnifying Party has the sole right to control
the defense of the Third Party Claim, the Indemnifying Party shall have the sole
right to settle such claim, provided that settlement is less than the amount of
the bond described in said Section or the amount of Escrow Shares held by ▇▇▇▇.
Furthermore, in the circumstances described in Section 7.6.1.1(vi), the
Indemnitee shall have the sole right to settle a Third Party Claim to the extent
provided in such Section.
(ii) In all other circumstances, if there
is a dispute between the Indemnifying Party and Indemnitee concerning whether a
Third Party Claim should be contested, settled or compromised, it shall be
settled, compromised or contested, in accordance with the next succeeding
subsections of this Section 7.6.1.2; provided, however, that the Indemnitee, or
its respective successors or assigns, shall neither be required to refrain from
paying or satisfying any claim which the Indemnifying Party has not acknowledged
in writing its obligations to indemnify the Indemnitee, or which has matured by
court judgment or decree, unless appeal is taken thereafter and proper appeal
bond posted by the Indemnifying Party, nor shall the Indemnitee be required to
refrain from paying or satisfying any Third Party Claim after and to the extent
that such Third Party Claim has resulted in an unstayed injunction or other
similar equitable relief against the Indemnitee or in an imposition of a lien
upon any of the properties or assets then held by the Indemnitee or its
respective successors and assigns (unless such claim shall have been discharged
or enforcement thereof stayed by the filing of a legally permitted bond by the
Indemnifying Party or otherwise, at its sole expense), or result in a breach or
default in a license, lease or other contract by which any of them is bound, or
would materially adversely affect their respective assets, businesses or
financial condition.
(iii) Subject to subsection (ii), in the
event that the Indemnifying Party, on the one hand, or the Indemnitee, on the
other hand, has reached a good faith, bona fide settlement agreement or
compromise, subject only to approval hereunder, with any claimant regarding a
matter which may be the subject of indemnification hereunder and desires to
settle on
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the basis of such agreement or compromise, such party who desires to so settle
or compromise shall notify the other party in writing of its desire setting
forth the terms of such settlement or compromise (the "Notice of Settlement").
(iv) The Third Party Claim may be settled
or compromised on the basis set forth in the Notice of Settlement unless within
twenty (20) days of the receipt of the Notice of Settlement the party who issued
the Notice of Settlement receives a notice from the other party of its desire to
continue to contest the matter (the "Notice to Contest") and, in such case:
(a) Should the Indemnitee deliver a Notice
to Contest, the claim shall be so contested and the liability of the
Indemnifying Party shall be limited as provided in subsection (c) below.
(b) If the settlement or compromise could
result in a claim for indemnification being made against the Indemnifying Party
and if the Indemnifying Party delivers the Notice to Contest, the claim shall be
so contested and the liability of the Indemnitee shall be limited as provided in
subsection (c) below.
(c) If a matter is contested as provided
in subsections (a) or (b) above and is later adjudicated, settled, compromised
or otherwise disposed of and such adjudication, compromise, settlement or
disposition results in a liability, loss, damage or injury in excess of the
amount for which one party desired previously to settle the matter as set forth
in the Notice of Settlement, then the liability of such party shall be limited
to such lesser proposed settlement amount and the party contesting the matter
shall be solely responsible for the amount in excess of such lesser proposed
settlement amount and without regard to any minimum or maximum restriction on
liability described in the Agreement.
(v) For an Indemnifying Party's Notice to
Contest to be effective, it must also state that the Indemnifying Party
acknowledges and agrees that it shall be obligated to indemnify the Indemnitee
for any amount in excess of the lesser proposed settlement amount as described
in subsection (iv)(c) above.
(vi) The Indemnifying Party hereby
expressly waives and renounces any and all rights to make a claim against the
Indemnitee or its respective directors, officers, agents and employees based
upon a right or claim of any Third Party to which it may become subrogated as a
result of making any payment for indemnification hereunder except to the extent
that such waiver adversely affects any rights of subrogation of an insurer under
an applicable insurance policy; provided however, nothing herein is intended to
constitute a waiver by the Indemnifying Party of any rights of subrogation to
which it may be entitled against persons other than those described herein.
7.6.2 Direct Claims. Any claim by an Indemnitee for
indemnification other than indemnification against a Third Party Claim (a
"Direct Claim") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, and the Indemnifying Party will have a period of
thirty (30) calendar days within which to respond in writing to such Direct
Claim. If the Indemnifying Party does not so respond within such thirty (30)
calendar day period, the Indemnifying
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Party will be deemed to have rejected such claim, in which event the Indemnitee
will be free to pursue such remedies as are set forth in Section 7.6.3 hereof.
7.6.3 Direct Claims Procedures.
(a) Any Direct Claim which the parties are unable
to resolve through negotiation within sixty (60) days of notice to the
Indemnifying Party of such Direct Claim (a "Dispute") shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "Association"), as the same are to be supplemented
hereunder, by a sole arbitrator. The decision of the arbitrator shall be final,
binding and conclusive and judgment upon the award rendered by the arbitrator
may be entered in any court or appropriate jurisdiction. With respect to such
arbitration:
(i) the arbitration proceeding shall be
held in the Association's office in Atlanta, Georgia, or in such other location
as is mutually agreeable to the parties and the arbitrator. (For purposes
herein, "party" shall refer to ▇▇▇▇ and, collectively, to the Shareholders and
the selection of an arbitrator on behalf of the Shareholders shall be made by
the Representative.)
(ii) the parties agree to use their best
efforts, in good faith, to select a sole arbitrator qualified to act as an
arbitrator based on the underlying nature of the Dispute. Both parties
acknowledge that under most circumstances a retired Judge or practicing attorney
would be most qualified to act as an arbitrator hereunder. Such arbitrator shall
be selected within twenty (20) business days after either party requests
arbitration. Upon selection, the arbitrator's name, address and telephone number
shall be forwarded to the Association's office in Atlanta, Georgia as part of
the arbitration process.
(iii) in the event the parties do not agree
on an arbitrator within twenty (20) days of demand for arbitration, the parties
shall be furnished with a list of arbitrators available from the Association.
The parties shall have ten (10) business days after receipt of such list to use
their best efforts, in good faith, to select an arbitrator from such list. In
the event a sole arbitrator is not agreed upon by the parties within the ten
(10) business days, then the arbitrator will be selected from the list provided
by the Association through a process of elimination in which each party
alternately strikes a name from such list and the arbitrator shall be the last
such name on the list. The Indemnifying Party shall be the first to strike a
name from such list.
(iv) the arbitrator is specifically
instructed to allow the parties reasonable discovery and to be guided therein by
the Federal Rules of Civil Procedure. If the arbitrator is not an attorney, or
is an attorney not familiar with the Federal Rules or Civil Procedure, and the
parties cannot agree among themselves with respect to discovery, the arbitrator
may consult an attorney and the cost of such consultation to the arbitrator
shall be an additional cost of the arbitration.
(v) once an arbitrator has been selected,
each party shall submit a statement of the case detailing the nature of the
Dispute, the basis for the position taken by the party, that party's
understanding of the basis for the position taken by the other party, legal
authority believed to govern the Dispute, a list of the exhibits and witnesses
known to the party at the point
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in time, and a request for discovery. In no event shall this submission exceed
five double spaced pages of test without specific written waiver first being
received from the arbitrator who shall specify additional pages allowed.
(vi) after the date of selection of an
arbitrator, the parties shall have a period not to exceed sixty (60) days to
conduct discovery as each deems appropriate. Once the discovery period has
closed, either by expiration of the time limit or by mutual agreement of the
parties, the arbitrator and the parties shall mutually agree upon a date to hold
the arbitration proceeding, said date not to be more than thirty (30) days after
the close of the discovery period. Prior to commencement of the arbitration
proceeding, each party shall serve an amended statement of the case, updating
the material set forth in the party's original statement of the case, and
including the list of witnesses who will testify, with a brief summation of the
testimony of such witnesses; which amended brief shall not exceed ten double
spaced pages of text without written waiver first being received from the
arbitrator.
(vii) Each party shall equally pay the fees
charged by the Association including any fee to be paid to the arbitrator, and
any cost incurred by the arbitrator as allowed by the Rules of the American
Arbitration Association, or this Section 7.6.3. In addition, in the award the
arbitrator shall specify which of the parties is the prevailing party, and the
prevailing party shall receive, as an additional part of the award,
his/their/its reasonable attorneys' fees, costs and expenses incurred in
connection with the arbitration proceeding in an amount deemed appropriate by
the arbitrator based upon the comparative fault of the parties. The amount of
fees and costs shall be based upon an affidavit from legal counsel of each
party, submitted as part of the arbitration proceeding, setting forth in
chronological order the dates legal services were rendered, the amount of time
within each day devoted to this proceeding, the name of the individual attorney,
paralegal and other assistants and his or her billing rate, and a list of
out-of-pocket costs or expenses incurred. The arbitrator shall take into account
the additional time involved in the arbitration hearing itself when considering
an award of reasonable attorneys' fees.
7.7 Escrowed Merger Consideration to be Used First for Indemnity. The
parties hereto agree that, prior to exercising any other rights or remedies ▇▇▇▇
or the ▇▇▇▇ Sub may have, ▇▇▇▇ shall first seek payment for claims pursuant to
this Agreement from the Escrow Shares and Escrow Cash, on an equal basis, held
pursuant to Section 2.1.6 before seeking payment directly from any Shareholder
for any amounts in excess of the value of the Escrow Shares and Escrow Cash.
Upon its reasonable belief of the occurrence of events giving rise to a claim
for indemnification of ▇▇▇▇ and the ▇▇▇▇ Sub by the Shareholders, ▇▇▇▇ shall
deliver notice to the Escrow Agent and the Shareholders in accordance with the
terms of Section 4 of the Escrow Agreement, setting forth the amount ▇▇▇▇
reasonably believes in good faith to be due and owing for such claim. An amount
of Escrow Cash equal to one-half of such amount and an amount of Escrow Shares
representing a value equal to one-half of such amount shall be released by the
Escrow Agent to ▇▇▇▇ upon delivery of such notice and the occurrence of an
Operative Event (as such term is defined in the Escrow Agreement). For purposes
of determining the number of Escrow Shares to be retained in escrow upon notice
of a claim not resolved prior to the first anniversary of the Closing Date, the
value of each share of ▇▇▇▇ Common Stock constituting the Escrow Shares shall be
calculated on the basis of the average closing price of the ▇▇▇▇ Common Stock as
quoted on the Nasdaq National Market for the twenty consecutive trading day
period ending on the trading day immediately prior to the first
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anniversary of the Closing Date. Upon resolution of any such claim, the
valuation of the Escrow Shares for purposes of determining the number of Escrow
Shares, if any, to be transferred to ▇▇▇▇ shall be recalculated on the basis of
a twenty day trading period ending on the trading day immediately prior to the
date of resolution of such claim. In the event that an amount is due and owing
that exceeds the combined value of the Escrow Cash and Escrow Shares then
remaining in escrow, the Shareholders shall (subject to Section 7.4 hereof)
remain personally liable for any such excess amounts.
7.7.1 Any amounts released from the Escrow Cash to satisfy a
claim for indemnity as provided above shall automatically reduce the principal
amount due under the Escrow Cash Note and interest to be paid to the
Shareholders under the Escrow Cash Note shall be calculated ab initio only on
the principal amount as so reduced.
7.8 Closing Date Audit Adjustments. Neither ▇▇▇▇ nor ▇▇▇▇ Sub shall
have a claim against the Acquired Company or the Shareholders for indemnity
pursuant to this Article VII in respect of a breach of any covenant,
representation, or warranty of the Seller or the Shareholders contained in or
made pursuant to this Agreement to the extent and in the amount that the subject
matter of any such breach is reflected in the calculation of Net Worth as of the
Closing Date pursuant to Section 2.1.7 of this Agreement or Net Operating
Results for December, 1997 pursuant to Section 2.1.8 of this Agreement;
provided, however, ▇▇▇▇ and the ▇▇▇▇ Sub shall have a claim for indemnification
to the extent that the amount of any liability, loss, damage, or injury and all
reasonable costs and expenses (including reasonable counsel fees and costs of
suit related thereto) exceeds the amount so reflected in such calculations.
VIII. TAX EFFECT OF THE TRANSACTION.
Neither ▇▇▇▇, the ▇▇▇▇ Sub, the Acquired Company nor the Shareholders
have made nor do any of them make herein any representation or warranty as to
the tax consequences of the transactions contemplated or provided for herein to
any party hereto. It is understood and agreed that each party has looked to its
own advisors for advice and counsel as to such tax effects.
It is the intent of the parties that the transactions herein shall
constitute a reorganization within the meanings of Sections 368(a)(1)(A) and
(a)(2)(D) of the Internal Revenue Code of 1986, as amended. ▇▇▇▇ represents that
it has no plan or intention to, following the Closing Date, issue additional
shares of its capital stock such that ▇▇▇▇ would lose "control" of the ▇▇▇▇ Sub
within the meaning of Section 368(c) of the Internal Revenue Code of 1986, as
amended. ▇▇▇▇ has no plan or intention to reacquire any of its stock issued in
the transactions contemplated by this Agreement. ▇▇▇▇ has no plan or intention
to liquidate the ▇▇▇▇ Sub, has no plan or intention to merge the ▇▇▇▇ Sub with
and into another corporation, to sell or otherwise dispose of any of the assets
of the Acquired Company acquired by ▇▇▇▇ in the transactions contemplated by
this Agreement, except for dispositions made in the ordinary course of business.
In addition to other information and records required to be kept and filed by
▇▇▇▇ and the ▇▇▇▇ Sub, ▇▇▇▇ and the ▇▇▇▇ Sub shall be responsible for
maintaining all documents and records required to be kept by such corporations
under Treasury Regulations Section 1.368-3 and ▇▇▇▇ and the ▇▇▇▇ Sub shall file
all information required by such regulation as a result of this transaction.
Furthermore, ▇▇▇▇ and ▇▇▇▇ Sub agree to make available all information requested
by the Shareholders reasonably requested by them and necessary
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to make any required filings pursuant to Treasury Regulations Section 1.368-3.
It is the present intent of ▇▇▇▇ and the ▇▇▇▇ Sub to continue the historic
business of the Acquired Company or to use a significant portion of the Acquired
Company's historic business assets in a business. In addition, the parties
hereto agree to make all requisite filings with the Internal Revenue Service
(and all other state and local taxing or regulatory authorities, as necessary)
in a manner consistent with reorganization treatment.
IX. GENERAL PROVISIONS.
9.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail, return receipt requested, first class postage
prepaid, or sent by Federal Express or similarly recognized overnight delivery
service with receipt acknowledged, addressed as follows:
9.1.1 If to the Acquired Company or the Shareholders:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Representative
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
and to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
and to:
Rosen, Cook, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇, Esq.
9.1.2 If to ▇▇▇▇ or ▇▇▇▇ Sub:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
▇▇▇▇ Bros. Transportation Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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and to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
3500 One Peachtree Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
9.1.3 If delivered personally, the date on which a notice,
request, instruction or document is delivered shall be the date on which such
delivery is made and, if delivered by mail or by overnight delivery service, the
date on which such notice, request, instruction or document is received shall be
the date of delivery. In the event any such notice, request, instruction or
document is mailed or shipped by overnight delivery service to a party in
accordance with this Section 9.1.3 and is returned to the sender as
nondeliverable, then such notice, request, instruction or document shall be
deemed to have been delivered or received on the fifth day following the deposit
of such notice, request, instruction, or document in the United States mails or
the delivery to the overnight delivery service.
9.1.4 Any party hereto may change its address specified for
notices herein by designating a new address by notice in accordance with this
Section 9.1.
9.2 Brokers.
9.2.1 The Acquired Company and the Shareholders, jointly and
severally, represent and warrant to ▇▇▇▇ and the ▇▇▇▇ Sub that no investment
banker, broker or finder has acted for it or them, in connection with this
Agreement or any of the transactions contemplated hereby. The Acquired Company
and the Shareholders, jointly and severally agree to indemnify and hold harmless
▇▇▇▇ and the ▇▇▇▇ Sub from and against any fee, claim, loss, or expense arising
out of any claim by any investment banker, broker or finder employed or alleged
to have been employed by it or them.
9.2.2 ▇▇▇▇ and the ▇▇▇▇ Sub, jointly and severally, represent
and warrant to the Acquired Company and the Shareholders that, except for ▇▇▇▇▇
& Associates, Ltd., they have not retained any investment banker, broker or
finder in connection with this Agreement or any of the transactions contemplated
hereby. ▇▇▇▇ shall be responsible for all fees owing to ▇▇▇▇▇ & Associates,
Ltd., and ▇▇▇▇ and the ▇▇▇▇ Sub agree to indemnify and hold harmless the
Acquired Company and the Shareholders from and against any fee, claim, loss, or
expense arising out of any claim by any investment banker, broker or finder
employed or alleged to have been employed by either of them.
9.3 Further Assurances. Each party covenants that at any time, and from
time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
9.4 Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall
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constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver.
9.5 Expenses. All expenses incurred by the parties hereto in connection
with or related to the authorization, preparation and execution of this
Agreement and the Closing of the transactions contemplated hereby, including,
without limitation of the generality of the foregoing, all fees and expenses of
brokers, agents, representatives, counsel and accountants employed by any such
party, shall be borne solely and entirely by the party which has incurred the
same. All such fees and expenses of the Acquired Company shall be borne by the
Shareholders. In no event shall any assets of the Acquired Company be utilized
for or be reduced by the payment of any such fees or expenses. Each Shareholder
hereby represents and warrants that no such fees or expenses have been paid by
the Acquired Company from any assets prior to the date of this Agreement, and
hereby covenants that the Acquired Company will not so pay any such fees or
expenses prior to or at the Closing. Notwithstanding the foregoing, if the Net
Worth of the Company is determined (in accordance with the procedures set forth
in Section 2.1.7) to be less than Four Million Dollars ($4,000,000.00), then all
fees and expenses of the Shareholders may be charged against and accrued in the
calculation of the Net Worth of the Acquired Company.
9.6 Nondisclosure of Terms. The Acquired Company and the Shareholders,
jointly and severally, represent and warrant that prior to the execution hereof
they have not disclosed any of the terms, conditions, obligations or matters
contained in or relating to this Agreement and the transactions contemplated
herein, and the Acquired Company and the Shareholders, jointly and severally,
covenant and agree that following the execution of this Agreement, it and they
shall not disclose to any person, individual or entity any of such terms,
conditions or matters and to keep the same confidential, regardless of whether
the Closing occurs.
9.7 Materiality. When an item in this Agreement is characterized as
"material," such item shall be deemed "material" even though individually it may
not be material, or even though the individual adverse effect on the assets or
the Business may not be material, if the liability, loss, damage or injury
(including all reasonable costs and expenses related thereto) arising from any
misrepresentation or other breach under this Agreement in connection with such
item and any other item or items (regardless of their characterization as
material) are in the aggregate material. Once all such items in the aggregate
are so deemed material, thereafter any liability, loss, damage or injury (and
related expenses) arising from any misrepresentation or breach in connection
with any item shall be deemed material and shall be deemed to have a material
adverse effect on the Acquired Company.
9.8 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns. The
invalidity or nonenforceability of this Agreement as to the Acquired Company or
any of the Shareholders shall not affect the validity or enforceability of this
Agreement as to others of such Acquired Company and Shareholders.
9.9 Headings. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
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9.10 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought.
9.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Alabama.
9.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.13 Pronouns. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
9.14 Exhibits Incorporated. All Exhibits attached hereto are
incorporated herein by reference, and all blanks in such Exhibits, if any, will
be filled in as required in order to consummate the transactions contemplated
herein and in accordance with this Agreement.
9.15 Time of Essence. Time is of the essence in this Agreement.
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IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed on its behalf, all on the day and year first above
written.
▇▇▇▇ BROS. TRANSPORTATION INC.
("▇▇▇▇")
By:
----------------------------------
Title:
-------------------------------
W.T. ACQUISITION CORP.
("▇▇▇▇ SUB")
By:
----------------------------------
Title:
-------------------------------
▇▇▇▇▇▇▇ TRANSPORT, INC.
("Acquired Company")
By:
----------------------------------
Title:
-------------------------------
SHAREHOLDERS
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
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LIST OF EXHIBITS
EXHIBITS
--------
2.1.1 Plan of Merger.
2.1.3(a) Form of Cash Consideration Note.
2.1.3(b) Form of Escrow Cash Note.
2.1.6 Form of Escrow Agreement.
2.1.7 Accounting Changes.
2.1.11 Form of Shareholder Acknowledgment, Consent and Power of
Attorney.
2.6 Shareholder Loans.
2.8.1 Form of Employment Agreement between ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
2.8.2 Form of Employment Agreement between ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇.
2.9 Form of Covenant Not to Compete.
2.10 Form of Real Estate Lease Agreement.
3.1 List of Jurisdictions Where There is Good Standing Status.
3.2 Articles of Incorporation and Bylaws.
3.4 List of Equity Investments.
3.5.1 1995 and 1996 Financial Statements and Interim Financial
Statements; Deviations from Consistency.
3.5.2 List of Liabilities not disclosed in the Financial Statements.
3.6 List of Tax Matters and Copies of Federal Income Tax Returns.
3.7.1.1 Fixed Assets and Depreciation Schedules.
3.7.1.3 List of Leased Assets - other than Real Estate.
3.7.1.7 Inventory - Not Readily Useable or Salable.
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3.7.1.8 Rights to Purchase Acquired Company Assets.
3.7.1.9 Bank Accounts and Safe Deposit Boxes of Acquired Company.
3.7.2.2 List of all Leases of Real Estate.
3.7.2.7 List of Permits.
3.8 List of Indebtedness.
3.9 Accounts Receivable and Notes Receivable Schedules.
3.10 List of Consent Requirements.
3.11 List of Changes.
3.12 List of Litigation.
3.13 List of Licenses and Permits.
3.14 List of Contracts.
3.15.1 List of Trademarks, Trade Names, Service Marks, Service Names,
Etc.; Logo; Licenses Granted with Respect to Intellectual
Property.
3.15.2 Lists of Acquired Company's Software.
3.16 List of Employees, Independent Contractors, Salaries, Rates,
Salary Increase Guidelines and Labor Matters.
3.17 List of Benefit Plans.
3.18 List of Customers and Brokers, Addresses, Telephone Numbers and
Principal Person of Contact and List of Problems with Customers.
3.19 List of Environmental Matters.
3.20 List of Insurance Matters.
3.21 List of Related Party Relationships.
3.23 List of Suppliers.
4.2 Form of Investment Letter.
4.5.3 Form of Transferee Letter.
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5.3 Consent Requirements for ▇▇▇▇ and the ▇▇▇▇ Sub.
6.2.1(k) Form of Opinion of Counsel for the Acquired Company and the
Shareholders.
6.2.2(d) Form of Opinion of Counsel for ▇▇▇▇ and ▇▇▇▇ Sub.
6.2.2(k) Shareholders Agreement.
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