ASSET PURCHASE AGREEMENT
ACTION DELIVERY SERVICE, INC.,
a Texas corporation
ACTION WAREHOUSE SERVICES, INC.,
a Texas corporation
and
MR. and ▇▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Sellers
and
KNIGHT TRANSPORTATION, INC.,
an Arizona corporation
and
KNIGHT ACQUISITION CORPORATION,
an Arizona corporation
Buyer
TABLE OF CONTENTS
ASSET PURCHASE AGREEMENT
RECITALS ....................................................................1
1. DEFINITIONS...............................................................1
"Action" .................................................................1
"Affiliate"...............................................................2
"Affiliated Group"........................................................2
"Buyer" .................................................................2
"Closing".................................................................2
"Closing Date"............................................................2
"COBRA" .................................................................2
"Code" .................................................................2
"Contracts"...............................................................2
"Damages".................................................................2
"Employee Benefit Plan"...................................................2
"Employee Pension Benefit Plan"...........................................3
"Employee Welfare Benefit Plan"...........................................3
"ERISA" .................................................................3
"Financial Statement".....................................................3
"GAAP" .................................................................3
"Governmental Entity".....................................................3
"Indemnitee"..............................................................3
"Intellectual Property"...................................................3
"Intellectual Property Rights"............................................3
"Knowledge"...............................................................4
"Laws" .................................................................4
"Liability"...............................................................4
"Lien" .................................................................4
"Material Adverse Environmental Effect"...................................4
"Most Recent Financial Statements.........................................4
"Most Recent Fiscal Month End"............................................4
"Most Recent Fiscal Year End".............................................4
"Multiemployer Plan"......................................................4
"Operative Documents".....................................................4
"Ordinary Course of Business".............................................5
"Person" .................................................................5
"Purchase Price"..........................................................5
"Securities Exchange Act".................................................5
"Security Interest".......................................................5
"Subsidiary"..............................................................5
"Seller" .................................................................5
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"Seller Share"............................................................5
"Seller Stockholder"......................................................5
"Tax" .................................................................5
"Tax Return"..............................................................5
2. PURCHASE AND SALE.........................................................6
2.1 Sale of Assets.......................................................6
2.2 Description of Assets................................................6
2.3 Excluded Assets......................................................7
2.4 Assumption of Liabilities............................................8
2.5 Amount of Purchase Price.............................................8
2.6 Adjustment to Purchase Price.........................................8
2.7 Payment of the Purchase Price.......................................11
2.8 Allocation of Purchase Price........................................11
2.9 Tax Free Transaction................................................12
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER......................12
3.1 Representations and Warranties......................................12
3.1.1 Organization; Power.........................................12
3.1.2 Seller's Stock..............................................12
3.1.3 Corporate Authority.........................................12
3.1.4 No Violation................................................13
3.1.5 Ownership of Assets; Contracts..............................13
3.1.6 Compliance with Law.........................................14
3.1.7 Pending Changes.............................................14
3.1.8 Licenses; Consents..........................................14
3.1.9 Litigation..................................................14
3.1.10 Labor.......................................................14
3.1.11 Unemployment Contributions..................................15
3.1.12 Salaries and Other Taxes....................................15
3.1.13 Customer Complaints.........................................15
3.1.14 Use and Occupancy of the Site...............................16
3.1.15 Laws and Actions Affecting the Site.........................16
3.1.16 Lease Matters...............................................16
3.1.17 Material Information........................................16
3.1.18 The Business................................................16
3.1.19 Brokers.....................................................16
3.1.20 No Undisclosed Liabilities..................................17
3.1.21 Assumptions or Guaranties of Indebtedness...................17
3.1.22 Principal Customers.........................................17
3.1.23 Other Agreements of Directors, Officers, et seq.............17
3.1.24 Absence of Defaults.........................................17
3.1.25 Insurance...................................................18
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3.1.26 Personnel...................................................18
3.1.27 Securities Law..............................................18
3.1.28 Events Subsequent to Most Recent Fiscal Year End............19
3.1.29 Tax Matters.................................................21
3.1.30 Real Property...............................................22
3.1.31 Powers of Attorney..........................................23
3.1.32 Environmental Matters, Health and Safety....................23
3.1.33 Financial Statements........................................26
3.1.34 Year 2000 Compliance........................................26
3.1.35 Disclosure..................................................26
3.2 Covenants...........................................................27
3.2.1 Additional Documents........................................27
3.2.2 Unemployment Tax Certificate................................27
3.2.3 Filing of Final Tax Returns.................................27
3.2.4 Termination of Employees....................................27
3.2.5 Non-Disclosure..............................................27
3.2.6 Seller's Name...............................................28
3.2.7 Franchise Tax Certificate...................................28
3.2.8 Intellectual Property.......................................28
3.2.9 Assignment of License and Permits...........................28
3.2.10 Maintenance of Contracts....................................28
3.2.11 Maintenance of Assets in Business...........................28
3.2.12 Compliance With Law.........................................28
3.2.13 Update and Completion of Exhibits...........................28
3.2.14 No Further Negotiations.....................................29
3.2.15 Access......................................................29
3.2.16 Customer and Account Relations..............................29
3.2.17 Payment of Taxes............................................29
3.2.18 Tax Withholding Agreement...................................29
3.2.19 Environmental Conditions....................................29
3.2.20 Payroll.....................................................30
3.2.21 Fence Repair................................................30
3.2.22 Change of Name..............................................30
3.2.23 Officer's Certificate.......................................30
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.......................31
4.1 Representations and Warranties......................................31
4.1.1 Organization; Power.........................................31
4.1.2 Corporate Authority.........................................31
4.1.3 No Violation................................................31
4.1.4 Brokers.....................................................31
4.1.5 Shares Received.............................................31
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5. CLOSING.................................................................32
5.1 Closing.............................................................32
5.2 Seller's Deliveries at Closing......................................32
5.3 Buyer's Deliveries at Closing.......................................33
6. CONDITIONS TO CLOSING...................................................34
6.1 Conditions to Buyer's Obligation....................................34
6.1.1 Representations and Warranties True.........................34
6.1.2 Compliance With Covenants...................................34
6.1.3 No Legal Proceedings........................................34
6.1.4 Corporate Approvals.........................................34
6.1.5 No Change In Business or Capital Structure..................34
6.1.6 No Change In Liabilities....................................34
6.1.7 Consulting Agreement........................................35
6.1.8 Consents and Approvals......................................35
6.1.9 No Defaults.................................................35
6.1.10 No Dissenter's Rights.......................................35
6.1.11 Deliveries..................................................35
6.1.13 Satisfaction of Buyer with Customer Relations...............35
6.2 Seller's Conditions to Closing......................................35
6.2.1 Compliance With Covenants...................................35
6.2.2 Representations and Warranties..............................35
6.2.3 Corporate Approvals.........................................35
6.2.4 Deliveries..................................................36
6.3 ▇▇▇▇▇ as Consultant.................................................36
6.4 Lease...............................................................36
6.5 Exclusivity.........................................................36
7. INDEMNIFICATION.........................................................36
7.1 Indemnification by Seller and ▇▇▇▇▇.................................36
7.2 Indemnification by Buyer............................................37
7.3 Procedures for Indemnification......................................37
7.4 Certain Limitations.................................................40
7.5 Termination of Indemnification Obligations..........................40
7.6 Other Matters.......................................................40
8. COVENANTS NOT TO COMPETE................................................41
9. TERMINATION.............................................................43
9.1 Termination of Agreement............................................43
9.2 Effect of Termination...............................................44
10. CONFIDENTIALITY.........................................................44
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11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................44
12. MISCELLANEOUS...........................................................44
12.1 Bulk Sales Law...................................................44
12.2 Counterparts.....................................................44
12.3 Notices..........................................................44
12.4 Successors and Assigns...........................................45
12.5 Execution of Documents...........................................45
12.6 Time of Essence..................................................46
12.7 Severability.....................................................46
12.8 Waiver and Amendment.............................................46
12.9 Remedies Cumulative..............................................46
12.10 Entire Agreement.................................................46
12.11 Attorneys' Fees..................................................46
12.12 Fees and Expenses................................................46
12.13 Terminology......................................................47
12.14 Governing Law....................................................47
12.15 Press Releases and Public Announcements..........................47
12.16 No Third-Party Beneficiaries.....................................47
12.17 Specific Performance.............................................47
12.18 Construction.....................................................47
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 13th day of
March, 1999, by and among KNIGHT TRANSPORTATION, INC., an Arizona corporation
("Knight"), KNIGHT ACQUISITION CORPORATION, an Arizona corporation ("Buyer"),
ACTION DELIVERY SERVICES, INC., a Texas corporation ("ADS"), and ACTION
WAREHOUSE SERVICE, INC., a Texas corporation ("AWS") (ADS and AWS are
hereinafter individually and collectively called "Seller"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇, husband and wife ("▇▇▇▇▇").
RECITALS:
A. Buyer is a wholly owned subsidiary of Knight;
B. Seller is primarily engaged in the business of operating a trucking and
transportation business (the "Business");
C. Seller's principal place of business is located at Corsicana, Texas (the
"Site"); and
D. Seller desires to sell, and Buyer desires to buy, all of the assets,
properties and rights used by Seller in connection with the Business, and to
assume certain limited liabilities of Seller as more specifically provided
herein. Buyer desires to purchase Seller's assets by delivering the common stock
of Knight, par value $.001 per share (the "Common Stock"), in exchange for all
of Seller's assets.
E. To facilitate the sale, Seller desires to enter into a plan of
reorganization pursuant to Section 368(a)(1)(C), 368(a)(2)(C) and 361 of the
Internal Revenue Code (the "Code").
NOW, THEREFORE, in consideration of the promises, agreements,
representations, warranties, covenants and obligations herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto understand and agree as follows:
AGREEMENT:
1. DEFINITIONS
The capitalized terms set forth below shall have the meanings stated below,
unless context requires otherwise.
"Action" means any action, suit or proceeding at law or in equity,
arbitration,
investigation or governmental, administrative, regulatory or other proceeding by
or before any arbitrator, court or other Governmental Entity.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
ss.1504(a) or any similar group defined under a similar provision of state,
local, or foreign law.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 5.1 below.
"Closing Date" has the meaning set forth in Section 5.1 below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Codess. 4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" means all written or oral license agreements, supply
agreements, purchase orders, sales orders, sales representation agreements,
warranty agreements, indemnity agreements, service agreements, employment and
consulting agreements, guarantee agreements, credit agreements, notes,
mortgages, security agreements, financing leases, comfort letters,
confidentiality agreements, joint venture agreements, partnership agreements,
leases, open bids, powers of attorney and all other agreements, arrangements.
understandings, contracts, memoranda of understanding, letters of intent and
commitments, including. in each case, all amendments, modifications and
supplements thereto and waivers and consents thereunder.
"Damages" means any and all losses, Liabilities, claims, damages,
deficiencies, obligations, fines, payments, Taxes, Liens, costs and expenses,
matured or un-matured. absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, known or unknown, whenever arising and whether or not resulting
from Third-Party Claims, including, without limitation, the costs and expenses
of any and all Actions or other legal matters; all amounts paid in connection
with any demands, assessments, judgments, settlements and compromises relating
thereto; interest and penalties recovered by a third party with respect thereto;
out-of-pocket expenses and reasonable attorneys', accountants' and other
experts' fees and expenses reasonably incurred in investigating, preparing or
defending against any such Actions or other legal matters or in asserting,
preserving or enforcing an Indemnitee's rights hereunder; and any losses that
may result from the granting of injunctive relief as a result of any such
Actions or other legal matters.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement
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which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit or other retirement, bonus, or incentive plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statement" has the meaning set forth in Section 3.1.33 below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Entity" means any federal, state or local government or any
court, arbitration tribunal, administrative or regulatory agency or commission
or other governmental authority or agency, domestic, foreign or international.
"Indemnitee" means any member of the Buyer Group or Seller Group (as such
terms are defined in Section 7.1 and 7.2 respectively) who or which may seek
indemnification pursuant to Article 7 of this Agreement.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
technologies, methods, processes, know-how, trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
"Intellectual Property Rights" means all rights of Seller to any
Intellectual Property and any rights specifically described in Section 2.2(c).
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"Knowledge" means actual knowledge after reasonable investigation.
"Laws" means all applicable laws, statutes, constitutions, treaties, rules,
regulations, ordinances, codes, judgments, rulings, orders, writs, decrees,
stipulations, injunctions and determinations of all Governmental Entities.
"Liability" means any and all debts, liabilities, obligations and
commitments, whether known or unknown, asserted or unasserted, fixed, absolute
or contingent, matured or unmatured, accrued or unaccrued, liquidated or
unliquidated, due or to become due, whenever or however arising (including,
without limitation, whether arising out of any Contract or tort based on
negligence, strict liability or otherwise) and whether or not the same would be
required by GAAP to be reflected as a liability in financial statements or
disclosed in the notes thereto.
"Lien" any reservation, restriction, right of way, charge, claim, community
property interest, condition, equitable interest, easement, encumbrance, option,
lien, pledge, charge, hypothecation, assignment, deposit arrangement, security
interest (preference, priority or other security agreement or preferential
arrangement of any kind), mortgage, deed of trust, retention of title agreement,
right of first refusal, right of first offer, preemptive right, or other
restriction or granting of any rights of any kind (including any restriction on,
or right granted with respect to, the use, voting, transfer, receipt of income
or exercise of any other attribute of ownership).
"Material Adverse Environmental Effect" means, with reference to a breach
of any representation, warranty or covenant of Section 3.1.32 by Seller or ▇▇▇▇▇
which requires an adjustment to the Purchase Price, a matter that alone or in
the aggregate with any other matter described in Section 3.1.32 (whether or not
material) results in an expense, liability or obligation to the Buyer or its
Subsidiaries in excess of $50,000 (provided, however, that this limitation shall
not affect Sellers' obligations to remediate any Environmental Condition under
Section 3.1.32 or 3.2.19).
"Most Recent Financial Statements" has the meaning set forth in Section
3.1.33 below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 3.1.33
below.
"Most Recent Fiscal Year End" shall mean December 31, 1998.
"Multiemployer Plan" has the meaning set forth in ERISA ss. 3(37).
"Operative Documents" means this Agreement and any other agreement,
document, instrument or certificate executed and delivered by Seller, Ellis,
Knight, their officers, employees, or agents or Buyer pursuant to this
Agreement.
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Purchase Price" has the meaning set forth in Section 2.5 below.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Subsidiary" means (i) any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors; and (ii) any limited or general partnership which is 50
percent or more owned or controlled by a subsidiary of Seller or which a
subsidiary of Seller has the power to vote more than 50 percent of the interests
in such partnership.
"Seller" has the meaning set forth in the preface above.
"Seller Share" means any share of the common stock of Seller.
"Seller Stockholder" means any Person who or which holds any Seller Shares.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code ss. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, unclaimed property, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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2. PURCHASE AND SALE
2.1 Sale of Assets. Seller hereby sells, transfers, conveys, assigns and
delivers to Buyer, and Buyer hereby purchases and acquires from Seller, good and
marketable title to, and rightful possession of, all of Seller's right, title
and interest in and to all of the properties, assets and rights of Seller
constituting the Business or used therein of every kind, character and
description, as further defined in Section 2.2 (other than the Excluded Assets,
as defined in Section 2.3), whether tangible or intangible, whether real,
personal or mixed, whether accrued, contingent or otherwise, and wherever
located (which purchased assets are collectively referred to as the "Assets"),
free and clear of any mortgages, pledges, liens, claims, security interests,
encumbrances, judgments, restrictions, options, royalty obligations, leases, or
charges of any kind (collectively, "Liens").
2.2 Description of Assets. The Assets shall include, without limitation,
all right, title and interest in and to all assets of every nature and
description of Seller, all properties and rights of Seller used directly or
indirectly in the conduct of, or generated by or constituting, the Business,
except as otherwise expressly set forth in Section 2.3 hereof, including, but
not limited to, the following assets:
(a) all equipment (including, without limitation, tractors, trailers
and computer equipment), inventory, investments, work in progress, machinery,
tools, goods, supplies, vehicles, furniture, fixtures and other tangible
personal property;
(b) the names "Action Delivery Service, Inc." and "Action Warehouse
Services, Inc.";
(c) all rights to any Intellectual Property used or contemplated to be
used in the Business, including, without limitation, all rights to the names,
and all goodwill associated therewith, including all rights under and to the
names and any trade marks and service marks associated with the Business or
under which the Business has been conducted;
(d) all information, files, records, correspondence, data, plans,
contracts and recorded knowledge, including customer and supplier lists relating
to the Assets and the Business;
(e) all rights and entitlements under any written or oral contract,
agreement, plans or specifications, instrument, registration, license,
franchise, certificate of occupancy, or other document, commitment, arrangement,
undertaking, practice, or authorization and any intangible property rights
associated with or constituting a part of the Business (specifically excluding,
however, any Employee Benefit Plan);
(f) all customer contracts, including, without limitation, all rights
and entitlements under or with respect to those contracts set forth in Exhibit
2.2(f) (the "Assigned Contracts");
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(g) all receivables due with respect to the Business;
(h) all investments in equity securities and bonds of independent
third parties;
(i) all cash on hand as of the Closing Date, except any cash
representing proceeds from overdrafts or proceeds to which any factor may be
entitled;
(j) the right to collect and retain all amounts under the Assigned
Contracts;
(k) all rights or choses-in-action arising out of occurrences before
or after the Closing, including, without limitation, all rights under express or
implied warranties in favor of Seller, if any, relating to the Assets and the
Business;
(l) all goodwill, if any, associated with the Assets and the Business;
(m) all prepaid expenses, unbilled costs and fees, and all warranty
reserves; and
(n) all licenses, permits, approvals or authorizations.
2.3 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include any of the following (the "Excluded Assets"):
(a) the Purchase Price to be paid to Seller pursuant to Section 2.5 of
this Agreement;
(b) corporate seals, certificates, articles of incorporation, bylaws,
minute books, stock books, Tax Returns, books of account, and financial records
of the Seller or any other documents or records which Seller is required by law
to retain in its possession;
(c) the rights to any of Seller's claims for any federal, state, land
or foreign Tax refunds and the rights to deferred income taxes;
(d) any Employee Benefit Plans and all amendments, documents and
financial statements relating thereto; and
(e) the proceeds of any claim under any insurance policy for any
incident occurring on or prior to the Closing Date other than any claims with
respect to an assumed Liability.
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2.4 Assumption of Liabilities. Except as specifically provided herein,
Buyer assumes none of Seller's liabilities (including, without limitation, any
employee claims, tort claims or any other liability of any type or nature), and
Seller shall be solely responsible for the payment of such liabilities; such
liabilities are hereinafter called the "Retained Liabilities."
(a) Buyer hereby assumes and agrees to perform, pay and discharge all
of Seller's obligations under the Assigned Contracts set forth in Exhibit
2.2(f).
(b) Buyer also assumes and agrees to perform, pay and discharge those
liabilities and obligations of Seller identified on Exhibit 2.4 hereto. The
"liabilities" described in Section 2.4(a) and 2.4(b) are hereinafter
collectively called the "Assumed Liabilities."
(c) Except as expressly agreed to pursuant to this Section 2.4, Buyer
does not assume or acquire, and shall not be liable for the Retained
Liabilities, including, without limitation any other liabilities, obligations or
debts of Seller, whether direct or indirect, asserted or unasserted, matured or
unmatured, contingent or otherwise. Seller expressly agrees the Buyer does not
assume any liability claim, damage, or expense arising from or in connection
with the dual fatality involving ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ occurring on June 24, 1998
outside of Alexandria, Louisiana (the "Tort Claim") and that any liability,
claim, damages, or other obligations associated with such claims are part of the
Retained Liabilities. The Retained Liabilities expressly excluded under the Tort
Claim include, but are not limited to, (i) Civil Suit Number 12632 filed on July
16, 1998 in the 35th Judicial District Court for the Parish of Grant in the
State of Louisiana by ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually and on behalf of the
minor, ▇▇▇▇▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ and the cross-claim filed
thereunder by ▇▇▇▇▇▇ ▇▇▇▇▇▇, individually and on behalf of the minor, ▇▇▇▇▇▇
▇▇▇▇▇▇, naming ADS, ▇▇▇▇▇ ▇▇▇▇▇▇, and ADS's commercial automobile liability and
commercial excess umbrella liability insurers, among others, as defendants; and
(ii) Civil Suit No. 12723, filed on September 1, 1998 in the 35th Judicial
District Court for the Parish of Grant in the State of Louisiana by ▇▇▇▇
▇▇▇▇▇▇▇▇ and the related cross-claim filed thereunder by ▇▇▇▇▇▇ ▇▇▇▇▇▇,
individually and on behalf of the minor, ▇▇▇▇▇▇ ▇▇▇▇▇▇, naming the same
defendants.
2.5 Amount of Purchase Price. Knight agrees to pay to Seller on the Closing
Date (as defined below) a purchase price (the "Purchase Price") consisting of
(i) the Stock Consideration (as defined below), subject to the adjustments
described herein, plus (ii) the assumption at Closing Date of the Assumed
Liabilities as herein provided in consideration of the sale of the Assets and
the covenants not to compete referred to in Article 8.
2.6 Adjustment to Purchase Price.
(a) The "Stock Consideration" shall equal that number of Knight shares
("Knight Shares") obtained by dividing $2,000,000.00 by the Average Price Per
Share. The "Average Price Per Share" of Knight shares shall be the average
closing price per common share of Knight stock as reported on the NASDAQ
National Market for the five day week of trading ending Friday, February 5,
1999, which the Parties agree is $20.50 per share. In no event shall the Average
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Price Per Share be less than $18.00 per share or more than $22.00 per share. The
Purchase Price shall be adjusted as provided in this Section 2.6(a) and 2.6(b)
below. The Purchase Price shall be reduced by (i) any decrease in the Assets of
Seller, as reflected on Seller's Most Recent Fiscal Month-End Financial
Statements, brought forward to the Closing Date (as contemplated by Section
2.6(b) below) from the Assets of Seller as shown on Seller's Most Recent Fiscal
Year-End Financial Statements; (ii) any increase in the Assumed Liabilities over
the amount of the Assumed Liabilities, accepted and assumed by Buyer on the
Closing Date, as reflected in the Closing Balance Sheet pursuant to Section
2.6(b); and (iii) any Damages resulting from and any breach of any
representation, warranty, or covenant of Seller set forth herein. The Purchase
Price shall be increased by (i) any increase in the Assets of Seller as
reflected on Seller's Most Recent Month-End Financial Statements, brought
forward to the Closing Date (as contemplated by Section 2.6(b) below) over the
Assets reflected in Seller's Most Recent Year-End Financial Statements, and (ii)
any decrease in the Assumed Liabilities below the amount established at the
Closing Date as reflected in the Closing Balance Sheet pursuant to Section
2.6(b). For purposes of this Section 2.6(a), no positive or negative adjustment
to the Purchase Price shall be made if the individual or aggregate amount of
such adjustments do not equal or exceed the sum of $50,000 (provided that such
$50,000 limitation shall not limit any obligation of Seller to effect any
environmental remediation required by Section 3.1.32 or 3.2.19 hereof). The
adjustments to the Purchase Price required by this Section shall be reflected in
the Closing Balance Sheet prepared in accordance with Section 2.6(b) below.
(b) Closing Balance Sheet.
(i) Within five (5) business days after the Closing Date, Buyer
will prepare and deliver to Seller a balance sheet of Seller (the "Closing
Balance Sheet") setting forth Assets (other than Excluded Assets), liabilities
(other than Retained Liabilities, which shall be excluded from the Closing
Balance Sheet) and total shareholders' equity, in each case as of the Closing
Date, and in accordance with GAAP applied on a basis consistent with the
Financial Statements. Anything contained herein to the contrary notwithstanding,
(A) the amounts set forth on the Closing Balance Sheet will not reflect any
purchase accounting adjustments as a result of the acquisition of the Assets or
the assumption of the Assumed Liabilities by Buyer and (B) amounts for deferred
income taxes will be excluded from the Closing Balance Sheet. The Closing
Balance Sheet shall take into account any positive or negative adjustments
required under Section 2.6(a). The date on which the Balance Sheet is delivered
to Seller is referred to herein as the "Delivery Date". Seller will assist Buyer
in the preparation of the Closing Balance Sheet. Seller will cause Buyer to be
provided with access at all reasonable times, following reasonable notice, to
the personnel, properties, books and records necessary for such purposes.
(ii) The Closing Balance Sheet will be deemed to be final,
binding and conclusive (the "Final Closing Balance Sheet") for all purposes on
the 10th business day after the Delivery Date unless Seller delivers to Buyer
written notice of its disagreement (a "Notice of Disagreement") prior to such
date specifying in reasonable detail the nature of Seller's objections to the
Closing Balance Sheet. Buyer will cause its employees who are employees of the
Business
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to assist Seller in the preparation of a Notice of Disagreement; provided such
assistance will not interfere with the normal work duties of such employees. To
be assertable in a Notice of Disagreement, an objection by Seller with respect
to any individual item on the Closing Balance Sheet must assert that the Closing
Balance Sheet was not prepared in accordance with the terms of Section 2.6(b)(i)
with respect to such item and relate to an aggregate adjustment equal to or
greater than $50,000 (provided that such $50,000 limitation shall not limit any
obligation of Seller to effect any environmental remediation required by Section
3.1.32 or Section 3.2.19 hereof). A Notice of Disagreement may also allege that
the Closing Balance Sheet contains mathematical errors. Seller hereby waives the
right to assert any objection to the Closing Balance Sheet that is not asserted
in a Notice of Disagreement delivered to Buyer within 10 business days after the
Delivery Date. If a Notice of Disagreement is delivered to Buyer within such
10-day period, then the Closing Balance Sheet (as adjusted, if necessary) will
be deemed to be the Final Closing Balance Sheet for all purposes on the earlier
of (x) the date Buyer and Seller resolve in writing all differences they have
with respect to the Closing Balance Sheet or (y) the date the disputed matters
are resolved in writing by the Accounting Firm (as defined below). In the event
that disputed matters are resolved by the Accounting Firm, the Final Closing
Balance Sheet will consist of both the applicable amounts from the Closing
Balance Sheet (or amounts otherwise agreed to in writing by Buyer and Seller) as
to items that have not been submitted for resolution to the Accounting Firm, and
the amounts determined by the Accounting Firm as to items that were submitted
for resolution by the Accounting Firm.
(iii) During the 10 business days following the delivery of a
Notice of Disagreement, Buyer and Seller will seek in good faith to resolve any
differences they may have with respect to matters specified in the Notice of
Disagreement and such discussions will be deemed to be for settlement purposes
and not disclosable in arbitration by the Accounting Firm described below. If,
at the end of such 10-day period, Buyer and Seller have not reached agreement on
such matters, Buyer will have an additional five (5) business days to advise
Seller in writing of Buyer's position with respect to each of Seller's proposed
adjustments that are in dispute ("Buyer's Letter"). Promptly following the
delivery to Seller of Buyer's Letter, Buyer and Seller will jointly engage
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇") (or, if ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is unable or
unwilling to act in such capacity, Deloitte and Touche, L.L.P. (the "Accounting
Firm")) to resolve the matters which remain in dispute with respect to the
Closing Balance Sheet. In connection with such engagement, each of Buyer and
Seller agrees to execute, if requested by the Accounting Firm, a reasonable
engagement letter including customary indemnities. Promptly after such
engagement of the Accounting Firm, Buyer or Seller will provide the Accounting
Firm with a copy of this Agreement, the Closing Balance Sheet, the Notice of
Disagreement and Buyer's Letter. The Accounting Firm will have the authority to
request in writing such additional written submissions from either Buyer or
Seller as it deems appropriate; provided, however, that a copy of any such
submission will be provided to the other party at the same time as it is
provided to the Accounting Firm. No party hereto will make (nor permit any of
its subsidiaries or Affiliates to make) any additional submission to the
Accounting Firm except in a report to such a written request by the Accounting
Firm. No party hereto will communicate (nor permit any of its subsidiaries or
Affiliates to communicate) with the Accounting Firm without providing the other
party a reasonable opportunity to participate in
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such communication with the Accounting Firm (other than with respect to written
submissions in response to the written request of the Accounting Firm). The
Accounting Firm will have 20 business days to review the documents provided to
it pursuant to this Section 2.6.(b)(iii). Within such 20-day period, the
Accounting Firm will furnish simultaneously to both parties its written
determination with respect to each of the adjustments in dispute submitted to it
for resolution. The Accounting Firm will resolve the differences regarding the
Closing Balance Sheet based solely on the information provided to the Accounting
Firm by Buyer and Seller pursuant to the terms of this Agreement (and not
independent review). The Accounting Firm's authority will be limited to
resolving disputes with respect to whether the Closing Balance Sheet was
prepared in accordance with Section 2.6(b)(i) with respect to the individual
items on the Closing Balance Sheet in dispute (it being understood that the
Accounting Firm will have no authority to make any adjustments to any financial
statements or amounts other than the Closing Balance Sheet and amounts set forth
therein that are in dispute). In resolving any disputed item, the Accounting
Firm may not assign a value to such item greater than the greatest value for
such item asserted by either party or less than the smallest value for such item
asserted by either party. The decision of the Accounting Firm will be, for all
purposes, conclusive, non-appealable, final and binding upon the parties hereto.
The fees of the Accounting Firm will be borne by Buyer and Seller in the same
proportion that the dollar amount of disputed items lost by a party bears to the
total dollar amount in dispute resolved by the Accounting Firm. Each party will
bear the fees, costs and expenses of its own accountants and all of its other
expenses in connection with matters contemplated by this Section 2.6(b).
(c) Post-Closing Adjustment.
(i) To the extent that there is any positive or negative
adjustment to the Purchase Price as a result of the adjustments contemplated by
this Section (taking into account the $50,000 adjustment limitation described
herein), Seller shall pay Buyer or Buyer shall pay Seller in cash for the amount
of the adjustment within 15 calendar days after Closing Balance Sheet has been
determined to be final pursuant to Section 2.6(b).
(ii) Any payment required under this 2.6(c) will bear interest
from the Closing Date to the date of payment (calculated based on actual days
elapsed in a 365-day year) at a rate per annum equal to 10 percent.
2.7 Payment of the Purchase Price. Buyer shall deliver certificates
evidencing the Stock Consideration on or before three (3) business days
following the Closing Date.
2.8 Allocation of Purchase Price. Buyer will, not later than 120 days after
the Closing Date, prepare and deliver to Seller a schedule (the "Allocation
Schedule") allocating the Purchase Price and the covenant not to compete
contained in Article 8 among the Assets in accordance with Treas. Reg. 1.1060-1T
(or any comparable provisions of state or local tax law) or any successor
provision. Buyer and Seller agree that fifty percent of the Purchase Price is
allocable to the Assets sold by AWS and fifty percent to the Assets sold by ADS.
Seller will have the right to raise reasonable objections to the Allocation
Schedule within 20 days after its receipt thereof, in
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which event Seller, Seller and Buyer will negotiate in good faith to resolve
such objections. If the parties have not resolved such objections within 60 days
after the initiation of such attempts, such objections will be resolved by an
arbitration to be conducted by the Accounting Firm, whose fees and expenses will
be borne equally by Buyer and Seller. Buyer and Seller will be bound by the
determination of the Accounting Firm rendered in such arbitration. Except to the
extent otherwise required by applicable laws, Buyer and Seller will make all tax
returns in a manner consistent with the Allocation Schedule (or, to the extent
any objection shall have been made to the Allocation Schedule, in a manner
consistent with the resolution of such objection by the parties or, if
applicable, the Accounting Firm) and will not make any inconsistent statement or
adjustment on any returns or during the course of any Internal Revenue Service
or other tax audit.
2.9 Tax Free Transaction. The parties anticipate that the transactions
contemplated by this Agreement will qualify as a tax free or deferred asset
acquisition under Internal Revenue Code ▇▇.▇▇. 368(a)(1)(C) and 368(a)(2)(C);
Seller, on or prior to the execution of this Agreement will have adopted a plan
of reorganization pursuant to Sections 361 and 368(a)(1) of the Code. Neither
Buyer nor Knight shall have any liability or obligation to Seller, or any of
them, if the transactions contemplated by this Agreement do not qualify for tax
free or tax deferred treatment under the Code.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
3.1 Representations and Warranties. Seller and ▇▇▇▇▇ jointly and severally
covenant, represent and warrant the following to Buyer, except as otherwise
disclosed in any Exhibits attached hereto (collectively, the Disclosure
Statement), which Disclosure Statement shall specifically identify by Section
the matter to which the exception applies, but shall not modify the
representations and warranties set forth below, except as specifically stated
below:
3.1.1 Organization; Power. Sellers' corporate entities are duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite power and authority to carry on its business as it
is now conducted and to own the properties and assets it now owns and is not
required to be qualified or licensed to do business as a foreign corporation in
any jurisdiction. Seller has heretofore delivered to Buyer correct and complete
copies of its Articles of Incorporation and Bylaws, as presently in effect.
Seller has no Subsidiaries and no Affiliates other than its officers, directors
and shareholders.
3.1.2 Seller's Stock. Those Persons listed in Exhibit 3.1.2 constitute
the only shareholders of Seller ("Shareholders"), and own the number and
percentage of issued and outstanding shares of Seller shown on Exhibit 3.1.2.
Seller's shares owned by the Shareholders are not subject to any liens,
encumbrances or adverse claims of any kind or notion. At least 90% of Seller's
shareholders irrevocably approved and consented to Seller entering into this
Agreement.
3.1.3 Corporate Authority. Seller has full corporate power and
authority to execute and deliver this Agreement and the other documents and
instruments executed by Seller in
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connection herewith and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the other documents and instruments
executed by Seller in connection herewith, and the performance by Seller of its
obligations hereunder and thereunder, have been duly and validly authorized by
Seller's Board of Directors and shareholders and no further corporate action is
necessary in connection therewith or in order to consummate the transactions
contemplated by this Agreement. This Agreement and the other documents and
instruments executed by Seller in connection herewith constitute valid and
binding obligations of Seller enforceable against Seller in accordance with
their respective terms.
3.1.4 No Violation. Neither the execution and delivery of this
Agreement by Seller or of the other documents and instruments executed by Seller
in connection herewith, nor the performance by Seller of its respective
obligations hereunder and thereunder, will (i) violate any provision of the
Articles of Incorporation or Bylaws of Seller; (ii) violate, conflict with,
constitute a default under, or permit the termination of any of the Assigned
Contracts or any other right or obligation of Seller; (iii) require the consent
of any governmental or regulatory authority or any other third party; (iv)
result in the imposition of any lien or claim upon any of the Assets; or (v)
violate any statute, law, regulation, rule, judgment, decree or order to which
Seller or the Business or the Assets are subject.
3.1.5 Ownership of Assets; Contracts.
(a) Seller has good and marketable title to, and rightful
possession of, all of the Assets, free and clear of any and all liens,
mortgages, pledges, security interest, charges, claims, restrictions and other
encumbrances or defects of title of any nature, or adverse claims.
(b) Seller has performed in all material respects all obligations
required to be performed by it pursuant to the Assigned Contracts and is not in
default under any Assigned Contract or other contract. Seller has no outstanding
monetary obligation under the Assigned Contracts, and there have been no
prepayments or deposits out of the ordinary made under any of the Assigned
Contracts. All of the Assigned Contracts are assignable to Buyer without the
approval of the other party thereto.
(c) Seller owns or possesses adequate permits, licenses or other
rights to conduct business in each jurisdiction in which it now or has ever
conducted business and possesses the right to use all trademarks, service marks,
patents, trade names and copyrights that are utilized in the conduct of the
Business, including the names under which the Sellers conduct the Business as it
is presently conducted and any service marks or trade names associated
therewith, and Seller has not received any notice of conflict with asserted
rights of others.
(d) None of the Intellectual Property Rights infringe upon or
violate any patent, trademark, trade name, servicemark or copyright, and Seller
has received no notice from any Person that Seller has violated or infringed
upon any patent, trademark, tradename, servicemark, copyright or trade secret.
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3.1.6 Compliance with Law. The Business and operations of Seller have
been and presently are in compliance with all applicable federal, state and
local law, statutes, ordinances, codes, judgments, decrees, injunctions, orders,
rules, regulations and rulings and all restrictive covenants pertaining to the
Business and the Site.
3.1.7 Pending Changes. To Seller's knowledge, there is no pending
change in any rule or regulation or zoning ordinance, which, if adopted, would
interfere with or have a material adverse effect on the operations of the
Business or any of the Assets.
3.1.8 Licenses; Consents. Seller has given all notices and obtained
all licenses, permits, approvals, authorizations and consents required by
federal, state or local laws, ordinances, codes, orders, rules or regulations
for the lawful construction, use, operation and/or maintenance and for the
conduct of the Business. All of such licenses, permits, approvals and
authorizations may be applied for and obtained by Buyer on or after the date
hereof without any requirement to cease or suspend any aspect of the Business
and without incurring any Liability while the applications are pending. Seller
shall cooperate fully with Buyer in connection with any such applications made
after the Closing Date. Exhibit 3.1.8 accurately lists all licenses, permits,
approvals and authorizations held or obtained by Seller in connection with the
conduct of the Business and no other licenses, permits or approvals are
necessary to conduct the Business. No consent, approval or authorization of, or
filing, declaration or registration with, any governmental or regulatory
authority or other third person is required to be made or obtained by Seller in
connection with the execution and delivery of this Agreement or the performance
by Seller of its obligations hereunder.
3.1.9 Litigation. Except as described in Exhibit 3.1.9, there is no
suit, action, arbitration, administrative proceeding or other proceeding, at law
or in equity of any nature, pending or threatened, against or affecting Seller
or any of the Assets. Except as set forth in Exhibit 3.1.9, there are no
judgments, orders or consent decrees to which Seller or its Business or Assets
is subject.
3.1.10 Labor. Exhibit 3.1.10 sets forth a list of the names,
employment status, location of employment, and rates of compensation (including
salaries, wages, commissions and bonuses) of all employees and all independent
contractors of Seller, each separately identified. Except as specifically
disclosed in Exhibit 3.1.10, the Seller does not have any written or oral
contract of employment with any of its respective employees, none is a party to
or subject to any collective bargaining agreement with Seller, and none has been
a party or subject to any collective bargaining agreement with Seller during the
last five (5) years. Seller has provided, as part of Exhibit 3.1.10, copies of
all agreements with any independent contractors. All such contracts are
terminable at will by Seller or, with respect to independent contractors, upon
90 days written notice. Seller is not a party to any pending or threatened labor
dispute and none has been the subject of any attempt to unionize its employees.
Seller has not experienced any actual or threatened employee strike, or employee
related work stoppage, slowdown or lockout. Except for the non-compliance
specifically
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disclosed in Exhibit 3.1.10, Seller has complied in all material respects with
all applicable federal, state and local laws, ordinances, rules and regulations
and requirements relating to the employment of labor, including, but not limited
to, laws governing wages and hours, collective bargaining, payment of Social
Security, unemployment and withholding taxes, and equal employment opportunity,
advancement of minorities and women, or discrimination based on age or
disability. Seller is not liable for any wage or any tax arrearages or any
penalties or assessments for failure to pay timely taxes or wages or to comply
with any employment related laws. At the Closing Date, the employees of Seller
will be terminable at will. Seller has not received notice from any employee
listed on Exhibit 3.1.10 that such employee is terminating or intends to
terminate employment with Seller. Seller has not received notice that any
employee who is a key employee or critical to any operations of Seller is
terminating or intends to terminate his or her employment. There are no pending
or threatened actions, proceedings, or claims against Seller involving
allegations of unlawful employment discrimination or unlawful employment
practices of any type, including, without limitation, violation of any employee
health, safety or payment laws. Except as specifically disclosed in on Exhibit
3.1.10, Seller have not received written notice of any employee complaints or
grievances or any alleged violations of any labor, wage or employment laws,
including the Age Discrimination in Employment Act, Occupational Health and
Safety Act, Title VII of the Civil Rights Act, Fair Labor Standards Act, any
Civil Rights Act adopted by the State of Texas, Americans With Disabilities Act,
and Family Medical Leave Act, as each is amended, from time to time. Except as
disclosed in Section 3.1.10, there are no pension, profit-sharing, retirement or
other Employee Benefit Plans maintained by Seller with respect to the Business
or with respect to which Seller is obligated to fund or make any payments.
3.1.11 Unemployment Contributions. Except for those amounts due for
the first quarter of 1999, Seller has paid all contributions required to be paid
by Seller to any unemployment compensation fund or other fund to which Seller is
required to contribute under the laws of the State of Texas with respect to
periods through and including the date hereof. Seller and ▇▇▇▇▇ agree to pay all
unemployment contributions that may be due for the first quarter of 1999, and
Buyer does not assume or agree to pay any such contributions.
3.1.12 Salaries and Other Taxes. Except for accrued vacation time
compensation, Seller has paid all wages, salaries, bonuses and commissions for
the period through March 12, 1999 to employees of Seller, and has withheld and
paid over to the proper Tax authorities all Taxes (including, without
limitation, state and federal income tax, Federal Insurance Contribution Act
("FICA") taxes, Federal unemployment tax, state unemployment tax, and franchise
taxes) required to be withheld or paid.
3.1.13 Customer Complaints. There are no customer complaints regarding
on-time delivery, or damaged goods of any kind or nature, and no oral or written
claims of any nature, pending or threatened, regarding Seller's Business.
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3.1.14 Use and Occupancy of the Site. To Sellers' knowledge, neither
the use nor the occupancy of the Site on which the business is located is in
violation of any building, zoning, flood plain, environmental, or land use
ordinance, code, law, rule or regulation or of any recorded restriction. The
Site is in compliance with any applicable environmental laws and Seller has no
notice that any governmental body or other Persons or entity is asserting any
violation of any such ordinance, code, law, rule, regulation or restriction or
requiring or calling attention to the need for any work, repairs, construction,
alterations, installation or remediation on or in connection with the Site which
has not been complied with prior to the date hereof.
3.1.15 Laws and Actions Affecting the Site. There are no pending or
threatened actions or proceedings in eminent domain affecting the Site or any
part thereof, or any pending or threatened actions relating to any change of the
present zoning, building or other land use laws, rules, regulations or
ordinances or recorded restrictions that would affect the use of the Site for a
trucking operation.
3.1.16 Lease Matters. A copy of each lease to which Seller is subject
or by which it is bound is set forth at Exhibit 3.1.16.
3.1.17 Material Information. Neither any financial statements or any
other information provided to Buyer by Seller with respect to the Business or
the Assets, nor this Agreement (including the Exhibits hereto), nor any
certificate or other information or document furnished or to be furnished by or
on behalf of Seller to Buyer or its representatives, contains or will contain
any untrue statement of a material fact relating to Seller, its financial or
business condition, the Business, the Assets, or the liabilities or omits or
will omit to state a material fact relating to Seller, its financial or business
condition, the Business, the Assets, or the liabilities required to be stated
herein or therein or necessary to make the statement herein or therein not
misleading. Seller and ▇▇▇▇▇ have disclosed to Buyer in writing all material
information relating to the Business, the Assets, the Assumed Liabilities and
the Retained Liabilities. Seller understands and agrees that Buyer has relied on
and is entitled to rely upon Seller's representation and warranties set forth
herein, and Buyer's due diligence shall not be deemed to limit or modify any
representation or warranty set forth herein.
3.1.18 The Business. As of the Closing, the Assets are in good
operating condition and repair, reasonable wear and tear excepted, and
constitute all of the assets, properties and rights, tangible or intangible,
utilized by Seller and necessary to operate the Business as it is presently
constituted. Seller knows of no defect, flaw or impairment in any of the Assets
subject to this Agreement which Seller has not disclosed to Buyer.
3.1.19 Brokers. All negotiations relative to this Agreement have been
carried on by Seller and its legal counsel directly, without the intervention of
any agent, finder or broker, and no finder's or broker's fee or commission is
payable to any Person as a result of Seller's actions with respect to the
transactions contemplated hereby.
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3.1.20 No Undisclosed Liabilities. There are no liabilities of Seller
of any kind, except for those incurred in the ordinary course of business, that
are not disclosed in this Agreement. There is no fact known to Seller which
adversely affects or to Seller's Knowledge, may in the future (so far as can now
reasonably be foreseen) adversely affect the business, properties, operations or
condition (financial or otherwise) of Seller or the Assets or the Business,
which has not been specifically disclosed in this Agreement or in an exhibit or
schedule delivered to Buyer pursuant to this Agreement.
3.1.21 Assumptions or Guaranties of Indebtedness. Seller is not
directly or contingently liable on any indebtedness of any Person or entity
(including without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in or otherwise to assure any Person or entity against loss)
whether as a result of the assumption, guaranty or endorsement of any debt or
otherwise.
3.1.22 Principal Customers. Set forth in Exhibit 3.1.22(a), which has
been delivered to Buyer, is a list of the names and addresses of all customers
of Seller as of February 28, 1999, and except as set forth in Exhibit 3.1.22(b),
no oral or written threat to Seller or to any officer or director of Seller has
been made to cancel or terminate any relationship with Seller, and Seller has
had no material loss of customers since February 28, 1999. Except as set forth
in Exhibit 3.1.22(b), no party to any such agreement has decreased materially,
or made any oral or written threat to Seller to decrease materially, its
purchase of Seller's transportation services as compared with such purchases
during the twelve (12) month period ended on the Closing Date.
3.1.23 Other Agreements of Directors, Officers, et seq. No key
employee of Seller is a party to or bound by any agreement, contract or
commitment, or subject to any restrictions (whether imposed by contract, court
order or otherwise), particularly, but without limitation in connection with any
previous employment of any such Person, which materially and adversely affects
the business or operations of Seller or the right of any such Person to
participate in the affairs of Seller.
3.1.24 Absence of Defaults. Except as set forth in Exhibit 3.1.24,
neither Seller nor any third party, is in default under or in violation of any
contract, agreement, lease, instrument, commitment or document (including,
without limitation, the Assigned Contracts) by which Seller is or any of its
properties or assets are bound, nor is there any event or events, circumstance
or circumstances, which, but for the service of notice or the lapse of time or
both, would become such a default or violation. Except as set forth in Exhibit
3.1.24, Seller and all third parties, are in full compliance with all of such
contracts, agreements, leases, instruments, commitments and documents
(including, without limitation, the Assigned contracts), and they are (and upon
assignment to Buyer of the Assigned Contracts, all Assigned Contracts will
continue to be) legal, valid and binding obligations enforceable in accordance
with their terms, subject to no claims, counterclaims or offsets. Seller enjoys
quiet possession of all of its leaseholds, personal and real. None of the
Assigned Contracts are subject to the contractual right of a third party to
renegotiate such Assigned Contract, or to redetermine price in less than 30 days
with notice.
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3.1.25 Insurance. Exhibit 3.1.25 sets forth the following information
with respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which Seller has been a party, a named insured, or otherwise
the beneficiary of coverage at any time within the past 7 years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (C) neither Seller nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. Seller has been covered during the past 5 years by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Exhibit 3.1.25 describes
any self-insurance arrangements affecting Seller, and Seller's trailers are
self-insured.
3.1.26 Personnel. Exhibit 3.1.10 contains a true and correct list
of all employees to whom Seller is paying compensation. Seller has delivered to
Buyer a true and correct list of employees that identifies the current annual
rate of compensation for each employee and in the case of hourly or commission
employees identifies certain reasonable ranges of rates and the number of
employees falling within each such range.
3.1.27 Securities Law. To the best of Seller's knowledge, neither
this Agreement nor any of the transactions contemplated hereby require
qualification or filing with, notice to or any authorization, consent or
approval of the Securities Commissioner of the State of Texas, the federal
Securities and Exchange Commission, or the comparable regulatory body of any
other state or jurisdiction.
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3.1.28 Events Subsequent to Most Recent Fiscal Year End. Since
the most Recent Fiscal Year End, there has not been any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of Seller. Without limiting the generality of the foregoing, since
that date:
(a) Seller has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(b) Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $5,000 or outside the Ordinary Course of
Business;
(c) no party (including Seller) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than $5,000
individually or $10,000 in the aggregate to which Seller is a party or by which
it is bound;
(d) Seller has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(e) Seller has not made any capital expenditure (or series
of related capital expenditures) either involving more than $5,000 or outside
the Ordinary Course of Business;
(f) Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either involving
more than $5,000 or outside the Ordinary Course of Business;
(g) Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than $5,000
singly or $10,000 in the aggregate;
(h) Seller has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(i) Seller has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $5,000 or outside the Ordinary Course of Business;
(j) Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
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(k) there has been no change made or authorized in the
charter or bylaws of Seller;
(l) Seller has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(m) Seller has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(n) Seller has not has experienced any damage, destruction,
or loss to its property that is not covered by insurance and Seller has assigned
any insurance proceeds to Buyer;
(o) Seller has not has made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(p) Seller has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(q) Seller has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(r) Seller has not has adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(s) Seller has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary Course of
Business;
(t) Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(u) Except for the repayment of notes payable to ▇▇▇▇▇ by
both ADS and AWS of $131,500 and $40,566.64 respectively, during 1999, Seller
has not paid any amount to any third party with respect to any Liability or
obligation (including any costs and expenses Seller has incurred or may incur in
connection with this Agreement and the transactions contemplated hereby) which
would not constitute an Assumed Liability if in existence as of the Closing;
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(v) There has been no material adverse change in Seller's
Assets; none of the Assigned Contracts has been terminated or canceled and no
customer of the Company has terminated or canceled any agreements or shipping
arrangements with the Seller;
(w) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving Seller; and
(x) Seller has not has committed to any of the foregoing.
3.1.29 Tax Matters.
(a) Seller has filed all Tax Returns that it is or has been
required by law to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by Seller (whether or not shown on any Tax Return) have
been paid. Seller will timely file any Tax Returns due. No claim has ever been
made by an authority in a jurisdiction where Seller does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of Seller that arose in connection with
any failure (or alleged failure) to pay any Tax.
(b) Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) No Seller who is a director of ADS or AWS ("Seller
Stockholder") or a director or officer (or employee responsible for Tax matters)
of Seller expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of Seller either (A) claimed or raised by any authority in
writing or (B) as to which any of Seller Stockholders and the directors and
officers (and employees responsible for Tax matters) of Seller has Knowledge
based upon personal contact with any agent of such authority. Exhibit 3.1.29
lists all federal, state, local, and foreign income Tax Returns filed with
respect to Seller for taxable periods ended on or after December, 1995,
indicates those Tax Returns that have been audited by any tax authority, and
indicates those Tax Returns that currently are the subject of audit. Seller has
delivered to Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by any of Seller since January 1, 1995.
(d) Seller has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) None of the Assumed Liabilities is an obligation to make
a payment that will not be deductible under Code ss.280G. Seller has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Code ss.6662. Seller is not a party to any Tax allocation or sharing agreement.
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Seller (A) has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return or (B) has no Liability for the Taxes of any Person
(other than any of Seller) under Reg. ss.1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
3.1.30 Real Property. Seller owns no real property and, other
than the leased property described in Exhibit 3.1.30(b), Seller owns and holds
no interest in any real property.
(a) Exhibit 3.1.30 lists and describes all real property
leased or subleased to Seller. Seller has delivered to Buyer correct and
complete copies of the leases and subleases listed in Exhibit 3.1.30 (as amended
to date). With respect to each lease and sublease listed in Exhibit 3.1.30:
(1) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(2) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 2 above);
(3) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(4) no party to the lease or sublease has repudiated any
provision thereof;
(5) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(6) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or sublease hold;
(7) all facilities leased or subleased thereunder, to
Seller's knowledge, have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and
regulations;
(8) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
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3.1.31 Powers of Attorney. Exhibit 3.1.31 lists all outstanding
powers of attorney executed on behalf of Seller.
3.1.32 Environmental Matters, Health and Safety.
(a) Definitions. The following definitions shall apply for
purposes of this Section 3.1.32:
(1) "Environmental Conditions" means environmental
circumstances with respect to soil, surface waters, groundwaters,
stream sediment, air and similar environmental media, both
on-site and off-site of the real property, either owned or leased
by Seller or on which it (or any predecessor) operates or has
operated its business (the "Premises"), that could require
remedial action and/or that may result in claims and/or demands
by and/or liabilities to third parties, including, but not
limited to governmental entities. Environmental Conditions shall
include, but are not limited to, those discovered before or after
the Closing Date.
(2) "Environmental Laws" means any and all federal, state,
local or municipal laws, regulations, ordinances, rules, orders,
guidelines, policies or requirements of any governmental
authority regulating or imposing standards of liability or
standards of conduct (including common law) concerning air,
water, solid waste, Hazardous Materials (including, but not
limited to, the transfer of facilities involved in the
generation, storage, handling, transportation and/or disposal of
Hazardous Materials), worker and community right-to-know, hazard
communication, noise, radioactive material, resource protection,
subdivision, inland wetlands and watercourses, health protection
and similar environmental, health and safety, as in effect as of
the Closing Date or any time prior to the Closing Date. Such laws
include, but are not limited to, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Responsibility
Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act, the Occupational Safety and Health Act, the
Hazardous Materials Transportation Act, the Toxic Substance
Control Act, the Federal Insecticide Fungicide and Rodenticide
Act, the Clean Water Act, the Clean Air Act, the Safe Drinking
Water Act, and laws relating to the regulation or permitting of
storm water drainage, and any laws relating to Seller's present
operations, all as amended and effective on the date hereof, and
including subsequent amendments thereto and the regulations,
rules, orders and policy statements promulgated or issued
thereunder. Environmental Laws also include any or all
environmental permits, approvals, consents, stipulations,
licenses, registrations, certificates and authorizations which
are required by law, ordinance or regulation and any and all
environmental regulatory compliance
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requirements applicable to Seller or any predecessor(s) in
interest as in effect at or prior to the Closing Date.
(3) "Hazardous Materials" means any petroleum, petroleum
products, fuel oil, explosives, reactive materials, ignitable
materials, corrosive materials, hazardous chemicals, hazardous
wastes, hazardous substances, extremely hazardous substances,
toxic substances, toxic chemicals, radioactive materials,
infectious materials and any other element, compound, mixture,
solution or substance which may pose a present or potential
hazard to human health or the environment, or as otherwise
defined and regulated by Environmental Laws.
(4) "Notice" means any summons, citation, directive, order,
claim, litigation, pleading, investigation, proceeding, judgment,
letter or any other written or oral communication from the United
States Environmental Protection Agency, the Texas Department of
Environmental Quality, or any other federal, state or local
agency or authority, or any other entity or any individual,
concerning any intentional or unintentional act or omission which
has resulted in or which may result in the Release of any
Hazardous Material into the environment, including the surface
water, groundwater, soil, air or other environmental media, or
other violation or alleged violation of Environmental Laws and
shall expressly include the imposition of any lien pursuant to
any federal, state or local environmental laws, ordinances or
regulations.
(4) "Release" means releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, ejecting, escaping,
leaching, disposing, migrating, seeping, infiltrating, draining
or dumping. This term shall be interpreted to include both the
present and past tense, as appropriate and "Threatened Release",
all as further defined by any Environmental Law.
(5) "Site Remediation Measures" means any efforts of
federal, state or local government, Seller and ▇▇▇▇▇, their
contractors, subcontractors, or agents, which are made, designed,
initiated, or maintained to ensure that Environmental Conditions
are consistent with Environmental Laws, and may include, without
limitation, investigation, site monitoring, containment,
clean-up, transport, removal, disposal, restoration and other
remedial efforts of any kind.
(b) Environmental Representations and Warranties. Seller and ▇▇▇▇▇
agree, represent and warrant to Buyer:
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(1) Compliance. Seller and ▇▇▇▇▇ have been and are in
compliance with, and have no liability or obligation arising
under, the Environmental Laws, and neither Seller nor ▇▇▇▇▇ has
received any Notice from any applicable governmental agency
seeking any information or alleging any violation of such
Environmental Laws. No Site Remediation Measure is necessary for
any business conducted by Seller or ▇▇▇▇▇ or the Premises, nor
are there any Environmental Conditions on the Premises. No
capital improvements, alterations or repairs to any facility
owned, leased or operated by Seller or ▇▇▇▇▇ are necessary or
required to bring such facility into compliance with all
Environmental Laws now in effect.
(2) Hazardous Materials/Underground Tanks. Seller and ▇▇▇▇▇
have not caused or permitted any use of the Premises to generate,
manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process any Hazardous Materials or solid
waste, except in compliance with all Environmental Laws, and have
not caused or permitted and have no knowledge of the Release of
any such Hazardous Materials on-site or off-site of the Premises,
except in compliance with all Environmental Laws. All plants,
buildings or structures owned, leased or used by Seller and ▇▇▇▇▇
and all principal items, machinery and equipment used in the
business conducted by Seller and ▇▇▇▇▇ comply with all applicable
Environmental Laws. The Premises do not contain any asbestos or
other Hazardous Materials, and no such materials are located on,
in or under the Premises. Any and all underground and aboveground
tanks at the Premises are in compliance with any and all
Environmental Laws, and such Environmental Laws do not mandate
the removal or retrofitting of such tanks for a period of five
(5) years after the Closing. The removal of any tank by Seller
has been carried out in compliance with all applicable
Environmental Laws. No condition, circumstance, or set of facts
constitutes a significant hazard to health, safety, property or
the environment for which Seller or ▇▇▇▇▇ is or may be liable.
Neither Seller nor ▇▇▇▇▇ has directly or indirectly, disposed of
Hazardous Materials or solid waste off-site in a manner that
gives rise to or creates an Environmental Condition or violates
any Environmental Law.
(3) There are no outstanding or threatened actions, claims,
proceedings, determinations or judgments by any party, including
but not limited to any governmental authority, whether federal,
state, local or any agency thereof, against or involving Seller
or ▇▇▇▇▇ in any manner arising under the Environmental Laws or
alleging or involving personal injury or damage as a result of a
violation of any Environmental Law or otherwise involving
Environmental Conditions.
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(4) Seller and ▇▇▇▇▇ and predecessor(s) in interest, have
complied with all notice, record keeping and reporting
requirements imposed by any governmental authority and any
informational requests or demands arising under any Environmental
Laws. Neither Seller nor ▇▇▇▇▇ is liable for any penalties,
fines, or forfeitures or is subject to any restrictions on the
conduct of its business for failure to comply with any of the
foregoing.
(5) Exhibit 3.1.32 describes the Environmental Conditions
known to Seller with respect to the Premises on which the
Business is operated. Seller agrees to remediate the
Environmental Conditions affecting the Premises, as provided in
Section 3.2.19.
3.1.33 Financial Statements. Attached hereto as Exhibit 3.1.33
are the following financial statements (collectively the "Financial Statements")
of the Seller: (i) unaudited consolidating balance sheets and statements of
income as of and for the fiscal years ended December 31, 1996, December 31,
1997, and December 31, 1998 (the "Most Recent Financial Statements") and the
unaudited, consolidated balance sheets, statements of income for the two month
period ended February 28, 1999 (the "Most Recent Fiscal Month End") for Seller.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of Seller as of such
dates and the results of operations of Seller for such periods, are correct and
complete, and are consistent with the books and records of Seller (which books
and records are correct and complete); provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack footnotes and other
presentation items.
3.1.34 Year 2000 Compliance. The computer programs and software
included in the Assets either (i) collectively recognize, calculate, sort,
store, display and/or process dates outside of the range of 1900-1999, including
the Year 2000 and beyond, correctly recognize that the Year 2000 is a leap year
and correctly handle all date calculations involving the date February 29, 2000;
or (ii) if such computers fail to meet the conditions described in clause (i),
such failure will not have a material adverse effect on the Business or the
Assets.
3.1.35 Disclosure. The representations and warranties contained
in this Section 3.1 (including any matters disclosed in any Exhibit) do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
Section 3.1 not misleading.
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3.2 Covenants. Seller and ▇▇▇▇▇ covenant and agree with Buyer as follows:
3.2.1 Additional Documents. From time to time after the date
hereof, at Buyer's request and without further consideration, Seller shall
execute and deliver such other instruments of conveyance, assignment and
transfer, execute such other and further documents, and take such other action
as Buyer reasonably may require to more effectively convey, transfer to and vest
in Buyer and to put Buyer in possession of the Assets.
3.2.2 Unemployment Tax Certificate. Seller represents that the
State of Texas does not issue unemployment tax certificates. Seller will pay all
unemployment tax due through the Closing Date and, thereafter, as required by
law with respect to persons employed by Seller.
3.2.3 Filing of Final Tax Returns. Seller shall timely file all
Tax Returns and reports and make all payments and deposits for Taxes, interest
and penalties with respect to periods through and including the Closing.
Seller's obligation to pay any penalties or interest shall survive the Closing
of this Agreement. Except as provided herein, Buyer shall have no obligation or
Liability for the Tax payments, interest or penalties resulting from Seller's
activities prior to the Closing, and Buyer does not assume any Liability for
unpaid Taxes, interest and penalties. Seller shall promptly notify Buyer of any
additional Tax, interest or penalties due. Except for the prorations described
below, in the event Buyer is liable for any Tax payment or Tax Liability of
Seller or ▇▇▇▇▇, including, without limitation, penalties or interest, Seller
and ▇▇▇▇▇, jointly and severally, agree to pay Buyer such amounts, upon demand,
and Buyer, at its option, shall have the right to reduce the amount of the
Purchase Price by the amount of any such Liability. Buyer and Seller agree that
any personal property taxes assessed as of January 1, 1999 with respect to the
Assets will be borne soley by Seller.
3.2.4 Termination of Employees. Seller shall, prior to the
Closing, give notice to all of Seller's employees whom Seller desires to
terminate that their employment with Seller is terminated effective as of the
Closing Date. Along with notice of termination, Seller shall pay all employees
wages through the Closing Date. Seller shall deliver to all such employees, when
available, federal and Texas W-2 forms. Buyer shall have the right, but not the
obligation, to rehire each of Seller's employees and Buyer desires to hire, and
Seller shall use its best efforts to assist Buyer in hiring any of Seller's
employees Buyer elects to hire.
3.2.5 Non-Disclosure. After the date hereof, Seller and any
Persons or entities directly or indirectly related to, controlling or controlled
by Seller shall not disclose, and shall use their best efforts to cause their
officers, directors, employees and agents not to disclose, or use for any
purpose, any confidential or proprietary information with respect to the
Business as engaged in by Seller or Buyer, including, without limitation,
customer lists, delivery routes and schedules, and the contents, terms and
existence of this Agreement, other than information which can be shown to be
obtainable through publicly available sources.
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3.2.6 Seller's Name. Following Closing Date, Seller shall take
all actions necessary under Texas law to dissolve, liquidate, and wind up the
business of Seller as consistent with Code ▇▇.▇▇. 368(a)(1)(c) and 368(a)(2)(c),
including paying all necessary fees with the Texas Secretary of State and
publishing all required notices, and filing any articles of dissolution or
liquidation that may be required under the laws of the State of Texas.
3.2.7 Franchise Tax Certificate. Within 30 days of, but not later
than, the Closing Date, Seller shall supply Buyer with a franchise tax
certificate indicating that all franchise taxes have been paid through the
Closing Date.
3.2.8 Intellectual Property. Seller agrees to execute, deliver to
Buyer and file with any appropriate governmental agency, any patent, tradename,
trademark, servicemark, copyright, or other application necessary or desirable
to protect Buyer's interest in any patents, tradenames, trademarks, servicemarks
or copyrights or which may be subject to protection through the filing of any
such application.
3.2.9 Assignment of License and Permits. To the extent any
license, permit, approval or authorization that is necessary to continue or
conduct the Business as it is presently conducted is transferable, Seller shall
cause such license, permit, authorization or approval to be transferred to Buyer
and Seller hereby assigns all such licenses, permits, authorizations and
approvals to Buyer.
3.2.10 Maintenance of Contracts. Seller, until the Closing Date,
shall maintain in force and effect all of the Assigned Contracts and shall not
commit any default or breach thereof and, in the event any default or breach
should occur, shall have fully cured and remedied such breach or default on or
before the Closing Date.
3.2.11 Maintenance of Assets in Business. Seller shall continue
to maintain and service the Assets used in the conduct of the Business in a
manner at least as good as has been consistent with past practice and shall take
any and all action necessary to maintain and preserve the Assets and to carry on
the Business as it is presently conducted. Seller shall not make any material
changes, modifications or enhancements in or to any of the Assets or purchase
additional Assets, except as to which Buyer may specifically consent in each
instance in writing. Seller shall continue to conduct the Business in the
ordinary course in a manner consistent with past practice. Seller shall use its
best efforts to maintain and conduct the Business in a manner consistent with
the terms and conditions of this Agreement.
3.2.12 Compliance With Law. Seller shall comply with all laws,
ordinances, rules, regulations and orders applicable to the Business and to the
Seller's operations, assets, properties and prospects.
3.2.13 Update and Completion of Exhibits. Seller shall promptly
update any schedule or exhibit attached to this Agreement in the event any
change occurs which would make
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such schedule or exhibit no longer correct as of the date delivered. Any update
shall not modify, amend or supplement the representations and warranties of
Seller, unless Buyer has consented to such modification in writing. The Exhibits
attached hereto are part of this Agreement. In the event the parties execute
this Agreement without fully completing all Exhibits, Seller agrees to promptly
complete the Exhibits. Buyer's obligation to perform hereunder is subject to its
review and approval of each Exhibit, including any Exhibit furnished after
execution of this Agreement or any amendment or supplement to an Exhibit. Buyer
shall have not less than seven business days to approve any Exhibit or amendment
or supplement to an Exhibit.
3.2.14 No Further Negotiations. Until the Closing Date, Seller
agrees not to, directly or indirectly, negotiate with any other Person or entity
with respect to the purchase of all or a portion of the Business, its Assets or
to transfer, mortgage or encumber or otherwise deal with any of the Assets
except other than in the ordinary course of business in a manner consistent with
past practice. Seller shall not provide any confidential information concerning
the Business or the Assets to any third party other than in the ordinary course
of business, and then only pursuant to a confidentiality, non-disclosure,
non-use agreement in a form acceptable in substance to Buyer.
3.2.15 Access. Seller shall give Buyer's officers, employees,
counsel, agents and accountants access to and the right to inspect during normal
business hours Seller's premises and all properties, assets, records, contracts
and other documents relating to the Business or the Assets or the Assumed
Liabilities or any of these. Seller shall furnish Buyer copies of any and all
documents, reports and information with respect to the conduct of the Business,
including Seller's financial statements and gross receipts records and shall
permit Buyer and its agents to inspect and make copies of the same. Buyer agrees
to keep all such information confidential.
3.2.16 Customer and Account Relations. ▇▇. ▇▇▇▇▇ will use his
best good faith efforts to introduce Buyer and its representatives to all key
Seller customer account representatives including K-Mart, Georgia Pacific,
International Paper and any other key customers designated by Buyer as a key
account prior to Closing and consistent with the Consulting Agreement attached
hereto as Exhibit 6.4.
3.2.17 Payment of Taxes. Seller and ▇▇▇▇▇ shall be jointly and
severally liable for, and shall promptly pay any penalties and interest imposed
on the Business or its Assets due to a failure of Seller or ▇▇▇▇▇ to pay timely
any taxes or tax assessment. Seller acknowledges that Buyer does not assume or
agree to pay any unpaid taxes, interest or penalties.
3.2.18 Tax Withholding Agreement. At Buyer's request, Seller and
Buyer will, at the Closing, enter into a successor/predecessor tax withholding
agreement pursuant to Rev. Proc. 96-60, 1996-53 I.R.B. 24, in form and substance
acceptable to Buyer with respect to any employees of Seller who are reemployed
by Buyer.
3.2.19 Environmental Conditions. Seller, at its sole cost and
expense, shall pay for all costs of remediating any Environmental Condition (as
such term is defined in Section
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3.1.32) including, without limitation, any Environmental Condition identified by
▇▇▇▇▇▇ Environmental Services, Inc. ("▇▇▇▇▇▇") and any Environmental Condition
described in Exhibit 3.1.32, that may exist on any property on which the
Business is located, as of the Closing Date, and Seller shall cause such
condition to be remediated to comply with any applicable Environmental Laws.
Seller, at its own expense, shall also carry out any remediation measures
recommended by ▇▇▇▇▇▇.
3.2.20 Payroll. Seller shall pay all payroll and payroll taxes
and compensation due its Employees through the payroll period ending March 15,
1999, including any amounts due with respect to unemployment compensation.
Seller may make such payments by retaining Buyer as Seller's Agent to make such
payroll disbursements; provided that it shall be Seller's obligation to provide
sufficient funds to Buyer to pay all such amounts, and Buyer does not assume any
obligation to pay Seller's payroll, payroll taxes or unemployment.
3.2.21 Intentionally Left Blank.
3.2.22 Change of Name. Immediately following the Closing Date,
ADS and AWS shall change their names and amend their certificates of
incorporation to reflect a new name that is acceptable to Buyer and does not
contain the names "Action" or "▇▇▇▇▇."
3.2.23 Officer's Certificate. Seller's Chief Executive Officer
shall execute and deliver on the Closing Date a Certificate (substantially in
the form set forth in Exhibit 3.2.21) attesting that:
(a) All Seller's representations and warranties are true and
correct as of the Closing Date;
(b) No liabilities exist which affect the Assets which Seller has
not disclosed to Buyer;
(c) After reasonable investigation and inquiry, Seller's Chief
Executive Officer certifies that matters set forth in Section 3.1.17, 3.1.20 and
3.1.35 of this Agreement are true and correct; and
(d) Seller has taken all necessary shareholder and corporate
action to authorize the execution, delivery and performance of the transactions
contemplated by this Agreement.
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4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
4.1 Representations and Warranties. Buyer represents and warrants to Seller
as follows:
4.1.1 Organization; Power. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona.
Buyer has all requisite power and authority to carry on its business as it is
now conducted.
4.1.2 Corporate Authority. Buyer has full corporate power and
authority to execute and deliver this Agreement and the other documents and
instruments executed by Buyer in connection herewith and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other documents and instruments executed by Buyer in
connection herewith and the performance by Buyer of its obligations hereunder
and thereunder, have been duly and validly authorized and no further corporate
action is necessary in connection therewith. This Agreement and the other
documents and instruments executed by Buyer in connection herewith constitute
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms.
4.1.3 No Violation. To the best of Buyer's Knowledge, neither the
execution and delivery of this Agreement by Buyer or of the other documents and
instruments executed by Buyer in connection herewith, nor the performance by
Buyer of its obligations hereunder and thereunder, will (i) violate any
provision of the Articles of Incorporation or Bylaws of Buyer; (ii) violate, be
in conflict with or constitute a default under, or permit the termination of,
any agreement to which Buyer is a party; or (iii) violate any statute, law,
regulation, rule, judgment, decree or order to which Buyer is subject.
4.1.4 Brokers. All negotiations relative to this Agreement have
been carried on by Buyer and its legal counsel directly, without the
intervention of any agent, finder or broker, and no finder's or broker's fee or
commission is payable to any Person as a result of Buyer's action with respect
to the transactions contemplated hereby.
4.1.5 Shares Received. The Knight Shares received by Seller or
its shareholders (collectively the "Seller Stockholders") will not be restricted
in any manner other than such shares shall be sold only in accordance with the
Securities and Exchange Act Rule 144, to the extent applicable, and shall comply
with all other restrictions on sale imposed by applicable state or federal
securities laws. The Knight Shares received by Seller Stockholders will not be
registered with the Securities and Exchange Commission; provided, however,
Seller Stockholders shall be afforded registration rights, on a pro rata basis
with any other selling shareholders, at Buyer or Knight's expense (exclusive of
any underwriter's discount or commission, which shall be borne by Seller
Stockholders), subject to any underwriter cutbacks or other limitations, as more
particularly described in the Registration Rights Agreement attached hereto as
Exhibit 4.1.5.
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5. CLOSING
5.1 Closing. The consummation of the transactions contemplated hereby (the
"Closing") shall occur at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, Texas, on or before March 15,1999, at 3:00 p.m. (the "Closing Date"),
unless Buyer and Seller mutually agree to a different date.
5.2 Seller's Deliveries at Closing. At the Closing, Seller
shall deliver the following to Buyer:
(a) The ▇▇▇▇ of Sale and Assignment and Assumption of Leases,
Contracts and Rights attached hereto as Exhibits 5.2(a) and 5.2(b) and such
other duly executed bills of sale, certificates of title, instruments of
assignment, transfer and conveyance and other documents containing appropriate
warranties of title as may be necessary, as determined by counsel to Buyer, to
vest fully in Buyer good and marketable title to and rightful possession of all
of the Assets, free and clear of any and all liabilities and Liens;
(b) All records, or copies thereof, of documents necessary or
appropriate for Buyer's use of the Assets and the conduct of the Business,
including, but not limited to, customer lists, lists of suppliers, sales
records, credit information, accounts receivable, service and repair records
relating to assets, and employee records pertaining to Seller's employees;
(c) A certificate of the Secretary of Seller attesting to the adoption
by Seller's Board of Directors and shareholders of resolutions, which are in
force and effect, authorizing the execution and delivery of this Agreement by
Seller, and the performance of Seller's obligations hereunder;
(d) Seller's Plan of Reorganization, which document may be delivered
within 30 days after the Closing Date.
(e) Articles of Amendment to Seller's Certificate of Incorporation
changing Seller's name, and as to resolutions of Seller's Board of Directors and
shareholders authorizing the dissolution, liquidation, and winding up of
business of Seller, which document may be delivered within 30 days after the
Closing Date
(f) True and complete copies of the Seller's Certificate of
Incorporation and bylaws.
(g) A current Certificate of Good Standing for Seller issued by the
Texas Comptroller of Public Accounts and a Certificate of Existence from the
Texas Secretary of State;
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(h) A fully executed copy of the Successor/Predecessor Tax Withholding
Agreement described in Section 3.2.18 an attached hereto as Exhibit 5.2(h);
(i) A fully executed copy of the Registration Rights Agreement
attached hereto as Exhibit 4.1.5;
(j) A fully executed copy of the ▇▇▇▇▇ ▇. ▇▇▇▇▇ Consulting Agreement
attached hereto as Exhibit 6.3;
(k) Seller's landlord shall have executed and delivered the Lease
Agreement attached hereto as Exhibit 6.4;
(l) A fully executed copy of the Officers Certificate described in
Section 3.2.21.
(m) An opinion of Seller's counsel in a form acceptable to Buyer; and
(n) Such other documents, instruments and certificates as Buyer shall
reasonably request, or as may be requested under this Agreement.
5.3 Buyer's Deliveries at Closing. At the Closing, Buyer shall deliver the
following to Seller:
(a) Payment of the Stock Consideration provided in Sections 2.6 and
2.7 hereof, adjusted for any reductions or setoffs permitted by this Agreement.
(b) A certificate of the Secretary of Buyer attesting to the adoption
of resolutions by Buyer's Board of Directors and shareholders, which are in
force and effect authorizing the execution and delivery of this Agreement and
the performance of Buyer's obligations hereunder;
(c) A fully executed copy of the Registration Rights Agreement
attached hereto as Exhibit 4.1.5;
(d) A fully executed copy of the ▇▇▇▇▇ ▇. ▇▇▇▇▇ Consulting Agreement
attached hereto as Exhibit 6.4;
(e) The Buyer's Officers Certificate set forth in Exhibit 5.3(f);
(f) An opinion of Buyer's counsel in a form acceptable to Seller; and
(g) Such other documents, instruments and certificates as Seller shall
reasonably request.
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6. CONDITIONS TO CLOSING.
6.1 Conditions to Buyer's Obligation. Buyer's obligation to close and to
consummate the transactions contemplated by this Agreement shall be subject to
the following conditions, unless Buyer elects to waive in writing, any of such
conditions. The conditions shall be solely for the benefit of Buyer.
6.1.1 Representations and Warranties True. All representations and
warranties of Seller set forth herein shall be true as of the date hereof and as
of the Closing Date except with respect to those items set forth in the
Disclosure Statement, as to each of which, Buyer shall have approved in writing
on or before the Closing Date.
6.1.2 Compliance With Covenants. Seller shall have performed and
complied with all agreements and covenants set forth herein and shall not be in
breach of any agreement or covenant set forth herein.
6.1.3 No Legal Proceedings. On the Closing Date, except as described
in Exhibit 3.1.9, no suit, action, proceeding or other matter shall be pending
or threatened before any court, agency, arbitrator, regulatory body or other
authority which could, if determined adversely to Seller, have a materially
adverse effect upon the Business or Assets or Buyer's ability to realize the
benefits of this Agreement. No proceeding (whether legal, equitable,
administrative or otherwise) concerning the Assets or the Business or any other
matter material to Seller shall be pending or threatened. No voluntary or
involuntary bankruptcy petition shall have been filed against Seller or any
receiver appointed or requested to be appointed.
6.1.4 Corporate Approvals. Seller shall have obtained all necessary
corporate approvals and authority, including, but not limited to, the consent
approval of any shareholders in order to consummate the transactions
contemplated hereby.
6.1.5 No Change In Business or Capital Structure. There shall have
been no change in the business, operations, assets, properties or prospects of
the Business, nor shall there be pending or threatened any change which would,
if resolved adversely to Seller, have a materially adverse effect on the
Business or the Assets or the ability of Seller to continue to conduct the
Business as it has previously been conducted. Prior to the Closing Date, Seller
will not issue any additional capital instruments, including, but not limited
to, shares of stock, except those under stock options, if any, presently issued
and outstanding.
6.1.6 No Change In Liabilities. There shall have been no increase in
the Assumed Liabilities. For this purpose a change in the Assumed Liabilities is
"material" if it, alone or combined with any other changes or adjustments
contemplated by Section 2.6 or any other provision of this Agreement, equals or
exceeds $50,000.
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6.1.7 Consulting Agreement. Buyer shall have entered into a consulting
agreement with ▇▇▇▇▇ ▇. ▇▇▇▇▇ and any other employee of Seller that Buyer has
designated as of the Closing Date as a key employee.
6.1.8 Consents and Approvals. Seller shall have obtained any third
party consents or approvals which may be necessary to convey and transfer to
Buyer the Assets and the Business, including, but not limited to, any consent
necessary for Seller to convey to Buyer the Assigned Contracts.
6.1.9 No Defaults. Buyer shall not be in default under any of the
Assigned Contracts and no event shall have occurred which, with either the
passage of time or the giving of notice or both, would constitute default under
any of the Assigned Contracts.
6.1.10 No Dissenter's Rights. None of Seller's shareholders shall have
exercised any dissenters rights or rights of appraisal and not less than ninety
percent (90%) of Seller's shareholders shall have voted to approve the
transactions evidenced by this Agreement.
6.1.11 Deliveries. Buyer shall have tendered as of the Closing Date
all deliveries required hereunder.
6.1.12 Seller's landlord, ▇▇▇▇▇, Inc., as of the Closing Date, shall
have executed and delivered to Buyer a new real estate lease in a form
acceptable to Buyer.
6.1.13 Satisfaction of Buyer with Customer Relations. Buyer is
satisfied with its ability to succeed to the representation of those accounts
designated in and pursuant to Section 2.2.16.
6.2 Seller's Conditions to Closing. As a condition to Seller's obligation
to close, the following conditions shall have been met as of the Closing Date or
waived in writing by Seller:
6.2.1 Compliance With Covenants. Buyer shall have performed all
covenants and agreements contained herein which are required to be performed by
it on or prior to the Closing Date.
6.2.2 Representations and Warranties. All representations and
warranties of Buyer shall be true as of the Closing Date.
6.2.3 Corporate Approvals. Buyer shall have obtained all necessary
corporate authorizations and approvals necessary to execute and delivery this
Agreement and to consummate the transactions contemplated hereby.
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6.2.4 Deliveries. Seller shall tender as of the Closing Date each of
the documents and the consideration required to be tendered as of such date
pursuant to the terms and conditions of this Agreement.
6.3 ▇▇▇▇▇ as Consultant. At the Closing Date, Buyer will retain ▇▇. ▇▇▇▇▇
as a senior marketing consultant and Buyer and ▇▇▇▇▇ will execute and deliver
the consulting agreement attached hereto as Exhibit 6.3..
6.4 Lease. Seller and ▇▇▇▇▇ shall use their best good faith efforts to
cause Seller's current Landlord ("Landlord") on or before the Closing Date to
execute and deliver to Buyer a written lease substantially in the form attached
hereto as Exhibit 6.4, pursuant to which Buyer may lease the real property on
which Seller's business is presently located for a term of not less than three
(3) years at a initial monthly rental of $5,000 per month (the "Lease"). Buyer's
and Landlord's execution and delivery of such lease in a form acceptable to
Buyer shall be a condition precedent to Buyer's obligation to close hereunder.
6.5 Exclusivity. Prior to the termination of this Agreement, Seller will
not (i) solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of Seller (including any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. Seller will notify Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
7. INDEMNIFICATION
7.1 Indemnification by Seller and ▇▇▇▇▇. Subject to the other provisions of
this Article 7, Seller and ▇▇▇▇▇, jointly and severally, shall save, indemnify,
defend and hold harmless Knight, Buyer and their Affiliates and their respective
partners, members, principals, employees, directors, officers, stockholders,
representatives and agents (collectively, the "Buyer Group") from and against,
and pay or reimburse, as the case may be, the Buyer Group, and each of them,
for, any and all Damages, as incurred, suffered by Buyer or any other member of
the Buyer Group based upon, arising out of or otherwise in any way relating to
or in respect of:
7.1.1 the failure of any of the representations and warranties of
Seller or ▇▇▇▇▇ contained in Article 3 or in any other documents executed and
delivered in connection with this Agreement to have been true and correct as of
the date hereof and as of the Closing Date, it being understood that to the
extent that any of such representations and warranties were expressly made as of
a specified date the same shall apply only to the failure of such
representations and warranties to be true and correct as of such specified date;
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7.1.2 any breach or violation of any covenant or agreement of Seller
and ▇▇▇▇▇ contained herein or in any certificate or other document delivered
pursuant hereto, including, without limitation, any environmental
representation, warranty or covenant;
7.1.3 the Retained Liabilities (including, without limitation, any
Liability which is not an Assumed Liability that may become a Liability of Buyer
by statute, regulation, common law or otherwise and the failure by Seller or
▇▇▇▇▇ to pay, perform or otherwise discharge any Retained Liabilities in
accordance with their terms); or
7.1.4 the enforcement by the Buyer Group of their rights to be
indemnified, defended and held harmless under this Agreement.
7.2 Indemnification by Buyer. Subject to the other provisions of this
Article 7, Buyer shall save, indemnify, defend and hold harmless Seller and
▇▇▇▇▇ and their respective employees, directors, officers, stockholders,
representatives and agents (collectively, the "Seller Group") from and against,
and pay or reimburse, as the case may be, Seller Group for, any and all Damages,
as incurred, suffered by Seller or any other member of Seller Group based upon,
arising out of or otherwise in any way relating to or in respect of:
7.2.1 the failure of any of the representations and warranties of
Buyer contained in Article 4 or in any other Operative Document to have been
true and correct as of the date hereof and as of the Closing Date, it being
understood that to the extent that any of such representations and warranties
were expressly made as of a specified date the same shall apply only to the
failure of such representations and warranties to be true and correct as of such
specified date;
7.2.2 any breach or violation of any covenant or agreement of Buyer
contained herein or in any certificate or other document delivered pursuant
hereto;
7.2.3 the Assumed Liabilities (including, without limitation, the
failure by Buyer to pay, perform or otherwise discharge any Assumed Liabilities
in accordance with their terms); or
7.2.4 the enforcement by Seller Group of their rights to be
indemnified, defended and held harmless under this Agreement.
7.3 Procedures for Indemnification.
7.3.1 If a claim or demand is made against an Indemnitee, or an
Indemnitee shall otherwise learn of an assertion, by any Person who is not a
party to this Agreement or an Affiliate thereto (a "Third-Party Claim") as to
which a party (the "Indemnifying Party") may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee will notify the
Indemnifying Party in writing of the Third-Party Claim (and specifying in
reasonable detail the factual basis for the Third-Party Claim and to the extent
known, the amount of the Third-Party
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Claim) within a reasonable period of time after becoming aware of such
Third-Party Claim; provided, however, that failure to give such notification
will not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
7.3.2 If a Third-Party Claim is made against an Indemnitee and the
Indemnifying Party unconditionally and irrevocably acknowledges in writing its
obligation to indemnify the Indemnitee therefor, the Indemnifying Party will be
entitled, within 30 days after receipt of written notice from the Indemnitee of
the commencement or assertion of any such Third-Party Claim, to assume the
defense thereof (at the expense of the Indemnifying Party) with counsel selected
by the Indemnifying Party and reasonably satisfactory to the Indemnitee. Should
the Indemnifying Party so elect to assume the defense of a Third-Party Claim,
the Indemnifying Party will not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in connection with the
defense thereof, provided that, if in any Indemnitee's reasonable judgment based
on advice of counsel a conflict of interest exists in respect of such claim,
such Indemnitee shall have the right to employ separate counsel to represent
such Indemnitee and in that event the reasonable fees and expenses of such
separate counsel shall be paid by such Indemnifying Party; provided, further,
that the Indemnifying Party shall only be responsible for the reasonable fees
and expenses of one separate counsel for such Indemnitee. If the Indemnifying
Party assumes the defense of any Third-Party Claim, the Indemnitee shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Party. The
Indemnifying Party shall be liable for the fees and expenses of counsel employed
by the Indemnitee if it does not expressly elect to assume the defense of any
Third-Party Claim within the 30-day period specified above (including
acknowledging its indemnification obligation as aforesaid). If the Indemnifying
Party assumes the defense of any Third-Party Claim, the Indemnifying Party will
promptly supply to the Indemnitee copies of all correspondence and documents
relating to or in connection with such Third-Party Claim and keep the Indemnitee
informed of developments relating to or in connection with such Third-Party
Claim, as may be reasonably requested by the Indemnitee (including, without
limitation, providing to the Indemnitee on reasonable request updates and
summaries as to the status thereto). If the Indemnifying Party chooses to defend
a Third-Party Claim, all the Indemnitees shall reasonably cooperate with the
Indemnifying Party in the defense thereof (such cooperation to be at the
expense, including reasonable legal fees and expenses, of the Indemnifying
Party). If the Indemnifying Party does not elect to assume control of the
defense of any Third-Party Claim within the 30-day period set forth above, the
Indemnitee shall have the right to undertake the defense of the Third-Party
Claim for the account of the Indemnifying Party, subject to the right of the
Indemnifying Party, at its expense, to assume the defense of the Third-Party
Claim at any time prior to final determination thereof by notifying the
Indemnitee in writing of its election to so assume the defense of such
Third-Party Claim and unconditionally and irrevocably acknowledging in writing
its obligation to indemnify the Indemnitee therefor.
7.3.3 If the Indemnifying Party acknowledges in writing its obligation
to indemnify the Indemnitee for a Third-Party Claim, the Indemnitee will agree
to any settlement,
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compromise or discharge of such Third-Party Claim which the Indemnifying Party
may recommend and which by its terms obligates the Indemnifying Party to pay the
full amount of Damages (whether through settlement or otherwise) in connection
with such Third-Party Claim and unconditionally and irrevocably releases the
Indemnitee completely from all Liability in connection with such Third-Party
Claim; provided, however, that, without the Indemnitee's prior written consent,
the Indemnifying Party shall not consent to any settlement, compromise or
discharge (including the consent to entry of any judgment), and the Indemnitee
may refuse to agree to any such settlement, compromise or discharge (i) that
provides for injunctive or other nonmonetary relief affecting the Indemnitee or
(ii) that, in the reasonable opinion of the Indemnitee would otherwise adversely
affect the Indemnitee. If the Indemnifying Party unconditionally and irrevocably
acknowledges in writing its obligation to indemnify the Indemnitee for a
Third-Party Claim, the Indemnitee shall not (unless required by law) admit any
liability with respect to, or settle, compromise or discharge, such Third-Party
Claim without the Indemnifying Party's prior written consent (which consent
shall not be unreasonably withheld).
7.3.4 Any claim on account of Damages which does not involve a
Third-Party Claim shall be asserted by reasonably prompt written notice given by
the Indemnitee to the Indemnifying Party from whom such indemnification is
sought. The failure by any Indemnitee to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability which it may have to such
Indemnitee under this Agreement, except to the extent that the Indemnifying
Party shall have been actually prejudiced by such failure. If the Indemnifying
Party does not dispute its liability to the Indemnitee with respect to the claim
made in such notice by notice to the Indemnitee prior to the expiration of a
45-calendar-day period following the Indemnifying Party's receipt of notice of
such claim, the claim shall be conclusively deemed a liability of the
Indemnifying Party. If the Indemnifying Party does not notify the Indemnitee
prior to the expiration of a 45-calendar-day period following its receipt of
such notice that the Indemnifying Party disputes its liability to the Indemnitee
under this Agreement, such claim specified by the Indemnitee in such notice
shall be conclusively deemed a liability of the Indemnifying Party under this
Agreement and the Indemnifying Party shall pay the amount of such liability to
the Indemnitee on demand or, in the case of any notice in which the amount of
the claim (or any portion thereof) is estimated, on such later date when the
amount of such claim (or such portion thereof) becomes finally determined.
During such 45-calendar-day period, the Indemnifying Party shall be entitled to
make any investigation of such claim that the Indemnifying Party deems
reasonably necessary or desirable and, in connection with such investigation,
the Indemnitee agrees to make available to the Indemnifying Party and its
authorized representatives the information relied upon by the Indemnitee to
substantiate such claim. If the Indemnifying Party has timely disputed its
liability with respect to such claim, as provided above, the Indemnifying Party
and the Indemnitee shall proceed in good faith to negotiate a resolution of such
dispute and, if not resolved through negotiations by the 90th day after notice
of such claim was given to the Indemnifying Party, the Indemnifying Party and
the Indemnitee will be free to pursue such remedies as may be available to such
parties under this Agreement or under applicable Law.
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7.4 Certain Limitations.
7.4.1 No loss, Liability, damage or deficiency shall constitute
Damages to any party to the extent of any insurance proceeds actually received
by such party with respect to such loss, Liability, damage or deficiency (after
deducting reasonable costs and expenses incurred in connection with recovery of
such proceeds).
7.4.2 No monetary amount shall be payable by Seller or ▇▇▇▇▇, on the
one hand, or Buyer, on the other hand, to any member of the Buyer Group or
Seller Group, respectively, with respect to the indemnification of any claims
pursuant to Section 7.1.1 or Section 7.2.1, as the case may be (other than with
respect to Seller's representation and warranty contained in Section 3.1.19
which shall not be subject to any limitation) until the aggregate amount of
Damages actually incurred by the Buyer Group or Seller Group, as the case may
be, with respect to such claims shall equal or exceed on a cumulative basis
$50,000 (but this provision shall not limit Seller's obligation to remediate any
Environmental Condition, as required by Sections 3.1.32 and 3.2.19 (the
"Threshold"), in which event Seller and ▇▇▇▇▇, or Buyer, as the case may be,
shall be responsible for all amounts, in excess of the Threshold. Claims made
pursuant to the representations and warranties contained in or made pursuant to
Section 3.1.19 will not be subject to the Threshold.
7.4.3 Seller and ▇▇▇▇▇ shall have no liability under this Article 7
with respect to a breach of a representation or warranty, any noncompliance with
or nonperformance of an agreement, obligation or covenant of Seller or ▇▇▇▇▇
under this Agreement, to the extent that Buyer has effected any adjustment to
the Purchase Price under Section 2.6 with respect to such breach, noncompliance
or nonperformance with the intent of the parties being to avoid double recovery
by Buyer or Buyer's Affiliates for such items of Damages.
7.5 Termination of Indemnification Obligations. The obligations of
each party to indemnify, defend and hold harmless the other party and other
Indemnitees (i) pursuant to Sections 7.1.1 and 7.2.1 shall terminate when the
applicable representation or warranty expires pursuant to the terms of this
Agreement, and (ii) pursuant to Sections 7.1.2, 7.1.3 and 7.1.4 and Sections
7.2.2, 7.2.3 and 7.2.1 shall continue without time limitation and shall not
terminate at any time; provided, however, that as to clause (i) above, such
obligations to indemnify, defend and hold harmless shall not terminate with
respect to any individual item as to which the Indemnitee shall have, before the
expiration of the applicable period, made a claim by delivering a notice
(stating in reasonable detail the basis of such claim) to the Indemnifying
Party.
7.6 Other Matters.
7.6.1 The parties acknowledge and agree that, except as set forth in
Article 8 and for claims of fraud or similar claims, the sole and exclusive
remedy with respect to any and all claims for indemnification relating to the
subject matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Article 7; provided, however, that nothing in this
Section 7.6.1 shall limit rights or remedies expressly provided for in this
Agreement or any other Operative
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Document or rights or remedies which, as a matter of applicable Law or public
policy, cannot be limited or waived.
7.6.2 In the event of payment in full by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
will be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim or against any other Person. Such Indemnitee
will cooperate with such Indemnifying Party in a reasonable manner, and at the
cost and expense of such Indemnifying Party, in prosecuting any subrogated right
or claim.
7.6.3 The right to indemnification, payment of Damages or other remedy
based upon breach of representations, warranties, covenants, agreements or
obligations will not be affected by any investigation conducted with respect to,
or knowledge acquired (or capable of being acquired) at any time, whether before
or after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with any such
representation, warranty, covenant, agreement or obligation.
7.6.4 The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant, agreement or obligation, will not affect the right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants, agreements and obligations.
8. COVENANTS NOT TO COMPETE
8.1 From the Closing Date, and for five (5) years after such date, ▇▇▇▇▇,
Seller, its shareholders (individually and jointly), and any Person or entity
indirectly or directly controlled by, related to, or affiliated with the
foregoing entities or Persons, shall not engage in the business of providing
transportation services, including, but not limited to, trucking and hauling
services ("Transportation Services") in the United States (the "Excluded Zone").
8.2 For purposes of this Agreement, ▇▇▇▇▇, Seller and its shareholders
shall be deemed to have breached their respective covenants not to compete if,
during such five (5) year period and in the Excluded Zone specified in section
8.1 above, any of them, directly or indirectly:
(a) Performs or causes any other Person or entity to perform
Transportation Services for any Person or entity in the Excluded Zone;
(b) Canvasses, solicits, or accepts or causes any other Person or
entity to canvass, solicit, or accept any Transportation Services business from
any Person or entity located in the Excluded Zone;
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(c) Grants to any Person the right to solicit Transportation Services
business of any kind or nature whatsoever from any Person or entity located in
the Excluded Zone;
(d) Requests or advises or causes any other Person to request or
advise any past, present, then present or prospective customer of Seller or
Buyer ("Customer") to withdraw, curtail, or cancel their business with Buyer;
(e) Discloses to any other Person the name of any Customer for
purposes of competing with the Transportation Services business of Buyer;
(f) Engages or causes any other Person to engage in the Transportation
Services business within the Excluded Zone or establishes an office or causes
any other Person to establish an office within the Excluded Zone for the purpose
of engaging in the Transportation Services business;
(g) Fails to take all action reasonably necessary to enforce, at
Buyer's request and expense, any and all provisions (which shall survive the
date of this Agreement) of any noncompete or confidentiality agreement which
Seller has entered into with respect to any employees, agents, or others of the
foregoing.
(h) Discloses to any other Person any information related to the
Assets and the Transportation Services, which information Seller agrees is
proprietary and confidential.
8.3 Seller and ▇▇▇▇▇ agree that all information concerning the Business and
the Assets is confidential and proprietary and Seller and ▇▇▇▇▇ agree not to
disclose such information to any third party without obtaining Buyer's prior
written consent, which consent may be withheld for any reason. Seller and ▇▇▇▇▇
agree that such proprietary and confidential information includes, but is not
limited to, Seller's customers, and any lists of customers or prospective
customers who may have need for Transportation Services; Seller and ▇▇▇▇▇
acknowledge that all such information constitutes trade secrets of Buyer.
8.4 The covenants set forth in this Section are intended by each of the
parties to be enforceable in all respects. The duration and geographic scope of
the covenants not to compete have been established by the parties after arms'
length negotiations and Buyer, Seller and ▇▇▇▇▇ agree that such covenants are
reasonable as to duration and geographic scope. Seller and ▇▇▇▇▇ waive any right
they may have to challenge in a court of law or otherwise the enforceability or
reasonableness of such covenants. Seller and ▇▇▇▇▇ agree that such covenants are
essential and necessary for Buyer to protect the Assets and the Business it is
purchasing and acquiring from Seller. In the event any court of competent
jurisdiction should find any provision of such covenants unenforceable in whole
or part by reason of the duration of such covenants, the geographic scope of
such covenants, or otherwise, Buyer, Seller and ▇▇▇▇▇ agree that such covenants
shall be reformed by the court in a manner that provides Buyer with the greatest
protection from competition by Seller and ▇▇▇▇▇
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consistent with law. Seller and ▇▇▇▇▇ agree that the Stock Consideration paid
pursuant to this Agreement is full and adequate consideration for the covenants
set forth in this Agreement.
8.5 In the event Seller or ▇▇▇▇▇ should breach the provisions of this
Article 8, the parties agree that Buyer will suffer irreparable harm, that
damages will not provide an adequate remedy, and that any actual damages may be
difficult or impossible to calculate. Accordingly, the parties agree that in the
event of a breach of the covenants of this Article 8, Buyer shall be entitled to
liquidated damages in the amount of 100% of the gross ▇▇▇▇▇▇▇▇ for the greater
period of (i) three (3) full years, or (ii) the remainder of said five (5) year
noncompete period, for each Customer or other Persons or entity with whom this
Article 8 is intended to prohibit Seller from engaging in business. In addition,
Buyer shall be entitled to injunctive relief restraining any party violating the
provisions of this Article 8 from violating any of the terms of this Agreement.
For this purpose, the parties agree that any action to enforce this Agreement
may be brought in the Superior Court or the United States District Court in
Maricopa County, Arizona and Seller and ▇▇▇▇▇ consent to the jurisdiction of
such court. Buyer's remedies hereunder shall be cumulative and nothing in this
Agreement shall prohibit Buyer from pursuing any other remedies available to it
at law or in equity.
9. TERMINATION.
9.1 Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
9.1.1 Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;
9.1.2 Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing Date (A) in the event Seller has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, Buyer has notified Seller of the breach, and
the breach has continued without cure for a period of 15 days after the notice
of breach or (B) if the Closing shall not have occurred on or before March 31,
1999, by reason of the failure of any condition precedent under Section 6.1
hereof (unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
9.1.3 Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing Date (A) in the event Buyer has breached
any material representation, warranty, or covenant contained in this Agreement
in any material respect, Seller has notified Buyer of the breach, and the breach
has continued without cure for a period of 10 days after the notice of breach or
(B) if the Closing shall not have occurred on or before March 31, 1999, by
reason of the failure of any condition precedent under Section 6.2 hereof
(unless the failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).
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9.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9.1 above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. CONFIDENTIALITY.
Each of the parties agree that this Agreement is confidential and that
neither the Agreement nor its terms or conditions will be disclosed in any
manner to any other Person. The foregoing sentence to the contrary
notwithstanding, a party may (i) disclose this Agreement to his attorney,
accountant or banker for appropriate business, tax or legal purposes, (ii)
disclose this Agreement if compelled to do so by the order of any court of
competent jurisdiction or the order of any state or federal agency, or (iii)
disclose this Agreement to obtain the consent of any person to the transfer of
the Assets or Business or if disclosure is required, in the opinion of counsel,
under the federal securities laws or any other law or regulation. In the event
disclosure of this Agreement is to be made under clause (ii) of the preceding
sentence, the party making such disclosure shall notify all other parties in
writing of the proposed disclosure and the time such disclosure is to be made
and furnish a copy of the order compelling such disclosure, and any other party
shall have the right to intervene in such proceeding in order to protect the
confidentiality of this Agreement.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations, warranties, covenants and indemnifications provided
for in this Agreement shall survive the Closing and shall be unaffected by any
investigation, verification, approval or subsequent notice made by or on behalf
of any party hereto. For all purposes of this Agreement, any information or
statement contained in any exhibit hereto or any document delivered in
connection herewith shall be deemed to be a representation and warranty.
12. MISCELLANEOUS.
12.1 Bulk Sales Law. Seller represents and warrants to Buyer that it is not
required to comply with any bulk sales or similar law in Texas. Buyer, at its
option, may waive compliance by Seller with the provisions of the Bulk Sales Law
adopted by the State of Texas.
12.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original instrument, but all such
counterparts shall constitute but one agreement.
12.3 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by telex,
Federal Express (or any similar courier service), registered or certified mail,
postage prepaid, addressed as follows or to such other address of which the
parties may have given notice:
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To Seller:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with copies to:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To Knight or Buyer:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
Knight Transportation, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Esq.
Ryley, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or by telex
or Federal Express (or any similar courier service); or (b) three (3) business
days after being sent, if sent by registered or certified mail.
12.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that no party hereto may assign its respective rights or
obligations hereunder without the prior written consent of the other parties.
Any assignment in contravention of this provision shall be void.
12.5 Execution of Documents. Each party to this Agreement agrees to perform
any further acts and deliver any further documents that may be reasonably
necessary to carry out the provisions of this Agreement.
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12.6 Time of Essence. Time is expressly declared to be of the essence of
this Agreement.
12.7 Severability. If any covenant, condition or other provision herein is
held to be invalid, void or illegal by any court of competent jurisdiction, the
same shall in no way affect, impair or invalidate any other covenant, condition
or other provision herein, and shall be reformed to the full extent permitted by
law so as to give maximum effect to the parties' intent in entering into this
Agreement. It is the intention and the agreement of the parties to this
Agreement that the noncompetition and confidential information provisions set
forth in this Agreement be enforceable to the maximum extent permitted by law
and, to that end, understand and agree that said provisions may be modified by a
court of law to ensure enforceability thereof.
12.8 Waiver and Amendment. No breach of any provision hereof can be waived
unless in writing. Waiver of any breach of any provision hereof shall not be
deemed to be a waiver of any other breach of the same or any other provision
hereof. This Agreement may be amended only by a written agreement executed by
all parties.
12.9 Remedies Cumulative. The various rights, options, elections, powers
and remedies of a party to this Agreement shall be construed as cumulative, and
none of them shall be construed as exclusive of any others, or of any legal or
equitable remedy which such party might otherwise have in the event of breach or
default of the terms hereof. The exercise of one right or remedy by a party or
parties shall not in any way impair the rights to any other right or remedy
until all obligations imposed on a party or parties have been fully performed.
12.10 Entire Agreement This Agreement, including the exhibits and schedules
hereto, contains the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings between the parties with respect to such subject matter. All
documents identified herein as Exhibits are fully incorporated herein by this
reference and constitute a part hereof. The recitals shall constitute part of
this Agreement.
12.11 Attorneys' Fees. The prevailing party in any dispute regarding this
Agreement shall be entitled to receive, in addition to any other remedy or
award, reasonable attorneys' fees and costs of litigation (including without
limitation, expert witness fees and costs, all appellate fees and costs, if any
and all other costs of litigation, whether or not recoverable under applicable
law), determined in the case of litigation or arbitration by the court or
arbitrator and not a jury.
12.12 Fees and Expenses. Each party to this Agreement will bear its own
costs, fees and expenses in connection with the transactions described in this
Agreement and the preparation and execution of this Agreement.
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12.13 Terminology. The captions in this Agreement and all exhibits thereto
are for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. All personal
pronouns used in this Agreement, whether used in the masculine, feminine or
neuter gender, shall, where appropriate, include all other genders, and the
singular shall include the plural and vice versa.
12.14 Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by, and construed and enforced in accordance
with, the substantive law of the State of Arizona, without regard to conflicts
of law principles.
12.15 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
12.16 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
12.17 Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
12.18 Construction. The parties hereto acknowledge that each party was
represented by legal counsel in connection with this Agreement and that each of
them and its counsel have reviewed and revised this Agreement, or have had an
opportunity to do so, and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or any exhibits hereto
or thereto.
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IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of
each of the parties hereto, to be effective as of March 13, 1999.
KNIGHT: SELLER:
KNIGHT TRANSPORTATION, INC., an ACTION DELIVERY SERVICE, INC., a
Arizona corporation Texas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- -----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Chief Executive Officer
ACTION WAREHOUSE SERVICES, INC.,
BUYER: a Texas Corporation
KNIGHT ACQUISITION CORPORATION, By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
an Arizona corporation -----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇▇:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, wife of ▇▇▇▇▇ ▇. ▇▇▇▇▇
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