1
EXHIBIT 10.49
--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND AMONG
WESTERN TRACTION COMPANY
THE ▇▇▇▇▇▇▇▇ FAMILY TRUST
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
AND
CRESCENT OPERATING, INC.
AUGUST 7, 1998
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS
Page
ARTICLE I -- TERMS OF THE TRANSACTION .................................... 1
1.1 Agreement to Sell and to Purchase Shares ....................... 1
1.2 Purchase Price and Payment ..................................... 1
ARTICLE II -- CLOSING, CLOSING DATE AND EFFECTIVE DATE ................... 2
2.1 Closing and Closing Date ....................................... 2
2.2 Effective Date ................................................. 2
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE COMPANY ......................................... 2
3.1 Corporate Organization ......................................... 2
3.2 Qualification .................................................. 2
3.3 Charter and Bylaws ............................................. 2
3.4 Capitalization of the Company .................................. 2
3.5 Authority Relative to This Agreement ........................... 3
3.6 Noncontravention ............................................... 4
3.7 Governmental Approvals ......................................... 4
3.8 No Subsidiaries ................................................ 4
3.9 Shares ......................................................... 4
3.10 Financial Statements .......................................... 4
3.11 Absence of Undisclosed Liabilities ............................ 5
3.12 Absence of Certain Changes .................................... 5
3.13 Tax Matters ................................................... 5
3.14 Compliance With Laws .......................................... 6
3.15 Legal Proceedings ............................................. 6
3.16 Title to Properties ........................................... 6
3.17 Sufficiency and Condition of Properties ....................... 7
3.18 Real Property ................................................. 7
3.19 Leased Property ............................................... 8
3.20 Inventory ..................................................... 8
3.21 Permits ....................................................... 9
3.22 Agreements .................................................... 9
3.23 ERISA ......................................................... 9
3.24 Environmental Matters ......................................... 11
3.25 Labor Relations ............................................... 12
3.26 Employees ..................................................... 12
3.27 Insider Interests ............................................. 13
3.28 Insurance ..................................................... 13
3.29 Bank Accounts and Powers of Attorney .......................... 13
3.30 Books and Records ............................................. 13
3.31 Illegal Payments .............................................. 14
3.32 Brokerage Fees ................................................ 14
i
3
3.33 Disclosure .................................................... 14
3.34 Representations and Warranties on Closing Date ................ 14
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER .................... 14
4.1 Corporate Organization ......................................... 14
4.2 Authority Relative to This Agreement ........................... 14
4.3 Noncontravention ............................................... 15
4.4 Governmental Approvals ......................................... 15
4.5 Purchase for Investment ........................................ 15
4.6 Brokerage Fees ................................................. 15
4.7 Representations and Warranties on Closing Date ................. 15
ARTICLE V -- CONDUCT OF THE COMPANY PENDING CLOSING ...................... 16
5.1 Conduct and Preservation of Business ........................... 16
5.2 Restrictions on Certain Actions ................................ 16
ARTICLE VI -- ADDITIONAL AGREEMENTS ...................................... 18
6.1 Access to Information .......................................... 18
6.2 Third Party Consents ........................................... 18
6.3 Employment and Noncompetition Agreements ....................... 18
6.4 Schedules To Be Agreed ......................................... 19
6.5 Public Announcements ........................................... 19
6.6 Notice of Litigation ........................................... 19
6.7 Notification of Certain Matters ................................ 19
6.8 Fees and Expenses .............................................. 19
6.9 Transfer Taxes ................................................. 20
6.10 Releases of Guaranties ......................................... 20
6.11 Negative Covenants ............................................ 20
6.12 Reporting ..................................................... 20
6.13 Survival of Covenants ......................................... 20
ARTICLE VII -- CONDITIONS TO OBLIGATIONS OF SELLER ....................... 21
7.1 Representations and Warranties True ............................ 21
7.2 Covenants and Agreements Performed ............................. 21
7.3 Legal Proceedings .............................................. 21
7.4 Other Documents ................................................ 21
7.5 Employment Agreements .......................................... 21
7.6 Certificate .................................................... 21
7.7 New Lease Agreements ........................................... 22
7.8 Schedules To Be Agreed ......................................... 22
ARTICLE VIII -- CONDITIONS TO OBLIGATIONS OF BUYER ....................... 22
8.1 Representations and Warranties True ............................ 22
8.2 Covenants and Agreements Performed ............................ 22
8.3 Certificate .................................................... 22
8.4 [Intentionally omitted] ........................................ 22
8.5 Legal Proceedings .............................................. 22
ii
4
8.6 Consents ....................................................... 22
8.7 No Material Adverse Change ..................................... 23
8.8 Employment Agreements .......................................... 23
8.9 Other Documents ................................................ 23
8.10 New Lease Agreements .......................................... 23
8.11 Schedules To Be Agreed ........................................ 23
ARTICLE IX -- TERMINATION, AMENDMENT AND WAIVER .......................... 24
9.1 Termination .................................................... 24
9.2 Effect of Termination .......................................... 24
9.3 Amendment ...................................................... 25
9.4 Waiver ......................................................... 25
9.5 Remedies Not Exclusive ......................................... 25
ARTICLE X -- SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION ................ 25
10.1 Survival ...................................................... 25
10.2 Indemnification by Seller ..................................... 25
10.3 Indemnification by Buyer ...................................... 26
10.4 Procedure for Indemnification ................................. 27
ARTICLE XI -- MISCELLANEOUS .............................................. 28
11.1 Notices ....................................................... 28
11.2 Entire Agreement .............................................. 28
11.3 Binding Effect; Assignment; No Third Party Benefit ............ 28
11.4 Severability .................................................. 29
11.5 GOVERNING LAW ................................................. 29
11.6 Further Assurances ............................................ 29
11.7 Descriptive Headings .......................................... 29
11.8 Gender ........................................................ 29
11.9 References .................................................... 29
11.10 Counterparts ................................................. 29
11.11 Joint and Several Obligations ................................ 30
ARTICLE XII -- DEFINITIONS ............................................... 30
12.1 Certain Defined Terms ......................................... 30
12.2 Certain Additional Defined Terms .............................. 31
iii
5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August
7, 1998, by and among Western Traction Company, a California corporation
("Western" or the "Company"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually (in such
individual capacity sometimes herein referred to as "▇▇▇▇▇▇▇▇") and as
Co-Trustee on behalf of the ▇▇▇▇▇▇▇ Family Trust, a trust created under an
amended declaration of trust dated March 20, 1982 (the "Trust") (▇▇▇▇▇▇▇▇,
individually and as Co-Trustee, and the Trust, collectively, are sometimes
herein referred to as "Seller"), and Crescent Operating, Inc., a Delaware
corporation ("Buyer").
WHEREAS, the Trust owns 150 shares of common stock, par value $10.00
per share, of the Company (the "Shares"); and
WHEREAS, the Trust desires to sell to Buyer, and Buyer desires to
purchase from the Trust, the Shares; and
WHEREAS, ▇▇▇▇▇▇▇▇ and the Company desire to join in the execution of
this Agreement for the purpose of evidencing their consent to the consummation
of the foregoing transaction and for the purpose of making certain
representations and warranties to and covenants and agreements with Buyer;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Seller and Buyer hereby agree as follows:
ARTICLE I -- TERMS OF THE TRANSACTION
1.1 Agreement to Sell and to Purchase Shares. At the Closing, and on
the terms and subject to the conditions set forth in this Agreement, the Trust
shall sell and deliver to Buyer, and Buyer shall purchase and accept from the
Trust, the Shares.
1.2 Purchase Price and Payment. In consideration of the sale of the
Shares to Buyer, Buyer shall pay to Seller an aggregate purchase price of
Fourteen Million and No/100 Dollars ($14,000,000.00) (the "Purchase Price"),
payable as follows:
(a) On July 15, 1998, Buyer deposited with Seller cash in the amount
of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the "Deposit")
pursuant to that certain Deposit Agreement dated as of July 15, 1998 between
Buyer and Seller, which Deposit shall be applied towards payment of a portion
of the Purchase Price at the Closing;
(b) At the Closing Buyer shall pay to Seller Six Million and No/100
Dollars ($6,000,000.00), by corporate check; and
(c) the remaining amount of the Purchase Price shall be paid by
Buyer's delivery to Seller at the Closing of Buyer's promissory note in the
principal amount of Seven Million Five Hundred Thousand and No/100 Dollars
($7,500,000.00) (the "Promissory Note"), which Promissory Note will be on the
form of Exhibit 1.2A attached hereto, and be secured by a security interest in,
and pledge
6
of, the Shares purchased by Buyer hereunder pursuant to the pledge agreement to
be granted by Buyer in favor of Seller at the Closing (the "Pledge Agreement")
in the form of Exhibit 1.2B attached hereto.
ARTICLE II -- CLOSING, CLOSING DATE AND EFFECTIVE DATE
2.1 Closing and Closing Date. The closing of the transactions
contemplated hereby (the "Closing" ) shall take place (i) at the offices of
▇▇▇▇▇▇▇▇ & Knight, P.C., in Dallas, Texas, at 11:00 a.m., local time, on August
10, 1998, or (ii) at such other time or place or on such other date as the
parties hereto shall agree. The date on which the Closing is required to take
place is herein referred to as the "Closing Date."
2.2 Effective Date. Notwithstanding the date this Agreement is
executed or the formal closing referenced above, the effective date of the
transfer of the Shares shall be as of the beginning of business on July 1, 1998
(the "Effective Date").
ARTICLE III -- REPRESENTATIONS
AND WARRANTIES OF SELLER AND THE COMPANY
Seller and the Company jointly and severally represent and warrant to
Buyer that:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
corporate authority to own, lease, and operate its properties and to carry on
its business as now being conducted. No actions or proceedings to dissolve the
Company are pending.
3.2 Qualification. The Company is duly qualified or licensed to do
business and is in good standing in each of the jurisdictions set forth on
Schedule 3.2, which are all the jurisdictions in which it owns, leases or
operates property or in which such qualification or licensing is required for
the conduct of its business.
3.3 Charter and Bylaws. The Company has made available to Buyer
accurate and complete copies of (i) the Articles of Incorporation and Bylaws of
the Company (certified by the Secretary of State of such Company's jurisdiction
of incorporation and the secretary or an assistant secretary of such Company,
respectively) as currently in effect, (ii) the stock records of the Company and
(iii) current minutes of the meetings of the Company's Board of Directors
authorizing the transactions contemplated by this Agreement, any committees of
such Board, and the Company's shareholders (and all consents in lieu of such
meetings). Such records, minutes and consents accurately reflect the stock
ownership of the Company and the actions taken by the Company's Board and the
Company's shareholders as set forth therein. The Company is not in violation
of any provision of its Articles of Incorporation or Bylaws.
3.4 Capitalization of the Company. The authorized capital stock of
the Company consists of 7,500 shares of Common Stock, par value $10.00 per
share, of which 150 shares are outstanding and owned by Seller, and no shares
are held in the Company's treasury. All outstanding shares of capital stock of
the Company have been validly issued and are fully paid and nonassessable, and
no
2
7
shares of capital stock of the Company are subject to, nor have any been issued
in violation of, preemptive or similar rights. All issuances, sales, and
repurchases by the Company of shares of its capital stock have been effected in
compliance with all Applicable Laws, including without limitation applicable
federal and state securities laws. The Shares constitute (and at the Closing
will constitute) all the outstanding shares of capital stock of the Company.
Except as set forth above in this Section 3.4, there are (and as of the Closing
Date there will be) outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into
or exchangeable for shares of capital stock or other voting securities of the
Company, (iii) no options or other rights to acquire from the Company, and no
obligation of the Company to issue or sell, any shares of capital stock or
other voting securities of the Company or any securities of the Company
convertible into or exchangeable for such capital stock or voting securities
and (iv) no equity equivalents, interests in the ownership or earnings or other
similar rights of or with respect to the Company. There are (and as of the
Closing Date there will be) no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any of the foregoing shares,
securities, options, warrants, equity equivalents, interests or rights.
3.5 Authority Relative to This Agreement.
(a) The Company has full corporate power and corporate authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement, and the consummation by it of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action of the
Company. This Agreement has been duly executed and delivered by the Company
and constitutes, and each other agreement, instrument or document executed or
to be executed by the Company in connection with the transactions contemplated
hereby has been, or when executed will be, duly executed and delivered by the
Company and constitutes, or when executed and delivered will constitute, a
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with their respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (ii) equitable principals which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
(b) Seller has full legal right, power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller and constitutes, and each other agreement, instrument or document
executed or to be executed by Seller in connection with the transactions
contemplated hereby has been, or when executed will be, duly executed and
delivered by Seller and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Seller, enforceable
against Seller in accordance with their respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (ii) equitable principals which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
3
8
3.6 Noncontravention.
(a) Except as set forth on Schedule 3.6(a) attached hereto, the
execution, delivery and performance by Seller and the Company of this Agreement
and the consummation by them of the transactions contemplated hereby do not and
will not (i) conflict with or result in a violation of any provision of the
charter or bylaws of the Company, (ii) conflict with or result in a violation
of any provision of or constitute (with or without the giving of notice or the
passage of time or both) a default under or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, contract, agreement or other instrument or obligation to
which the Company is a party or by which the Company or any of its properties
may be bound, (iii) result in the creation or imposition of any Encumbrance
upon the properties of the Company or (iv) assuming compliance with the matters
referred to in Section 3.7, violate any Applicable Law binding upon the
Company.
(b) Except as set forth on Schedule 3.6(b) attached hereto, the
execution, delivery, and performance by Seller of this Agreement and the
consummation by Seller of the transactions contemplated hereby do not and will
not (i) conflict with or result in a violation of any provision of or
constitute (with or without the giving of notice or the passage of time or
both) a default under or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation or
acceleration under, any contract, agreement, instrument or obligation to which
Seller is a party or by which Seller or any of Seller's properties may be
bound, (ii) result in the creation or imposition of any Encumbrance upon the
properties of Seller or (iii) assuming compliance with the matters referred to
in Section 3.7, violate any Applicable Law binding upon Seller.
3.7 Governmental Approvals. Other than filings required by the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and routine
filings under applicable federal and state securities laws, no consent,
approval, order or authorization of or declaration, filing or registration
with, any Governmental Entity is required to be obtained or made by any Seller
or the Company in connection with the execution, delivery or performance by
Seller and the Company of this Agreement or the consummation by them of the
transactions contemplated hereby.
3.8 No Subsidiaries. The Company does not own, directly or
indirectly, any capital stock or other securities of any corporation or have
any direct or indirect equity or ownership interest in any other person.
3.9 Shares. Seller is (and at the Closing will be) the record and
beneficial owner of, and upon consummation of the transactions contemplated
hereby Buyer will acquire good, valid and marketable title to, the number of
Shares set forth opposite the name of such Seller on Annex I, free and clear of
all Encumbrances, other than (i) those that may arise by virtue of any actions
taken by or on behalf of Buyer or its affiliates, (ii) restrictions on transfer
that may be imposed by federal or state securities laws, or (iii) the security
interest and pledge granted in favor of the Trust pursuant to the Pledge
Agreement.
3.10 Financial Statements. The Company has delivered to Buyer
accurate and complete copies of (i) the Company' audited balance sheet as of
October 31, 1997 and the related audited
4
9
statements of income, and stockholders' equity for the year then ended, and the
notes and schedules thereto, together with the unqualified report thereon of
Armanino & ▇▇▇▇▇▇▇, LLP, independent public accountants (the "Audited Financial
Statements"), and (ii) the Company's unaudited balance sheet as of June 30,
1998 (the "Latest Balance Sheet"), and the related unaudited statements of
income, and stockholders' equity for the eight-month period then ended (the
"Unaudited Financial Statements"), certified by the Company's chief financial
officer (collectively, the "Financial Statements"). The Financial Statements
(i) represent actual bona fide transactions, (ii) have been prepared from the
books and records of the Company in conformity with generally accepted
accounting principles applied on a basis consistent with preceding years
throughout the periods involved, except that the Unaudited Financial Statements
are not accompanied by notes or other textual disclosure required by generally
accepted accounting principles, and (iii) accurately, completely, and fairly
present the Company's financial position as of the respective dates thereof and
its results of operations and cash flows/changes in financial position for the
periods then ended. Except as noted in the Financial Statements or in Schedule
3.10 attached hereto, the statements of income included in the Financial
Statements do not contain any items of special or nonrecurring income, and the
balance sheets included in the Financial Statements do not reflect any write-up
or revaluation increasing the book value of any assets, nor have there been any
transactions since October 31, 1997 giving rise to special or nonrecurring
income or any such write-up or revaluation.
3.11 Absence of Undisclosed Liabilities. The Company does not have
any material liabilities or obligations (whether accrued, absolute, contingent,
unliquidated or otherwise, and whether due or to become due), except (i)
liabilities reflected on the Latest Balance Sheet as of June 30, 1998, (ii)
liabilities described in the notes accompanying the Audited Financial
Statements, (iii) liabilities which have arisen since the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a material
liability for breach of contract, breach of warranty, tort or infringement),
(iv) liabilities arising under executory contracts entered into in the ordinary
course of business (none of which is a liability for breach of contract) or (v)
liabilities specifically set forth on Schedule 3.11.
3.12 Absence of Certain Changes. Except as disclosed on Schedule
3.12, since June 30, 1998, (i) there has not been any material adverse change
in or any event or condition that might reasonably be expected to result in any
material adverse change in, the business, assets, results of operations, or
condition (financial or otherwise) of the Company; (ii) the business of the
Company has been conducted only in the ordinary course consistent with past
practice; (iii) the Company has not incurred any material liability, engaged in
any material transaction or entered into any material agreement outside the
ordinary course of business consistent with past practice; (iv) the Company has
not suffered any material loss, damage, destruction or other casualty to any of
its assets (whether or not covered by insurance); and (v) the Company has not
taken any of the actions set forth in Section 5.2 except as permitted
thereunder.
3.13 Tax Matters. Except as disclosed on Schedule 3.13:
(a) the Company has (and as of the Closing Date will have) duly filed
all federal, state, local, and foreign Tax Returns required to be filed by or
with respect to it with the IRS or other applicable Taxing authority, and no
extensions with respect to such Tax Returns have (or as of the Closing Date
will have) been requested or granted;
5
10
(b) the Company has (and as of the Closing Date will have) paid or
adequately reserved against in the Financial Statements, all Taxes due or
claimed by any taxing authority to be due, from or with respect to it, except
Taxes that are being contested in good faith by appropriate legal proceedings
and for which adequate reserves have been set aside as disclosed on Schedule
3.13;
(c) there has been no issue raised or adjustment proposed (and none
is pending) by the IRS or any other taxing authority in connection with any of
the Tax Returns;
(d) the Company has (and as of the Closing Date will have) made all
deposits required with respect to Taxes;
(e) the federal income Tax Returns of the Company have not been
audited by the IRS within the last five years;
(f) no waiver or extension of any statute of limitations as to any
federal, state, local or foreign Tax matter has been given by or requested from
Company; and
(g) the Company has not filed a consent under Section 341(f) of the
Code.
3.14 Compliance With Laws. The Company has complied with all
Applicable Laws (including without limitation Applicable Laws relating to
securities, properties, business products, manufacturing processes, advertising
and sales practices, employment practices, terms and conditions of employment,
wages and hours, safety, occupational safety, health, environmental protection,
product safety and civil rights). Neither Seller nor the Company have received
any written notice, which has not been dismissed or otherwise disposed of, that
the Company has not so complied. The Company is not charged or, to the best
knowledge of Seller and the Company, threatened with or, to the best knowledge
of Seller and the Company, under investigation with respect to, any violation
of any Applicable Law relating to any aspect of the business of the Company.
3.15 Legal Proceedings. Except as disclosed on Schedule 3.15, there
are no Proceedings pending or, to the best knowledge of Seller and the Company,
threatened against or involving the Company (or any of its directors or
officers in connection with the business or affairs of the Company) or any
properties or rights of the Company. Except as disclosed on Schedule 3.15, any
and all potential liability of the Company under such Proceedings is adequately
covered (except for standard deductible amounts) by the existing insurance
maintained by the Company described in Section 3.28. No judgment, order, writ,
injunction or decree of any Governmental Entity has been issued or entered
against the Company which continues to be in effect. There are no Proceedings
pending or, to the best knowledge of Seller and the Company, threatened seeking
to restrain, prohibit or obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
3.16 Title to Properties. The Company has good and marketable title
to all properties (real, personal, and mixed, tangible and intangible) it owns
or purports to own, including without limitation the properties reflected in
its books and records and in the Latest Balance Sheet, other than those
disposed of after the date of such balance sheet in the ordinary course of
business consistent
6
11
with past practice, free and clear of all Encumbrances, except (a) as disclosed
on Schedule 3.16, (b) as set forth in the Latest Balance Sheet as securing
specific liabilities, (c) liens for Taxes not yet due and payable or the
validity of which is being contested in good faith by appropriate legal
proceedings and for which adequate reserves have been set aside, (d) statutory
liens (including materialmen's, mechanic's, repairmen's, landlord's, and other
similar liens) arising in connection with the ordinary course of business
securing payments not yet due and payable or, if due and payable, the validity
of which is being contested in good faith by appropriate legal proceedings and
for which adequate reserves have been set aside, and (e) such imperfections or
irregularities of title, if any, as (A) are not substantial in character,
amount or extent and do not materially detract from the value of the property
subject thereto, (B) do not materially interfere with either the present or
intended use of such property and (C) do not, individually or in the aggregate,
materially interfere with the conduct of the Company's normal operations.
3.17 Sufficiency and Condition of Properties. The properties owned,
leased or used by the Company are in all material respects in the same
operating condition and repair (ordinary wear and tear excepted) as when such
properties were inspected by Buyer on or about June 24-25, 1998 and on or about
July 15, 1998 (three days). Such properties and their uses conform to all
Applicable Laws, and Seller and the Company have not received any notice to the
contrary. All such tangible properties are in the Company's possession or
under its control.
3.18 Real Property.
(a) Set forth on Schedule 3.18 is a list, by street address and (in
the case of owned real property) deed reference, of all real property owned or
leased by the Company (for purposes of this Section, the "Real Property"), and
a list of all Encumbrances of any kind to which the Real Property is subject,
and, with respect to leased Real Property, a list of the applicable leases.
Except as set forth on Schedule 3.18, there are no persons (other than the
Company) in possession of any portion of the Real Property as lessees, tenants
at sufferance or trespassers, nor does any person (other than the Company) have
a lease, tenancy or other right of occupancy or use of any portion of the Real
Property. There exists no Proceeding or court order or building code
provision, deed restriction or restrictive covenant (recorded or otherwise) or
other private or public limitation, which might in any way impede or adversely
affect the continued use of the Real Property by the Company in the manner it
is currently used. The Company does not own any real property.
(b) All the Real Property is zoned for the various purposes for which
such Real Property is being used, and there exists no pending or, to the best
knowledge of Seller and the Company, threatened Proceeding which might
adversely affect the validity of such zoning.
(c) The Real Property is connected to and serviced by water, sewage
disposal, gas, telephone and electric facilities which are adequate for the
current use of the Real Property and, to the best knowledge of Seller and the
Company, are in compliance with all Applicable Laws. All public utilities
required for the operation of the Real Property enter the Real Property through
adjoining public streets or, if they pass through adjoining private land, do so
in accordance with valid public easements, and all utility lines and mains
located on the Real Property have been properly dedicated to, and are serviced
and maintained by, the appropriate public or quasi-public entity.
7
12
(d) The buildings, improvements and fixtures situated on the Real
Property are in good condition and repair (excepting ordinary wear and tear and
minor maintenance and repair problems which would normally be associated with
such assets when used in connection with the operation of the Company's
business).
(e) Neither the whole nor any part of the Real Property is subject to
any pending Proceeding for condemnation or other taking by any Governmental
Entity, and, to the best knowledge of Seller and the Company, no such
condemnation or other taking is contemplated or threatened.
(f) Other than for routine maintenance or similar items, there are no
material unpaid charges, debts, liabilities, claims or obligations arising from
the construction, occupancy, ownership, use or operation of the Real Property
or the buildings, improvements or fixtures situated thereon or the business
operated thereon, which could give rise to any mechanic's or materialmen's or
other statutory lien against the Real Property or the buildings, improvements
or fixtures situated thereon or any part thereof or for which the Company will
be responsible.
(g) No Seller is a "foreign person" within the meaning of Sections
1445 and 7701 of the Code.
3.19 Leased Property. The Company has good and valid leasehold
interests in all properties held by it under lease. The lessee under each such
lease has been in peaceable possession (or remedied any claims relating
thereto) of the property covered thereby since the commencement of the original
term of such lease. No waiver, indulgence or postponement of the lessee's
obligations under any such lease has been granted by the lessor or of the
lessor's obligations thereunder by the lessee. The lessee under each such
lease is not in breach of or in default under such lease, nor has any event
occurred which (with or without the giving of notice or the passage of time or
both) would constitute a default by the lessee under such lease, and the lessee
has not received any notice from, or given any notice to, the lessor indicating
that the lessee or the lessor is in breach of or in default under such lease.
To the best knowledge of Seller and the Company, none of the lessors under such
leases is in breach thereof or in default thereunder. The lessee under each
such lease has full right and power to occupy or possess, as the case may be,
all the property covered by such lease.
3.20 Inventory. All inventory (except for immaterial items but
otherwise including raw materials, work-in-progress, and finished goods) and
related supplies reflected on the Latest Balance Sheet or thereafter acquired
and not disposed of in the ordinary course of business is in good condition and
is merchantable, suitable and usable for the production or completion of
merchantable products, for sale in the Company's ordinary course of business as
first quality goods at normal ▇▇▇▇-ups. None of such items (except for
immaterial items) is obsolete, discontinued, returned, damaged, overage, or of
below standard quality or merchantability, except for items that have been
written down to realizable market value or for which adequate reserves have
been provided in the Latest Balance Sheet. Each whole good item of inventory
reflected on the Latest Balance Sheet or in the Company's books and records is
valued at cost, plus freight in plus certain repair costs. Inventory is
written down to market at the time of trade-in or at the end of each fiscal
year. Parts inventory is valued at market price which the Company believes
does not materially differ from cost. All items have not moved in five years
have been written down to zero as of the last fiscal year-end inventory. The
present quantities of all inventories of the Company are sufficient to serve
8
13
adequately its customers in the ordinary course. Finished goods in such
inventories conform to the applicable specifications of the Company, including
all applicable warranties, whether express or implied, given in connection with
the sales of such goods and under Applicable Laws, and are free from defects in
design, workmanship, and material. The Company also maintains sufficient
inventories of spare and replacement parts to meet repair and replacement
obligations in the ordinary course, under applicable warranties or otherwise.
3.21 Permits. Set forth on Schedule 3.21 is a list of all Permits
held by the Company, which are all the Permits necessary or required for the
conduct of the business of the Company as currently conducted. Each of such
Permits is in full force and effect, the Company is in compliance with all its
obligations with respect thereto, and, to the best knowledge of Seller and the
Company, no event has occurred which permits or with or without the giving of
notice or the passage of time or both would permit, the revocation or
termination of any thereof. Except as disclosed on Schedule 3.21, no notice
has been issued by any Governmental Entity and no Proceeding is pending or, to
the best knowledge of Seller and the Company, threatened with respect to any
alleged failure by the Company to have any Permit.
3.22 Agreements.
(a) All agreements, arrangements, and understandings of any nature
(written or oral, formal or informal) other than agreements pursuant to which
the Company leases equipment to third parties (collectively, for purposes of
this Section, "agreements") to which the Company is a party or by which the
Company or any of its properties is otherwise bound, regardless of amount or
subject matter, that are material to the business, assets, results of
operations, condition (financial or otherwise) or prospects of the Company are
listed on Schedule 3.22.
(b) The Company has delivered to Buyer accurate and complete copies of
the agreements listed on Schedule 3.22. Each of such agreements is a valid and
binding agreement of the parties thereto enforceable against them in accordance
with its terms. No breach or default exists with respect to any of such
agreements, and no event has occurred which, after the giving of notice or the
passage of time or otherwise, will result in any such breach or default.
3.23 ERISA.
(a) Set forth on Schedule 3.23 is a list identifying each "employee
benefit plan", as defined in Section 3(3) of ERISA, (i) which is subject to any
provision of ERISA, (ii) which is maintained, administered or contributed to
by the Company or any affiliate of the Company, and (iii) which covers any
employee or former employee of the Company or any affiliate of the Company or
under which the Company or any affiliate of the Company has any liability. The
Company has delivered to Buyer accurate and complete copies of such plans (and,
if applicable, the related trust agreements) and all amendments thereto and
written interpretations thereof, together with (i) the three (3) most recent
annual reports (Form 5500 including, if applicable, Schedule B thereto)
prepared in connection with any such plan and (ii) the most recent actuarial
valuation report prepared in connection with any such plan. Such plans are
referred to in this Section 3.26 as the "Employee Plans". For purposes of this
Section 3.26 only, an "affiliate" of any person means any other person which,
together with such person, would be treated as a single employer under Section
414 of the
9
14
Code. The only Employee Plans which individually or collectively would
constitute an "employee pension benefit plan" as defined in Section 3(2) of
ERISA are identified as such on Schedule 3.23.
(b) Except as otherwise identified on Schedule 3.23, (i) no Employee
Plan constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA
(for purposes of this Section, a "Multiemployer Plan"), (ii) no Employee Plan
is maintained in connection with any trust described in Section 501(c)(9) of
the Code, (iii) no Employee Plan is subject to Title IV of ERISA or to the
minimum funding standards of ERISA and the Code, and (iv) during the past five
years, neither the Company nor any of its affiliates have made or been required
to make contributions to any Multiemployer Plan. There are no accumulated
funding deficiencies as defined in Section 412 of the Code (whether or not
waived) with respect to any Employee Plan. The fair market value of the assets
held with respect to each Employee Plan which is an employee pension benefit
plan, as defined in Section 3(2) of ERISA, exceeds the actuarially determined
present value of all benefit liabilities accrued under such Employee Plan
(whether or not vested) determined using reasonable actuarial assumptions.
Neither the Company nor any affiliate of the Company has incurred any liability
under Title IV of ERISA arising in connection with the termination of, or
complete or partial withdrawal from, any plan covered or previously covered by
Title IV of ERISA. The Company and all of the affiliates of the Company have
paid and discharged promptly when due all liabilities and obligations arising
under ERISA or the Code of a character which if unpaid or unperformed might
result in the imposition of a lien against any of the assets of the Company.
Nothing done or omitted to be done and no transaction or holding of any asset
under or in connection with any Employee Plan has or will make the Company or
any director or officer of the Company subject to any liability under Title I
of ERISA or liable for any Tax pursuant to Section 4975 of the Code. There are
no threatened or pending claims by or on behalf of the Employee Plans or by
any participant therein, alleging a breach or breaches of fiduciary duties or
violations of Applicable Laws which could result in liability on the part of
the Company, its officers or directors or such Employee Plans, under ERISA or
any other Applicable Law and there is no basis for any such claim.
(c) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified since the
date of its adoption, and each trust forming a part thereof is exempt from Tax
pursuant to Section 501(a) of the Code. Set forth on Schedule 3.23 is a list
of the most recent IRS determination letters with respect to any such Plans,
accurate and complete copies of which letters have been delivered to Buyer.
Each Employee Plan has been maintained in compliance with its terms and with
the requirements prescribed by all Applicable Laws, including but not limited
to ERISA and the Code, which are applicable to such Plans.
(d) To the extent not listed on Schedule 3.22, there is set forth on
Schedule 3.23 a list of each employment, severance or other similar contract,
arrangement or policy and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (i)
is not an Employee Plan, (ii) is entered into, maintained or contributed to, as
the case may be, by the Company or any affiliate of the Company, and (iii)
covers any employee or former employee of the Company or any affiliate of the
Company or under which the Company or any affiliate of the Company has any
liability. Such contracts, plans, and
10
15
arrangements as are described in the preceding sentence are referred to for
purposes of this Section 3.23 as the "Benefit Arrangements". Each Benefit
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by Applicable Laws.
(e) Neither the Company nor any affiliate of the Company has
performed any act or failed to perform any act, and there is no contract,
agreement, plan, or arrangement covering any employee or former employee of the
Company or any affiliate of the Company, that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 162(a)(1) or 280G of the Code or Section
162(i)(2) of the Code prior to its amendment by the Technical and Miscellaneous
Revenue Act of 1988, or could give rise to any penalty or excise Tax pursuant
to Section 4980B or 4999 of the Code.
(f) Except as disclosed on Schedule 3.23, there has been no
amendment, written interpretation, or announcement (whether or not written) by
the Company or any affiliate of the Company of or relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement which would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended December 31, 1997.
(g) The representations and warranties set forth in Sections 3.23(b),
(c), (d) and (e) above are made to the best of Seller's knowledge to the extent
they relate to occurrences or matters arising after October 31, 1997, but are
not so qualified with respect to occurrences or matters arising or in existence
on or prior to October 31, 1997.
3.24 Environmental Matters.
(a) Except as disclosed in Schedule 3.24 or in the Phase I and Phase
II Reports prepared by Law Engineering on behalf of Buyer, neither the Company
nor any property owned or leased by the Company (for purposes of this Section,
the "Property") is in violation of, or subject to any pending or, to the best
knowledge of Seller and the Company, threatened Proceeding under, or subject to
any remedial obligations under, any Applicable Laws pertaining to health,
safety, the environment, Hazardous Substances, or Solid Wastes (such Applicable
Laws as they now exist or are hereafter enacted and/or amended are
collectively, for purposes of this Section 3.24, called "Applicable
Environmental Laws"), including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended, for
purposes of this Section 3.24, called "CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended, for purposes of this Section, called "RCRA"),
and other applicable federal or state environmental conservation or protection
laws. No asbestos, material containing asbestos that is or may become friable,
or material containing asbestos deemed hazardous by Applicable Laws, has been
installed in any Property. The representations and warranties set forth in the
preceding sentences of this Section would continue to be true and correct
following disclosure to the applicable Governmental Entities of all relevant
facts, conditions and circumstances, if any, pertaining to the Property.
11
16
(b) Except as set forth on Schedule 3.24, the Company has not obtained
and is not required to obtain any Permits to construct, occupy, operate, or use
any buildings, improvements, fixtures, equipment or other tangible property
forming a part of the Property by reason of any Applicable Environmental Laws.
(c) The terms "Hazardous Substance" and "Release" shall have the
meanings specified in CERCLA, and the terms "Solid Waste" and "Disposal" (or
"Disposed") shall have the meanings specified in RCRA; provided that in the
event either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the effective
date of such amendment; and provided further, that to the extent the laws of
the jurisdiction in which the Property is located establish a meaning for
"Hazardous Substance", "Release", "Solid Waste", or "Disposal" (or "Disposed")
which is broader than that specified in either CERCLA or RCRA, such broader
meaning shall apply.
3.25 Labor Relations.
(a) Except as disclosed on Schedule 3.25, (i) there are no collective
bargaining agreements or other similar agreements, arrangements, or
understandings, written or oral, with employees as a group to or by which the
Company is a party or is bound; (ii) no employees of the Company are
represented by any labor organization, collective bargaining representative, or
group of employees; (iii) no labor organization, collective bargaining
representative, or group of employees claims to represent a majority of the
employees of the Company in an appropriate unit of the Company; (iv) the
Company has not been involved with any representational campaign by any union
or other organization or group seeking to become the collective bargaining
representative of any of its employees or been subject to or, to the best
knowledge of Seller and the Company, threatened with any strike or other
concerted labor activity or dispute; and (v) the Company is not obligated to
bargain collectively with respect to wages, hour, and other terms and
conditions of employment with any recognized or certified labor organization,
collective bargaining representative or group of employees.
(b) The Company is in compliance with all Applicable Laws pertaining
to employment and employment practices and wages, hour, and other terms and
conditions of employment in respect of its employees and is not engaged in any
unfair labor practices or unlawful employment practices. There is no pending
or, to the best knowledge of Seller and the Company, threatened Proceeding by
or before, and the Company is not subject to any judgment, order, writ,
injunction or decree of or inquiry from, the National Labor Relations Board,
the Equal Employment Opportunity Commission, the Department of Labor, or any
other Governmental Entity in connection with any current, former or prospective
employee of the Company.
(c) Seller and the Company believe that relations with the employees
of the Company are satisfactory.
3.26 Employees. Set forth on Schedule 3.26 is a list of (a) all
directors and officers of the Company, and (b) the name, social security
number, and dates of employment by the Company of each employee and consultant
of the Company as of June 30, 1998, together with the total amounts of salary,
bonuses and other compensation paid by the Company to each such person for the
current
12
17
fiscal year. The consummation of the transactions contemplated by this
Agreement will not result in the incurring of any severance pay obligations to
any person employed by the Company. Except as set forth on Schedule 3.26,
neither Seller, nor any affiliate of Seller has entered into any type of
employment or consulting agreement, written or oral, with any employee of the
Company, nor has Seller or any affiliate of Seller engaged in discussions with
any such employee relating thereto.
3.27 Insider Interests. Except as disclosed on Schedule 3.27, no
shareholder, director, officer or employee of the Company or any associate of
any such shareholder, director, officer or employee is presently, directly or
indirectly, a party to any transaction with the Company, including, without
limitation, any agreement, arrangement, or understanding, written or oral,
providing for the employment of, furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to any such
shareholder, director, officer, employee or associate. To the best knowledge
of Seller and the Company, no shareholder, director, officer or employee of the
Company, any associate of any such shareholder, director, officer or employee
owns, directly or indirectly, any interest in, or serves as a director, officer
or employee of, any customer, supplier, or competitor of the Company. For
purposes of this Section 3.31 only, an "associate" of any shareholder,
director, officer or employee means any member of the immediate family of such
shareholder, director, officer or employee or any corporation, partnership,
trust or other entity in which such shareholder, director, officer or employee
has a substantial ownership or beneficial interest (other than an interest in a
public corporation which does not exceed three percent of its outstanding
securities) or is a director, officer, partner, or trustee or person holding a
similar position.
3.28 Insurance. Set forth on Schedule 3.28 is a list of all policies
of fire, liability, casualty, life, and other insurance owned or held by the
Company that are currently in effect. Such policies are in full force and
effect and represent such coverage as is customary for companies engaged in
lines of business similar to those of the Company. No event has occurred nor,
to the best knowledge of the Company and Seller, does any fact or condition
exist which would render any of such policies void or voidable or subject any
of such policies to cancellation or termination. The Company has given timely
notice to the appropriate insurance carrier of all pending or threatened claims
against it that are insured. Schedule 3.28 also lists all pending and
threatened insured claims that are not listed on Schedule 3.15.
3.29 Bank Accounts and Powers of Attorney. Set forth on Schedule
3.29 are (i) the name and address of each bank or other financial institution
in which the Company has an account or a safe deposit box, the account and safe
deposit box numbers thereof, and the names of all persons authorized to draw
thereon or to have access thereto, (ii) the names of all persons authorized to
borrow funds on behalf of the Company and the names of all entities from which
they are authorized to borrow funds, and (iii) the names of all persons, if
any, holding powers of attorney from the Company.
3.30 Books and Records. All of the current books and records of the
Company, including all personnel files, employee data and other materials
relating to employees, are substantially complete and correct. Such books and
records accurately and fairly reflect, in reasonable detail and in all material
respects, all transactions, assets, and liabilities of the Company.
13
18
3.31 Illegal Payments. To the best knowledge of Seller and the
Company, none of Seller or the Company or any director, officer, employee or
agent of any Seller or the Company has, directly or indirectly, paid or
delivered any fee, commission, or other sum of money or item of property
however characterized to any broker, finder, agent, government official, or
other person, in the United States or any other country, in any manner related
to the business or operations of the Company, which such Seller or the Company
or any such director, officer, employee or agent knows or has reason to believe
to have been illegal under any Applicable Law.
3.32 Brokerage Fees. Neither Seller nor any of his affiliates has
retained any financial advisor, broker, agent or finder or paid or agreed to
pay any financial advisor, broker, agent or finder on account of this Agreement
or any transaction contemplated hereby. Seller shall indemnify and hold
harmless Buyer from and against any and all losses, claims, damages and
liabilities (including legal and other expenses reasonably incurred in
connection with investigating or defending any claims or actions) with respect
to any finder's fee, brokerage commission or similar payment in connection with
any transaction contemplated hereby asserted by any person on the basis of any
act or statement made or alleged to have been made by the Seller or any of such
Seller's affiliates.
3.33 Disclosure. No representation or warranty made by Seller or the
Company in this Agreement contains or will contain, at the time of delivery,
any untrue statement of a material fact or omits or will omit, at the time of
delivery, to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading.
3.34 Representations and Warranties on Closing Date. The
representations and warranties made in this Article III will be true and
correct on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date,
except that any such representations and warranties which expressly relate only
to an earlier date shall be true and correct on the Closing Date as of such
earlier date.
ARTICLE IV -- REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Company that:
4.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of
its incorporation and has all requisite corporate power and corporate authority
to own, lease, and operate its properties and to carry on its business as now
being conducted.
4.2 Authority Relative to This Agreement. Buyer has full corporate
power and corporate authority to execute, deliver, and perform this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery, and performance by Buyer of this Agreement, and the consummation by
it of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes, and each other agreement, instrument, or
document executed or to be executed by Buyer in connection with the
transactions contemplated hereby has been, or when
14
19
executed will be, duly executed and delivered by Buyer and constitutes, or when
executed and delivered will constitute, a valid and legally binding obligation
of Buyer, enforceable against Buyer in accordance with their respective terms,
except that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances.
4.3 Noncontravention. The execution, delivery and performance by
Buyer of this Agreement and the consummation by it of the transactions
contemplated hereby do not and will not (i) conflict with or result in a
violation of any provision of the charter or bylaws of Buyer, (ii) conflict
with or result in a violation of any provision of, or constitute (with or
without the giving of notice or the passage of time or both) a default under,
or give rise (with or without the giving of notice or the passage of time or
both) to any right of termination, cancellation or acceleration under, any
bond, debenture, note, mortgage, indenture, lease, contract, agreement, or
other instrument or obligation to which Buyer is a party or by which Buyer or
any of its properties may be bound, (iii) result in the creation or imposition
of any Encumbrance upon the properties of Buyer or (iv) assuming compliance
with the matters referred to in Section 4.4, violate any Applicable Law binding
upon Buyer.
4.4 Governmental Approvals. No consent, approval, order or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by Buyer in connection
with the execution, delivery or performance by Buyer of this Agreement or the
consummation by it of the transactions contemplated hereby, other than (i)
compliance with any applicable requirements of the Securities Act; (ii)
compliance with any applicable requirements of the Exchange Act; (iii)
compliance with any applicable state securities laws, and (iv) filings with
Governmental Entities to occur in the ordinary course following the
consummation of the transactions contemplated hereby.
4.5 Purchase for Investment. The Buyer is acquiring the Shares for
investment for its own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof to the public.
4.6 Brokerage Fees. Neither Buyer nor any of its affiliates has
retained any financial advisor, broker, agent or finder or paid or agreed to
pay any financial advisor, broker, agent or finder on account of this Agreement
or any transaction contemplated hereby. Buyer shall indemnify and hold
harmless Seller from and against any and all losses, claims, damages and
liabilities (including legal and other expenses reasonably incurred in
connection with investigating or defending any claims or actions) with respect
to any finder's fee, brokerage commission or similar payment in connection with
any transaction contemplated hereby asserted by any person on the basis of any
act or statement made or alleged to have been made by Buyer or any of its
affiliates.
4.7 Representations and Warranties on Closing Date. The
representations and warranties made in this Article IV will be true and correct
on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date,
except that any such representations and warranties which expressly relate only
to an earlier date shall be true and correct on the Closing Date as of such
earlier date.
15
20
ARTICLE V -- CONDUCT OF THE COMPANY PENDING CLOSING
Seller and the Company hereby jointly and severally covenant and
agree with Buyer as follows:
5.1 Conduct and Preservation of Business. Except as contemplated by
this Agreement, during the period from the date hereof to the Closing, the
Company (i) shall conduct its operations according to its ordinary course of
business consistent with past practice and in compliance with all Applicable
Laws; (ii) shall use its reasonable best efforts to preserve, maintain and
protect its properties and (iii) shall use its reasonable best efforts to
preserve intact its business organization, to keep available the services of
its officers and employees, and to maintain existing relationships with
licensors, licensees, suppliers, contractors, distributors, customers and
others having business relationships with it.
5.2 Restrictions on Certain Actions. Without limiting the generality
of the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Closing, the Company shall not, without the prior written consent
of Buyer:
(a) amend its charter or bylaws;
(b) (i) issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise) any shares of its capital stock of any class or any other
securities or equity equivalents or (ii) amend in any respect any of the terms
of any such securities outstanding as of the date hereof;
(c) (i) split, combine or reclassify any shares of its capital stock;
(ii) declare, set aside or pay any dividend or other distribution (whether in
cash, stock, or property or any combination thereof) in respect of its capital
stock; (iii) repurchase, redeem or otherwise acquire any of its securities or
(iv) adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing a liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company;
(d) (i) except in the ordinary course of business consistent with past
practice, create, incur, guarantee or assume any indebtedness for borrowed
money or otherwise become liable or responsible for the obligations of any
other person; (ii) make any loans, advances or capital contributions to, or
investments in, any other person; (iii) pledge or otherwise encumber shares of
capital stock of the Company or (iv) except in the ordinary course of business
consistent with past practice, mortgage or pledge any of its assets, tangible
or intangible, or create or suffer to exist any lien thereupon;
(e) (i) enter into, adopt or (except as may be required by law) amend
or terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase, pension, retirement, deferred compensation,
employment, severance, or other employee benefit agreement, trust, plan, fund
or other arrangement for the benefit or welfare of any director, officer or
(ii) except for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do
16
21
not result in a material increase in benefits or compensation expense to the
Company, increase in any manner the compensation or fringe benefits of any
director, officer, or employee or (iii) pay to any director, officer or
employee any benefit not required by any employee benefit agreement, trust,
plan, fund or other arrangement as in effect on the date hereof;
(f) acquire, sell, lease, transfer or otherwise dispose of, directly
or indirectly, any assets outside the ordinary course of business consistent
with past practice or any assets that in the aggregate are material to the
Company;
(g) acquire (by merger, consolidation or acquisition of stock or
assets or otherwise) any corporation, partnership or other business
organization or division thereof;
(h) except as set forth on Schedule 5.2, make any capital expenditure
or expenditures which, individually, is in excess of $25,000 or, in the
aggregate, are in excess of $250,000;
(i) make any Tax election or settle or compromise any federal, state,
local or foreign Tax liability;
(j) except as set forth on Schedule 5.2, pay, discharge, or satisfy
any claims, liabilities or obligations (whether accrued, absolute, contingent,
unliquidated or otherwise, and whether asserted or unasserted), other than the
payment, discharge, or satisfaction in the ordinary course of business
consistent with past practice, or in accordance with their terms, of
liabilities reflected or reserved against in the Latest Balance Sheet or
incurred since June 30, 1998 in the ordinary course of business consistent with
past practice; provided, however, that in no event shall the Company repay any
long-term indebtedness except to the extent required by the terms thereof;
(k) enter into any lease, contract, agreement, commitment,
arrangement or transaction outside the ordinary course of business consistent
with past practice;
(l) amend, modify or change any existing lease, contract or agreement
other than in the ordinary course of business consistent with past practice;
(m) waive, release, grant or transfer any rights of value, other than
in the ordinary course of business consistent with past practice;
(n) other than in the ordinary course of business, lay off any of its
employees;
(o) change any of its banking or safe deposit arrangements;
(p) change any of the accounting principles or practices used by it,
except for any change required by reason of a concurrent change in generally
accepted accounting principles and notice of which is given in writing by the
Company to Buyer;
(q) take any action which would or might make any of the
representations or warranties of Seller or the Company contained in this
Agreement untrue or inaccurate as of any time from the date
17
22
of this Agreement to the Closing or would or might result in any of the
conditions set forth in this Agreement not being satisfied; or
(r) authorize or propose, or agree in writing or otherwise to take,
any of the actions described in this Section 5.2.
ARTICLE VI -- ADDITIONAL AGREEMENTS
6.1 Access to Information. Between the date hereof and the Closing,
Seller and the Company (i) shall give Buyer and its authorized representatives
reasonable access to all employees, all plants, offices, warehouses, and other
facilities, and all books and records, including work papers and other
materials prepared by the Company's independent public accountants, of the
Company, (ii) shall permit Buyer and its authorized representatives to make
such inspections as they may reasonably require, and (iii) shall cause the
Company's officers to furnish Buyer and its authorized representatives with
such financial and operating data and other information with respect to the
Company as Buyer may from time to time reasonably request; provided, however,
that no investigation pursuant to this Section shall affect any representation
or warranty of Seller or the Company contained in this Agreement (except as
otherwise expressly provided in any such representation or warranty) or in any
agreement, instrument, or document delivered pursuant hereto or in connection
herewith; and provided further that Seller and the Company shall have the right
to have a representative present at all times.
6.2 Third Party Consents. Seller and the Company shall each use its
reasonable best efforts to obtain all consents, approvals, orders,
authorizations and waivers of, and to effect all declarations, filings and
registrations with, all third parties (including Governmental Entities) that
are necessary, required or deemed by Buyer to be desirable to enable Seller to
transfer the Shares to Buyer as contemplated by this Agreement and to otherwise
consummate the transactions contemplated hereby. All costs and expenses of
obtaining or effecting any and all of the consents, approvals, orders,
authorizations, waivers, declarations, filings and registrations referred to in
this Section 6.2 shall be borne by Buyer.
6.3 Employment and Noncompetition Agreements.
(a) ▇▇▇▇▇▇▇▇ and the Company shall enter into an employment and
noncompetition agreement (the "▇▇▇▇▇▇▇▇ Employment Agreement") at (and subject
to the occurrence of) the Closing pursuant to which the Company shall agree to
employ Seller as President of the Company for the period and on the terms set
forth therein and the Seller shall agree not to compete, directly or
indirectly, with the Company for the period and in the area of interest set
forth therein. The ▇▇▇▇▇▇▇▇ Employment Agreement shall be in substantially the
form set forth as Exhibit 6.3(a).
(b) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and the Company shall enter into an
employment agreement (the "▇▇▇▇▇▇▇ Employment Agreement") at (and subject to
the occurrence of) the Closing pursuant to which the Company shall agree to
employ ▇▇▇▇▇▇▇ as a Vice President of the Company for the period and on the
terms set forth therein. The ▇▇▇▇▇▇▇ Employment Agreement shall be in
substantially the form set forth as Exhibit 6.3(b).
18
23
6.4 Schedules To Be Agreed. Notwithstanding references in this
Agreement to the contrary, the parties have entered into this Agreement without
attaching any of the Schedules referred to herein as being attached hereto
(such Schedules, the "Schedules to be Agreed"). Prior to the Closing, the
Seller will prepare proposed forms of the Schedules to be Agreed and submit
such proposed forms to Buyer for approval. Agreement by all of the parties
hereto on the form and substance of the Schedules to be Agreed shall be a
condition to each party's obligations hereunder.
6.5 Public Announcements. Except as may be required by Applicable
Law or the NASDAQ National Market System market rules here, neither Buyer, on
the one hand, nor Seller and the Company, on the other, shall issue any press
release or otherwise make any public statement with respect to this Agreement
or the transactions contemplated hereby without the prior written consent of
the other party.
6.6 Notice of Litigation. Until the Closing, (i) Buyer, upon
learning of the same, shall promptly notify Seller of any Proceeding which is
commenced or threatened against Buyer and which affects this Agreement or the
transactions contemplated hereby and (ii) Seller and the Company, upon learning
of the same, shall promptly notify Buyer of any Proceeding which is commenced
or threatened against Seller or the Company and which affects this Agreement or
the transactions contemplated hereby and any Proceeding which is commenced or
threatened against any Seller or the Company and which would have been listed
on Schedule 3.15 if such Proceeding had arisen prior to the date hereof.
6.7 Notification of Certain Matters. Seller and the Company shall
give prompt notice to Buyer of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in Article III to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any failure of
Seller or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied in any material respect by such
person hereunder. Buyer shall give prompt notice to Seller of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in
Article IV to be untrue or inaccurate in any material respect at or prior to
the Closing and (ii) any failure of Buyer to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied in any
material respect by such person hereunder. The delivery of any notice pursuant
to this Section 6.7 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, (ii) modify the
conditions set forth in Articles VII and VIII or (iii) limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
6.8 Fees and Expenses. Except as otherwise expressly provided in
this Agreement, all fees and expenses of ▇▇▇▇▇▇▇▇, the Trust and the Company,
including fees and expenses of counsel, financial advisors and accountants,
incurred in connection with this Agreement and the transactions contemplated
hereby, up to a maximum aggregate amount of $50,000, shall be paid by the
Company if the Closing shall occur, and by Buyer if the Closing does not occur,
and all such fees and expenses of ▇▇▇▇▇▇▇▇, the Trust and the Company over
$50,000 shall be paid by ▇▇▇▇▇▇▇▇ and the Trust. All fees and expenses of
Buyer, including fees and expenses of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby, shall be paid by Buyer, whether or not the Closing shall
occur.
19
24
6.9 Transfer Taxes. All sales and transfer Taxes and fees (including
all real estate transfer and closing Taxes and recording fees, if any) incurred
in connection with this Agreement and the transactions contemplated hereby
shall be borne by Buyer, and Buyer shall file all necessary documentation with
respect to, and make all payments of, such Taxes and fees on a timely basis.
6.10 Releases of Guaranties. Within sixty (60) days after the Closing
Date, Buyer shall take all necessary steps to cause ▇▇▇▇▇▇▇▇ to be released
from any agreements it may have as guarantor, codebtor, cosigner or surety for
or in connection with the Company or its obligations, provided that such
obligations are reflected in the Financial Statements or Schedule 6.10 hereto,
and Buyer shall defend and indemnify ▇▇▇▇▇▇▇▇ against any and all claims,
demands, liabilities, costs, and damages under any such agreements. The
failure of Buyer to obtain the releases required by this Section 6.10 within
the specified sixty (60) day period shall constitute an event of default under
the Promissory Note.
6.11 Negative Covenants. Notwithstanding any provision contained
herein to the contrary, until the Promissory Note is repaid in full, the
Company and the Buyer shall not cause, or permit the Company to take, any of
the following action without first obtaining the consent of ▇▇▇▇▇▇▇▇:
(a) commencing any business or line of business which is inconsistent
with the current business of the Company in any material respect or making any
fundamental changes to the nature of the business of the Company;
(b) voluntarily liquidating or dissolving the Company or filing a
voluntary petition by the Company pursuant to Chapter 7 or Chapter 11 of the
bankruptcy act;
(c) merging, consolidating or reorganizing the Company with another
entity;
(d) admitting a new shareholder or otherwise issuing or selling any
equity securities of the Company or any warrant, option or right (whether
contingent or otherwise) to purchase or acquire any equity securities in the
Company to any person or entity;
(e) engaging in any transaction or series of transactions, or taking
any action or actions, the result of which is to cause the net worth of the
Company (as determined in accordance with GAAP) to be less than $14,000,000; or
(f) amending its articles of incorporation.
6.12 Reporting. Until the Promissory Note is paid in full, the Buyer
will deliver to ▇▇▇▇▇▇▇▇, promptly when available, the annual, quarterly and
monthly financial statements of the Company.
6.13 Survival of Covenants. Except for any covenant or agreement
which by its terms expressly terminates as of a specific date, the covenants
and agreements of the parties hereto contained in this Agreement shall survive
the Closing without contractual limitation.
20
25
ARTICLE VII -- CONDITIONS TO
OBLIGATIONS OF SELLER
The obligations of the Seller to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
7.1 Representations and Warranties True. All the representations and
warranties of Buyer contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date, shall be true and correct on and as of the
Closing Date as if made on and as of such date, except as affected by
transactions contemplated or permitted by this Agreement and except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
as of such specified date.
7.2 Covenants and Agreements Performed. Buyer shall have performed
and complied with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
7.3 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.4 Other Documents. Seller shall have received the certificates,
instruments, and documents listed below:
(a) The Cash Portion of the Purchase Price to be delivered to the
Seller pursuant to Section 1.2.
(b) The Promissory Note to be delivered to the Seller pursuant to
Section 1.2, registered in the name of the Seller and duly executed by Buyer.
(c) The Pledge Agreement to be delivered to the Seller pursuant to
Section 1.2, together with the stock certificates representing the Shares duly
endorsed in blank, or accompanied by stock powers duly executed in blank, and
otherwise in form acceptable to Buyer for transfer on the books of the Company,
all duly executed by Buyer.
(d) Such other certificates, instruments, and documents as may be
reasonably requested by Seller prior to the Closing Date to carry out the
intent and purposes of this Agreement.
7.5 Employment Agreements. The Company shall have entered into the
▇▇▇▇▇▇▇▇ Employment Agreement and the ▇▇▇▇▇▇▇ Employment Agreement at the
Closing.
7.6 Certificate. Seller shall have received a certificate executed
by on behalf of the Buyer by the president or the vice president-finance of
Buyer, dated the Closing Date, representing and certifying, in such detail as
the Seller may reasonably request, that the conditions set forth in this
Article VII have been fulfilled and that Buyer is not in breach of any
provision of this Agreement.
21
26
7.7 New Lease Agreements. At or prior to the Closing, the Company
and ▇▇▇▇▇▇▇▇ shall have entered into new lease agreements for the four Company
facilities owned by ▇▇▇▇▇▇▇▇ located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, which
lease agreements shall be in form and substance reasonably acceptable to each
of ▇▇▇▇▇▇▇▇, the Company and Buyer.
7.8 Schedules To Be Agreed. At or prior to the Closing, the Company,
Buyer, the Trust and ▇▇▇▇▇▇▇▇ shall have agreed on the Schedules to be Agreed,
which Schedules to be Agreed shall be in form and substance reasonably
acceptable to each of ▇▇▇▇▇▇▇▇, the Company, the Trust and Buyer.
ARTICLE VIII -- CONDITIONS TO
OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the
Closing Date of each of the following conditions:
8.1 Representations and Warranties True. All the representations and
warranties of Seller and the Company contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as if made
on and as of such date, except as affected by transactions contemplated or
permitted by this Agreement and except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such
specified date.
8.2 Covenants and Agreements Performed. Seller and the Company shall
have performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
8.3 Certificate. Buyer shall have received a certificate executed by
each Seller and on behalf of the Company by the president and the vice
president-finance of the Company, dated the Closing Date, representing and
certifying, in such detail as Buyer may reasonably request, that the conditions
set forth in this Article VIII have been fulfilled and that Seller and the
Company are not in breach of any provision of this Agreement.
8.4 [Intentionally omitted]
8.5 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
8.6 Consents. All consents and approvals of third parties (including
Governmental Entities) required to be obtained by or on the part of the parties
hereto or otherwise necessary for the consummation of the transactions
contemplated hereby shall have been obtained, and all thereof shall be in full
force and effect at the time of Closing.
22
27
8.7 No Material Adverse Change. Since June 30, 1998, there shall not
have been any material adverse change in the business, assets, results of
operations, condition (financial or otherwise), or prospects of the Company.
8.8 Employment Agreements. ▇▇▇▇▇▇▇▇ shall have entered into the
▇▇▇▇▇▇▇▇ Employment Agreement with the Company, and ▇▇▇▇▇▇▇ shall have entered
into the ▇▇▇▇▇▇▇ Employment Agreement with the Company.
8.9 Other Documents. Buyer shall have received the certificates,
instruments, and documents listed below:
(a) The stock certificates representing the Shares duly endorsed in
blank, or accompanied by stock powers duly executed in blank, and otherwise in
form acceptable to Buyer for transfer on the books of the Company, provided,
however, stock certificates representing the Shares shall in turn be
redelivered to Seller pursuant to and in accordance with the terms of the
Pledge Agreement.
(b) The minute books, stock records, and corporate seal of the
Company.
(c) The written resignation from the Board of Directors of the
Company of each member of such Board, such resignation to be effective
concurrently with the Closing on the Closing Date.
(d) The written resignation as an officer of the Company of each
officer of the Company (other than ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇), such resignation to
be effective concurrently with the Closing on the Closing Date.
(e) A copy of the resolutions of the Board of Directors of the
Company authorizing the execution, delivery, and performance by the Company of
this Agreement, certified by the secretary or an assistant secretary of the
Company.
(f) Such other certificates, instruments, and documents as may be
reasonably requested by Buyer prior to the Closing Date to carry out the intent
and purposes of this Agreement.
8.10 New Lease Agreements. At or prior to the Closing, the Company
and ▇▇▇▇▇▇▇▇ shall have entered into new lease agreements for the four Company
facilities owned by ▇▇▇▇▇▇▇▇ located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, which
lease agreements shall be in form and substance reasonably acceptable to each
of ▇▇▇▇▇▇▇▇, the Company and Buyer.
8.11 Schedules To Be Agreed. At or prior to the Closing, the
Company, Buyer, the Trust and ▇▇▇▇▇▇▇▇ shall have agreed on the Schedules to be
Agreed, which Schedules to be Agreed shall be in form and substance reasonably
acceptable to each of ▇▇▇▇▇▇▇▇, the Company, the Trust and Buyer.
23
28
ARTICLE IX -- TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:
(a) by mutual written consent of Seller and Buyer; or
(b) by either Seller or Buyer, if:
(i) the Closing shall not have occurred on or before
August 31, 1998, unless such failure to close shall be due to a breach
of this Agreement by the party seeking to terminate this Agreement
pursuant to this clause (i); or
(ii) there shall be any statute, rule or regulation that
makes consummation of the transactions contemplated hereby illegal or
otherwise prohibited or a Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby, and such order, decree, ruling
or other action shall have become final and nonappealable; or
(c) by Seller, if (i) any of the representations and warranties of
Buyer contained in this Agreement shall not be true and correct in any material
respect, when made or at any time prior to the Closing as if made at and as of
such time, or (ii) Buyer shall have failed to fulfill any of its obligations
under this Agreement in any material respect, and, in the case of each of
clauses (i) and (ii), such misrepresentation, breach of warranty, or failure
(provided it can be cured) has not been cured within thirty (30) days of actual
knowledge thereof by Buyer; or
(d) by Buyer, if (i) any of the representations and warranties of
Seller or the Company contained in this Agreement shall not be true and correct
in any material respect, when made or at any time prior to the Closing as if
made at and as of such time, or (ii) Seller or the Company shall have failed to
fulfill any of their obligations under this Agreement in any material respect,
and, in the case of each of clauses (i) and (ii), such misrepresentation,
breach of warranty, or failure (provided it can be cured) has not been cured
within thirty (30) days of actual knowledge thereof by Seller.
9.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.1 by Seller, on the one hand, or Buyer, on the
other, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, except that the agreements
contained in this Section 9.2 and in Section 6.5 shall survive the termination
hereof. Nothing contained in this Section 9.2 shall relieve any party from
liability for damages as a result of any breach of this Agreement. In the
event that this Agreement is terminated pursuant to Section 9.1(a), Section
9.1(b) or Section 9.1(d), Seller shall return to Buyer the full amount of the
Deposit paid to Seller within ten (10) days of such termination. In addition,
in the event of any termination of this Agreement the ▇▇▇▇▇▇▇▇ Employment
Agreement and the ▇▇▇▇▇▇▇ Employment Agreement shall be void and have no
effect.
24
29
9.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.
9.4 Waiver. Each of Seller and the Company, on the one hand, and
Buyer, on the other, may (i) waive any inaccuracies in the representations and
warranties of the other contained herein or in any document, certificate, or
writing delivered pursuant hereto or (ii) waive compliance by the other with
any of the other's agreements or fulfillment of any conditions to its own
obligations contained herein. Any agreement on the part of a party hereto to
any such waiver shall be valid only if set forth in an instrument in writing
signed by or on behalf of such party. No failure or delay by a party hereto in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
9.5 Remedies Not Exclusive. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law. The rights and remedies of any party based upon, arising out of, or
otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant, or agreement contained in this Agreement shall in no way be
limited by the fact that the act, omission, occurrence, or other state of facts
upon which any claim of any such inaccuracy or breach is based may also be the
subject matter of any other representation, warranty, covenant, or agreement
contained in this Agreement (or in any other agreement between the parties) as
to which there is no inaccuracy or breach.
ARTICLE X -- SURVIVAL OF
REPRESENTATIONS; INDEMNIFICATION
10.1 Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate, instrument, or
document delivered pursuant hereto shall survive the Closing without
contractual limitation, regardless of any investigation made by or on behalf of
any party.
10.2 Indemnification by Seller.
(a) Subject to the terms and conditions of this Article X, Seller
shall indemnify, defend, and hold harmless Buyer, the subsidiaries and parent
corporations of Buyer (including, after the Closing, the Company), each
director and officer of Buyer or any of its subsidiaries or parent
corporations, and each affiliate thereof, and their respective heirs, legal
representatives, successors and assigns (collectively, the "Buyer Group"), from
and against any and all claims, actions, causes of action, demands,
assessments, losses, damages, liabilities, judgments, settlements, penalties,
costs, and expenses (including reasonable attorneys' fees and expenses), of any
nature whatsoever, whether actual or consequential, including any liability
over the $2,500.00 deductible for the litigation described in Schedule 3.15
attached hereto (collectively, "Damages"), asserted against, resulting to,
imposed upon, or incurred by any member of the Buyer Group, directly or
indirectly, by reason of or resulting from any breach by Seller or the Company
of any of their representations, warranties, covenants, or agreements contained
in this Agreement or in any certificate, instrument, or document delivered
pursuant hereto.
25
30
(b) Except with respect to claims for which Buyer has given written
notice to Seller prior to the second anniversary date of the Closing Date, to
the greatest extent permitted by law, the parties agree that no claim under
this Section 10.2 for damages which Seller may owe Buyer shall be filed in
court or otherwise asserted after the second anniversary date of the Closing
Date, and that this shortened period for asserting claims shall operate as a
statue of limitations and as a defense, and shall not be tolled by lack of
discovery, equitable factors, or any other matters, except for active,
fraudulent concealment of material information directly relating to the claims
which are asserted against Seller. The parties agree that this limitation of
liability and shortened time period within which to bring claims is reasonable
under the circumstances and is a material part of the parties' transaction and
the consideration being provided to Seller hereunder.
(c) No indemnification shall be required to be made by Seller
pursuant to this Section 10.2 with respect to any claims unless and until the
aggregate amount of Damages incurred by members of the Buyer Group with respect
to all claims under this Section 10.2 (whether asserted, resulting, imposed, or
incurred before, on, or after the Closing Date) exceeds $100,000, it being
agreed and understood that, if such amount is exceeded, Seller shall be liable
to the full extent of such Damages, including those not in excess of $100,000.
No indemnification shall be required to be made by Seller pursuant to this
Section 10.2 with respect to any claims to the extent that the aggregate amount
of Damages incurred by members of the Buyer Group with respect to all claims
under this Section 10.2 (whether asserted, resulting, imposed, or incurred
before, on, or after the Closing Date) exceeds $3,000,000.
(d) The amount of Damages required to be paid by Seller to any other
party pursuant to this Section 10.2 shall be reduced to the extent of any
amounts actually received by such other party after the Closing Date pursuant
to the terms of the insurance policies (if any) covering such claim. Further,
to the extent any claims for Damages against Seller hereunder are or purport to
be covered by insurance policies, Buyer will first commence a claim under the
applicable insurance policies before making any claim against Seller for
Damages. In connection with the foregoing, until the second anniversary date
of the Closing Date, Buyer agrees that it will not change, or permit to be
changed, the Company's current primary insurance carrier without the prior
written consent of ▇▇▇▇▇▇▇▇.
10.3 Indemnification by Buyer.
(a) Subject to the terms and conditions of this Article X, Buyer
shall indemnify, defend, and hold harmless the Seller, the subsidiaries and
parent corporations, if any, of the Seller, each director and officer, if any,
of the Seller or any of its subsidiaries or parent corporations, and each
affiliate thereof, and their respective heirs, legal representatives,
successors, and assigns (collectively, the "Seller Group"), from and against
any and all Damages asserted against, resulting to, imposed upon, or incurred
by any member of the Seller Group, directly or indirectly, by reason of or
resulting from any breach by Buyer of any of its representations, warranties,
covenants, or agreements contained in this Agreement or in any certificate,
instrument, or document delivered pursuant hereto.
(b) Except with respect to claims for which Seller has given written
notice to Buyer prior to the second anniversary date of the Closing Date, to
the greatest extent permitted by law, the parties agree that no claim under
this Section 10.3 for damages which Buyer may owe Seller shall
26
31
be filed in court or otherwise asserted after the second anniversary date of the
Closing Date, and that this shortened period for asserting claims shall operate
as a statue of limitations and as a defense, and shall not be tolled by lack of
discovery, equitable factors, or any other matters, except for active,
fraudulent concealment of material information directly relating to the claims
which are asserted against Buyer. The parties agree that this limitation of
liability and shortened time period within which to bring claims is reasonable
under the circumstances and is a material part of the parties' transaction and
the consideration being provided to Buyer hereunder.
(c) No indemnification shall be required to be made by Buyer pursuant
to this Section 10.3 with respect to any claims unless and until the aggregate
amount of Damages incurred by members of the Seller Group with respect to all
claims under this Section 10.3 (whether asserted, resulting, imposed, or
incurred before, on, or after the Closing Date) exceeds $100,000, it being
agreed and understood that, if such amount is exceeded, Buyer shall be liable
to the full extent of such Damages, including those not in excess of $100,000.
No indemnification shall be required to be made by Buyer pursuant to this
Section 10.3 with respect to any claims to the extent that the aggregate amount
of Damages incurred by the members of the Seller Group with respect to all
claims under this Section 10.3 (whether asserted, resulting, imposed, or
incurred before, on, or after the Closing Date) exceeds $3,000,000. The
foregoing limitation on the amount of claims shall in no way reduce the amounts
payable on the Promissory Note.
(d) The amount of Damages required to be paid by Buyer to any other
party pursuant to this Section 10.3 shall be reduced to the extent of any
amounts actually received by such other party after the Closing Date pursuant
to the terms of the insurance policies (if any) covering such claim. Further,
to the extent any claims for Damages against Buyer hereunder are or purport to
be covered by insurance policies, Seller will first commence a claim under the
applicable insurance policies before making any claim against Buyer for
Damages.
10.4 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 10.2 or 10.3 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to
be made against an indemnifying party under such Section, give written notice
to the indemnifying party of the commencement thereof, but the failure so to
notify the indemnifying party shall not relieve it of any liability that it may
have to any indemnified party except to the extent the indemnifying party
demonstrates that the defense of such action is prejudiced thereby. In case
any such action shall be brought against an indemnified party and it shall give
written notice to the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. If the indemnifying party elects to
assume the defense of such action, the indemnified party shall have the right
to employ separate counsel at its own expense and to participate in the defense
thereof. If the indemnifying party elects not to assume (or fails to assume)
the defense of such action, the indemnified party shall be entitled to assume
the defense of such action with counsel of its own choice, at the expense of
the indemnifying party. If the action is asserted against both the
indemnifying party and the indemnified party and there is a conflict of
interests which renders it inappropriate for the same counsel to represent both
the indemnifying party and the indemnified party, the indemnifying party shall
be responsible for paying for separate counsel for the indemnified party;
provided, however, that if there is more than one indemnified party, the
indemnifying party shall not be responsible for paying for
27
32
more than one separate firm of attorneys to represent the indemnified parties,
regardless of the number of indemnified parties. If the indemnifying party
elects to assume the defense of such action, (a) no compromise or settlement
thereof may be effected by the indemnifying party without the indemnified
party's written consent (which shall not be unreasonably withheld) unless the
sole relief provided is monetary damages that are paid in full by the
indemnifying party and (b) the indemnifying party shall have no liability with
respect to any compromise or settlement thereof effected without its written
consent (which shall not be unreasonably withheld).
ARTICLE XI -- MISCELLANEOUS
11.1 Notices. All notices, requests, demands, and other
communications required or permitted to be given or made hereunder by any party
hereto shall be in writing and shall be deemed to have been duly given or made
if delivered personally, or transmitted by first class registered or certified
mail, postage prepaid, return receipt requested, or sent by prepaid overnight
delivery service, or sent by cable, telegram, telefax, or telex, to the parties
at the following addresses (or at such other addresses as shall be specified by
the parties by like notice):
If to Buyer: ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telefax: 817.339.1001
If to Seller: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇
Telefax: 510.475.9027
11.2 Entire Agreement. This Agreement, together with the Schedules,
Exhibits, Annexes, and other writings referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
11.3 Binding Effect; Assignment; No Third Party Benefit. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors, and permitted
assigns. Except as otherwise expressly provided in this Agreement, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties, except that Buyer may assign to any wholly owned subsidiary
of Buyer any of Buyer's rights, interests, or obligations hereunder, upon
notice to the other party or parties, provided that no such assignment shall
relieve Buyer of its obligations hereunder. Except as provided in Article X,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any person other than the parties hereto, and their respective heirs,
legal representatives, successors, and permitted assigns, any rights, benefits,
or remedies of any nature whatsoever under or by reason of this Agreement. In
the event the transactions contemplated hereby are consummated, nothing in this
Section 11.3 shall render the Seller Employment Agreement and the ▇▇▇▇▇▇▇
Employment Agreement unenforceable.
28
33
11.4 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in
all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by Applicable Law.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Notwithstanding
any other provision or agreement between the parties hereto, this Agreement and
the schedules and exhibits hereto shall be deemed to have been executed,
delivered and entered into in Union City, California.
11.6 Further Assurances. From time to time following the Closing, at
the request of any party hereto and without further consideration, the other
party or parties hereto shall execute and deliver to such requesting party such
instruments and documents and take such other action (but without incurring any
material financial obligation) as such requesting party may reasonably request
in order to consummate more fully and effectively the transactions contemplated
hereby.
11.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only, do not constitute a part of this
Agreement, and shall not affect in any manner the meaning or interpretation of
this Agreement.
11.8 Gender. Pronouns in masculine, feminine, and neuter genders
shall be construed to include any other gender, and words in the singular form
shall be construed to include the plural and vice versa, unless the context
otherwise requires.
11.9 References. All references in this Agreement to Articles,
Sections, and other subdivisions refer to the Articles, Sections, and other
subdivisions of this Agreement unless expressly provided otherwise. The words
"this Agreement", "herein", "hereof", "hereby", "hereunder", and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. Whenever the words "include",
"includes", and "including" are used in this Agreement, such words shall be
deemed to be followed by the words "without limitation". Each reference herein
to a Schedule, Exhibit, or Annex refers to the item identified separately in
writing by the parties hereto as the described Schedule, Exhibit, or Annex to
this Agreement. All Schedules, Exhibits, and Annexes are hereby incorporated
in and made a part of this Agreement as if set forth in full herein.
11.10 Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all, the parties hereto.
29
34
11.11 Joint and Several Obligations. The obligations and
liabilities of the Trust and ▇▇▇▇▇▇▇▇ as "Seller" under this Agreement or in
any certificate, instrument, or document delivered pursuant hereto shall be
joint and several.
ARTICLE XII -- DEFINITIONS
12.1 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it below:
"affiliate" has the meaning specified in Rule 12b-2
promulgated under the Exchange Act.
"affiliate" means, with respect to any person, any other
person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with, such person.
"Affiliated Group" has the meaning set forth in Section 1504
of the Code.
"Applicable Law" means any statute, law, rule, or regulation
or any judgment, order, writ, injunction, or decree of any Governmental
Entity to which a specified person or property is subject.
"Code" means the Internal Revenue Code of 1986, as amended.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition, or otherwise),
easements, and other encumbrances of every type and description,
whether imposed by law, agreement, understanding, or otherwise.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any public, governmental, or
regulatory body, agency, department, commission, board, bureau, or
other authority or instrumentality (domestic or foreign).
"Intellectual Property" means patents, trademarks, service
marks, trade names, copyrights, trade secrets, know-how, inventions,
and similar rights, and all registrations, applications, licenses, and
rights with respect to any of the foregoing.
"IRS" means the Internal Revenue Service.
30
35
"Permits" means licenses, permits, franchises, consents,
approvals, and other authorizations of or from Governmental Entities.
"person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
"Proceedings" means all proceedings, actions, claims, suits,
investigations, and inquiries by or before any arbitrator or
Governmental Entity.
"reasonable best efforts" means a party's reasonable best
efforts in accordance with reasonable commercial practice and without
the incurrence of unreasonable expense.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means any income Taxes or similar assessments or any
sales, excise, occupation, use, ad valorem, property, production,
severance, transportation, employment, payroll, franchise, or other Tax
imposed by any United States federal, state, or local (or any foreign
or provincial) Taxing authority, including any interest, penalties, or
additions attributable thereto.
"Tax Return" means any return or report, including any related
or supporting information, with respect to Taxes.
"to the best knowledge of Seller and the Company" (or similar
references to Seller and the Company's knowledge) means the knowledge
of or receipt of notice (oral or written) by any of Seller or the
Company's executive officers, as such knowledge has been obtained in
the normal conduct of the business of the Company or in connection with
the preparation of the Schedules to this Agreement and the furnishing
of information to Buyer as contemplated by this Agreement, after having
made a reasonable investigation of the accuracy of the representations
and warranties made by Seller and the Company in this Agreement or in
any document, certificate, or other writing furnished by Seller or the
Company to Buyer pursuant hereto or in connection herewith.
"Transaction Costs" means investment banking, legal,
accounting, and other fees or costs not deductible for federal income
Tax purposes but incurred as a result of the transactions contemplated
by this Agreement.
"Treasury Regulations" means one or more treasury regulations
promulgated under the Code by the Treasury Department of the United
States.
12.2 Certain Additional Defined Terms. In addition to such terms as
are defined in the opening paragraph of and the recitals to this Agreement and
in Section 12.1, the following terms are used in this Agreement as defined in
the Sections set forth opposite such terms:
31
36
Defined Term Section Reference
------------ -----------------
agreements 3.22
Applicable Environmental Laws 3.24
associate 3.31
Audited Financial Statements 3.10
Benefit Arrangements 3.23
Buyer Preamble
Buyer Group 10.2
▇▇▇▇▇▇▇▇ Employment Agreement 6.3
CERCLA 3.24
▇▇▇▇▇▇▇ Employment Agreement 6.3
Closing 2.1
Closing Date 2.1
Common Stock Preamble
Damages 10.2
Disposal 3.24
Disposed 3.24
Effective Date 2.2
Employee Plans 3.26
Financial Statements 3.10
Hazardous Substance 3.24
Latest Balance Sheet 3.10
Multiemployer Plan 3.23
Pledge Agreement 1.2
Promissory Note 1.2
Property 3.24
Purchase Price 1.2
RCRA 3.24
Real Property 3.18
Release 3.24
Schedules to be Agreed 6.4
Seller Preamble
Seller Group 10.3
Shares Preamble
Solid Waste 3.24
Unaudited Financial Statements 3.10
[Signature page to follow]
32
37
IN WITNESS WHEREOF, the parties have executed this Agreement, or
caused this Agreement to be executed by their duly authorized representatives,
all as of the day and year first above written.
WESTERN TRACTION COMPANY
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
By:
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
The ▇▇▇▇▇▇▇▇ Family Trust
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, co-trustee
By:
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, co-trustee
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
CRESCENT OPERATING, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------