EXHIBIT 1
SHARE PURCHASE AGREEMENT
between
DESTINATION RAILWAYS, INC.
(Shareholder)
and
AMERICAN HERITAGE RAILWAYS, INC.
(Buyer)
to acquire all of the issued and outstanding stock of
THE DURANGO & SILVERTON NARROW GAUGE RAILROAD COMPANY
dated as of July 2, 1998
SHARE PURCHASE AGREEMENT
INTRODUCTION
THIS SHARE PURCHASE AGREEMENT is dated as of July __, 1998. The parties
are DESTINATION RAILWAYS, INC., a Florida corporation (the "Shareholder"), being
the owner of all of the issued and outstanding shares of capital stock of THE
DURANGO & SILVERTON NARROW GAUGE RAILROAD COMPANY, a Colorado corporation (the
"Company"), FIRST AMERICAN RAILWAYS, INC., a Nevada corporation ("First
American") (the Shareholder and First American shall sometimes be referred to
individually as a "Shareholder Party" and collectively as the "Shareholder
Parties") and AMERICAN HERITAGE RAILWAYS, INC., a Florida corporation (the
"Buyer").
BACKGROUND
The Shareholder owns 100,000 shares of the common stock of the Company
representing all of the issued and outstanding shares of capital stock thereof
(the "Shares"). The Buyer desires to purchase from the Shareholder, and the
Shareholder desires to sell to the Buyer, all of the Shares in exchange for the
Purchase Price in accordance with the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
TERMS AND CONDITIONS
1. DEFINITIONS.
For convenience and brevity, certain terms used in various
parts of this Agreement are listed in alphabetical order and defined or referred
to below (such terms to be equally applicable to both singular and plural forms
of the terms defined). Other terms may be defined in the text of this Agreement.
"ACQUISITION" means the acquisition of all of the Shares by
the Buyer and all related transactions provided for in or contemplated by this
Agreement or any Exhibit hereto.
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"AGREEMENT" means this Share Purchase Agreement.
"ANCILLARY DOCUMENTS" means the documents to be delivered at
Closing, as described in Sections 3.2, 9 and 10 hereof.
"APPLICABLE LAW(S)" shall include, but shall not be limited
to, the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of 1986
("▇▇▇▇"), 42 U.S.C. ss.9601, ET SEQ. (hereinafter collectively "CERCLA"); the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 ("RCRA") and subsequent Hazardous and Solid Waste Amendments of
1984, also known as the 1984 "RCRA" amendments, 42 U.S.C. ss.6901 ET SEQ.; the
Hazardous Material Transportation Act, 49 U.S.C. ss.1801, ET SEQ.; the Clean
Water Act, as amended, 33 U.S.C. ss.1311, ET SEQ.; the Clean Air Act, as
amended, 42 U.S.C. ss.7401-7642; the Toxic Substance Control Act, as amended, 15
U.S.C. ss.2601 ET SEQ.; the Federal Insecticide, Fungicide, and Rodenticide Act
("FIFRA"), as amended, 7 U.S.C. ss.136-136y; the Emergency Planning and
Community Right-to-Know Act of 1986 ("EPCRTKA" or "EPCRA"), as amended, 42
U.S.C. ss.11001, ET SEQ. (Title III of ▇▇▇▇); the Occupational Safety and Health
Act of 1970 ("OSHA"), as amended, 29 U.S.C. ss.651, ET SEQ.; any similar state
statute; and the regulations promulgated thereunder; any state or local
"Superfund" or "SuperLien" laws; and any other federal, state and/or local laws
or regulations, whether currently in existence, enacted or promulgated prior to
Closing, that govern or relate to:
(i) The existence, cleanup and/or remedy of
contamination of property;
(ii) The protection of the environment from
spilled, deposited or otherwise emplaced
contamination;
(iii) The control of hazardous or toxic substances
or wastes; or
(iv) The use, generation, discharge,
transportation, treatment, removal or
recovery of hazardous or toxic substances or
wastes, including building materials such as
asbestos.
"ASSETS" means all of the Company's assets, properties,
business, goodwill and rights of every kind and description, real and personal,
tangible and intangible, wherever situated and whether or not reflected on the
Latest Year-End Balance Sheet or the Interim Balance Sheet.
"AUDITED FINANCIALS" means those certain unaudited financial
statements of the Company prepared by ▇▇▇▇▇▇▇▇ & Company dated as of March 31,
1998, and for the three months ended March 31, 1998, and the audited financial
statements of the Company as of December 31, 1997, and for the nine months ended
December 31, 1997, delivered by the Shareholder and/or the Company to the Buyer.
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"BUSINESS" means the existing and prospective business,
operations, facilities and other Assets, financial condition, result of
operations, finances, markets, products, competitive position, customers and
customer relations and personnel of the Company.
"BUSINESS DAY" means any calendar day which is not a Saturday,
Sunday or public holiday under the laws of Florida.
"BUYER" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual.
"▇▇▇▇▇▇▇▇ LOANS" means the $4,200,000 ▇▇▇▇▇▇▇▇ Loan and the
$5,850,000 ▇▇▇▇▇▇▇▇ Loan.
"$4,200,000 ▇▇▇▇▇▇▇▇ LOAN" means that certain loan evidenced
by a promissory note dated March 13, 1997, in the original principal amount of
$4,200,000, given by First American to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., which note has
an outstanding principal balance as of the date hereof of $4,200,000.
"$5,850,000 ▇▇▇▇▇▇▇▇ LOAN" means that certain loan evidenced
by a promissory note dated March 13, 1997, in the original principal amount of
$5,850,000, given by First American to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., which note has
an outstanding principal balance as of the date hereof of $5,850,000.
"CLAIM NOTICE" is defined in Section 8.2(a).
"CLOSING" and "CLOSING DATE" are defined in Section 3.1.
"CLOSING PAYMENT" means the amount of $2,000,000.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means The Durango & Silverton Narrow Gauge Railroad
Company, a Colorado corporation.
"CONTRACT" means any written or oral contract, agreement,
lease, plan, instrument or other document, commitment, arrangement, undertaking,
practice or authorization that is binding on any person or its property under
applicable law.
"COPYRIGHTS" means registered copyrights, copyright
applications and readily identifiable unregistered copyrights.
"COURT ORDER" means any judgment, decree, injunction, order or
ruling of any federal, state or local court or governmental or regulatory body
or authority that is binding on any person or its property under applicable law.
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"DEFAULT" means (1) a breach of or default under any Contract,
(2) the occurrence of an event that with the passage of time or the giving of
notice or both would constitute a breach of or default under any Contract, or
(3) the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"EFFECTIVE DATE" means the date this Agreement is executed by
the last one of Buyer and the Shareholder.
"EMPLOYEE BENEFIT PLANS" means "employee benefit plans" as
defined in Section 3(3) of ERISA and any other plan, policy, program, practice
or arrangement providing compensation or other benefits to any current or former
officer or employee of the Company, or any dependent or beneficiary thereof,
which are now or have been maintained by the Company, or any affiliate or under
which the Company or any affiliate has any obligation or liability, whether
actual or contingent, including, without limitation, all incentive, bonus,
deferred compensation, vacation, holiday, medical, disability, share purchase or
other similar plans, policies, programs, practices or arrangements.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"FIRST AMERICAN" means First American Railways, Inc., a Nevada
corporation, the sole shareholder of Shareholder.
"GAAP" means generally accepted accounting principles as in
effect in the United States, consistently applied.
"HAZARDOUS SUBSTANCE(S)" shall be construed broadly to include
any toxic or hazardous substance, material, or waste, and any other contaminant,
pollutant or constituent thereof, whether liquid, solid, semi-solid, sludge
and/or gaseous, including without limitation, chemicals, compounds, pesticides,
petroleum products including crude oil and any fraction thereof, asbestos
containing materials or other similar substances or materials which are
regulated or controlled by, under or pursuant to any federal, state or local
statutes, laws, ordinances, codes, rules, regulations, orders or decrees, not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of
1986 ("▇▇▇▇"), 42 U.S.C. ss.9601, ET SEQ. (hereinafter collectively "CERCLA");
the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 ("RCRA") and subsequent Hazardous and Solid Waste
Amendments of 1984, also known as the 1984 "RCRA" amendments, 42 U.S.C. ss.6901
ET SEQ.; the Hazardous Material Transportation Act, 49 U.S.C. ss.1801, ET SEQ.;
the Clean Water Act, as amended, 33 U.S.C. ss.1311, ET SEQ.; the Clean Air Act,
as amended, 42 U.S.C. ss.7401-7642; the Toxic Substance Control Act, as amended,
15 U.S.C. ss.2601 ET SEQ.; the Federal Insecticide, Fungicide, and Rodenticide
Act ("FIFRA"), as amended, 7 U.S.C. ss.136-136y; the Emergency Planning and
Community Right-to-Know Act of 1986 ("EPCRTKA" or "EPCRA"), as amended, 42
U.S.C. ss.11001, ET SEQ. (Title III of ▇▇▇▇); the Occupational Safety and Health
Act of 1970 ("OSHA"), as amended, 29 U.S.C. ss.651, ET SEQ.; any similar state
statute; or in the
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regulations implementing such statutes, or which has been or shall be determined
prior to Closing by an agency or a court to be a hazardous or toxic substance
regulated under any other Applicable Laws; or any substance or material that is
or becomes regulated prior to Closing by any federal, state, or local
governmental authority.
"INTELLECTUAL PROPERTY" means Copyrights, Patents, Trademarks,
technology rights and licenses, computer software (including without limitation
any source or object codes therefor or documentation relating thereto), trade
secrets, franchises, know-how, inventions and intellectual property rights.
"INTEREST RATE" means the rate equal to the rate published in
the "Money Rates" column of THE WALL STREET JOURNAL (or if such rate or THE WALL
STREET JOURNAL is no longer published, then any publicly available source of
similar market data) and described as "High-grade unsecured notes sold through
dealers by major corporations" and with a stated maturity date of 30 days (the
"Commercial Paper Rate") adjusted monthly, plus 650 basis points.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means (a) when applied to the Company, the actual
knowledge (after reasonable investigation) of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or
any officer or director of the Company, and (b) when applied to the Shareholder,
the actual knowledge (after reasonable investigation) of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ or any officer or director of the Shareholder.
"LATEST YEAR-END BALANCE SHEET" and "LATEST YEAR-END BALANCE
SHEET DATE" are defined in Section 4.7.
"LETTER OF INTENT" means that certain binding letter of
intent, dated June 18, 1998, between First American, Buyer, and ▇▇▇▇▇▇▇▇, as
assigned by ▇▇▇▇▇▇▇▇ to Buyer, and amended as of even date.
"LIABILITY" means any direct or indirect liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
or by any person (other than endorsements of notes, bills and checks presented
to banks for collection or deposit in the ordinary course of business) of any
type, whether accrued, absolute, contingent, matured, unmatured or other.
"LICENSES" means licenses, franchises, permits, easements,
rights and other authorizations.
"LIEN" means any mortgage, lien, security interest, pledge,
encumbrance, restriction on transferability, defect of title, charge or claim of
any nature whatsoever on any property or property interest.
"LIENHOLDER" means the holder of or other person entitled to
any benefits arising under any Lien.
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"LITIGATION" means any lawsuit, action, arbitration,
administrative or other proceeding, criminal prosecution or governmental
investigation or inquiry involving or affecting the Company, any Shareholder
party, the Business, the Assets or any Contracts to which the Company or any
Shareholder Party is a party or by which it or any of the Assets or the Business
may be bound or affected.
"MANAGEMENT AGREEMENT" means that certain Management Agreement
to be entered promptly following the Closing between First American and Buyer,
as provided for pursuant to the amended Letter of Intent.
"NATIONSBANK LOAN" means that certain term loan given by
NationsBank, N.A. (South) ("NationsBank") to the Company evidenced by a
promissory note (the "Note"), dated March 13, 1997, in the original principal
amount of $8.5 million, which Note has an outstanding principal balance as of
the date hereof of approximately $7,152,503.
"PATENTS" means all patents and patent applications.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLANS" means "employee pension benefit plans" as
defined in Section 3(2) of ERISA.
"PERMITTED LIENS" means liens for taxes not yet due and
payable.
"PLEDGE AGREEMENT" means that certain General Pledge and
Security Agreement, dated June 18, 1998, between First American, Buyer, and
▇▇▇▇▇▇▇▇.
"PURCHASE PRICE" has the meaning set forth in paragraph 2.1,
below.
"RAILROAD" means that certain narrow gauge railroad operated
by the Company situated entirely in the State of Colorado and extending
generally from Durango, Colorado to Silverton, Colorado.
"REGULATION" means any statute, law, ordinance, regulation,
order or rule of any federal, state, local or other governmental agency or body
or of any other type of regulatory body, including, without limitation, those
covering environmental, energy, safety, health, transportation, bribery, record
keeping, zoning, antidiscrimination, antitrust, wage and hour, price and wage
control matters, tax, and security matters.
"SHAREHOLDER" means DESTINATION RAILWAYS, INC., a Florida
corporation.
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"SHARES" means 100,000 shares of the common stock of the
Company, no par value, which constitutes all of the issued and outstanding
capital stock of the Company, and the 1000 shares of the common stock of The
Durango & Silverton Railroad Scenic Tour Bus Company, which constitutes all of
the capital stock of such company.
"TRADEMARKS" means registered trademarks, registered service
marks, trademark and service ▇▇▇▇ applications and readily identifiable
unregistered trademarks and service marks.
2. SALE AND PURCHASE OF THE SHARES.
2.1 PURCHASE PRICE. The Buyer agrees to pay the Shareholder
the Purchase Price as follows: (a) $500,000 has already been delivered to
Seller, and (b) the Closing Payment at Closing.
2.2 SALE AND PURCHASE OF THE SHARES. Subject to the terms and
conditions hereinafter set forth and on the basis of and in reliance upon the
representations, warranties, obligations and agreements set forth herein, at the
Closing the Shareholder shall sell to the Buyer and the Buyer shall purchase
from the Shareholder all of the Shares owned by the Shareholder in exchange for
the payment to the Shareholder of the Purchase Price.
2.3 MANAGEMENT AGREEMENT. Shareholder and Buyer shall enter
into the Management Agreement.
2.4 ACCESS TO PROPERTY. The Buyer has previously received
copies of all title information, including title insurance policies, relating to
the Real Property. The Buyer, its counsel, accountants, agents and other
representatives shall have full and reasonable access to the Real Property,
personal property, files, documents, records, permits, equipment, and all Assets
of the Company (the "Records"). The Shareholder will make the Records
immediately available to the examination and otherwise reasonably cooperate with
Buyer in connection with this paragraph. The Buyer's licensed inspectors and
professionals will also have the right to enter upon the Real Property during
business hours after reasonable notice for the purpose of inspecting, at the
sole cost and expense of the Buyer, the Real Property with respect to soil
conditions, environmental matters, roof, structure, HVAC, electrical systems,
plumbing, machinery, surveying matters and performing other similar
investigatory work as the Buyer considers appropriate, including, without
limitation, a Phase I and/or Phase II environmental audit (as appropriate)of the
Real Property. The Buyer will have the right to make reasonable inquiries of
tenants, governmental authorities, utility companies, Shareholder-designated
representatives of the Company and other like parties and to make such
feasibility studies and analyses as it considers appropriate. The Buyer hereby
covenants and agrees to use all reasonable efforts so that neither the Buyer nor
any of Buyer's representatives will interfere with the Company's Business. Any
entry made on the Real Property by the Buyer and its representatives will be at
the sole risk of the Buyer. The right of inspection will terminate when and if
this Agreement is terminated. The Buyer hereby covenants and agrees to indemnify
and hold harmless the Company and the Shareholder from any and all loss,
liability, costs (inclusive of reasonable attorneys' fees and disbursements),
claims, demands, damages, actions, causes of action, and suits actually and
directly arising out of or in any manner related to the exercise by the Buyer of
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the Buyer's rights under this paragraph. The Buyer will pay for all work and
inspections performed on or in connection with the Real Property and will not
permit the creation of any lien in favor of any contractor, subcontractor,
materialman, mechanic, surveyor, architect or laborer. The Buyer further
covenants and agrees that if this transaction does not close it will repair any
damage caused by Buyer.
3. CLOSING.
3.1 CLOSING DATE. The closing (the "Closing") of the sale and
purchase of the Shares shall take place at the offices of ▇▇▇▇▇▇ & Zeder, P.A.,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, at 5:00 P.M. local
time, on July 2, 1998. The date of the Closing is hereinafter sometimes referred
to as the "Closing Time."
3.2 DELIVERIES. At the Closing, subject to the provisions of
this Agreement, the Shareholder shall deliver to the Buyer, free and clear of
all Liens, except for the Liens of the NationsBank Loan and the ▇▇▇▇▇▇▇▇ Loans,
a stock transfer power(s) signed in blank (the original certificate for the
Shares is being held by NationsBank pursuant to the terms of the NationsBank
Loan), and with all applicable transfer taxes paid by Shareholder, in exchange
for the delivery by the Buyer to the Shareholder of a wire transfer in the
amount of the Closing Payment. The Management Agreement shall be executed and
delivered by Buyer and All Aboard Services, Inc. promptly following the Closing.
In addition, Shareholder shall cause to be delivered to Buyer all
original minute books, stock record books, books of account, corporate seals,
Contracts and other documents, instruments and papers belonging to the Company,
401K plans and plan documents, environmental reports, appraisals, notices from
welfare beneficiaries, actuarial reports, personnel files and records,
regulatory actions, original leases, deeds, surveys, patents, patent
applications, prints, schematics, drawings of original trains, and shall cause
full possession and control of all of the Assets and of all other things and
matters pertaining to the operation of the Business to be transferred and
delivered to the directors and officers elected to succeed the resigned
directors and officers of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The Shareholder
Parties jointly and severally represent and warrant to the Buyer, except as set
forth on the Disclosure Schedule attached hereto, or otherwise known to Buyer,
its officers, attorneys or accountants, that the following representations and
warranties are true and correct:
4.1 ORGANIZATION AND STANDING. Each of the Company, First
American and the Shareholder is a corporation duly organized, validly existing
and in good standing in the jurisdiction in which it is organized, having full
power and authority to carry on its business as it has been and is now being
conducted and the Company has full power and authority to own, lease and operate
the Assets. The Shareholder is a wholly-owned subsidiary of First American and
the Company is a wholly-owned subsidiary of Shareholder. The Company has no
subsidiaries and no stock or other equity or ownership interest (whether
controlling or not) in any corporation, association, partnership, joint venture
or other entity.
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4.2 CAPITALIZATION AND SHARE OWNERSHIP. The Company's
authorized capital stock consists of 500,000 shares of Common Stock. There are
100,000 shares of the Company's Common Stock presently issued and outstanding
(previously defined as the "Shares"), all of which Shares are owned by the
Shareholder, and which will be free and clear of any Liens, except for the liens
of NationsBank Loan and the ▇▇▇▇▇▇▇▇ Loan. All of the Shares have been duly
authorized and validly issued, are fully paid and nonassessable, were not issued
in violation of the terms of any Contract binding upon the Company, the
Shareholder or First American, and were issued in compliance with all applicable
charter documents of the Company, the Shareholder, and First American and in
compliance with and all applicable federal and state securities or "blue sky"
laws and regulations. No equity securities of the Company, other than the
Shares, are issued or outstanding. There are, and have been, no preemptive
option or conversion rights with respect to the Shares. There are: (a) no
existing Contracts, subscriptions, options, warrants, calls, commitments or
rights of any character granting to any person any right or power to purchase or
otherwise acquire any capital shares or other securities or equity interest in
or of the Company or from the Company itself, whether or not presently issued or
outstanding, from any shareholder of the Company, at any time, or upon the
happening of any stated event; and (b) no Contracts, subscriptions, options,
warrants, calls, commitments or rights to purchase or otherwise acquire from any
Shareholder of the Company any such convertible or exchangeable securities.
4.3 AUTHORITY AND BINDING EFFECT. The Shareholder and First
American each has the full power and authority to execute, deliver and perform
this Agreement and each of the Shareholder and First American have taken all
actions necessary to secure all approvals required in connection therewith. The
authorization, execution and delivery of this Agreement and the consummation of
the transactions herein contemplated will not contravene or violate the Articles
of Incorporation or By-Laws of the Company, the Shareholder or First American.
This Agreement constitutes the legal, valid and binding obligation of the
Shareholder Parties, enforceable against each of them in accordance with its
terms.
4.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except with respect
to approval by NationsBank and ▇▇▇▇▇▇▇▇, to the best of Shareholder Parties'
Knowledge, neither the execution and delivery of this Agreement by the
Shareholder Parties nor the consummation of the transactions contemplated hereby
will contravene or violate any Regulation or Court Order which is applicable to
the Company or the Shareholder Parties, or will result in a Default under, or
require the consent or approval of any party to, any Contract or License
relating to the Business or the Assets or to or by which the Company or the
Shareholder Parties is a party or otherwise bound or affected, or require the
Company, Buyer or the Shareholder Parties to notify or obtain any License from
any federal, state, local or other court or governmental agency or body or from
any other regulatory authority.
4.5 RESTRICTIONS. Neither the Company, nor any Shareholder
Party is a party to any Contract or subject to any restriction or any Court
Order or Regulation which materially and adversely affects the Company, the
Assets or the Business or affects or restricts the ability of the Company or any
Shareholder Party to consummate the Acquisition.
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4.6 THIRD-PARTY OPTIONS. There are no existing Contracts,
options, commitments or rights with, to or in any third party to acquire the
Company, any of the Assets or any interest therein or in the Business.
4.7 FINANCIAL STATEMENTS. The Company and the Shareholder have
delivered to the Buyer (1) the Company's audited year-end balance sheets at
December 31, 1997, (2) its related audited statements of income and cash flows
for the fiscal years then ended, and (3) all related notes and schedules, each
of which have been prepared by ▇▇▇▇▇▇▇▇ & Company. All Liabilities of the
Company at December 31, 1997, required to be reflected or reserved for by GAAP
are fully reflected or reserved for in the Company's consolidated balance sheet
at December 31, 1997, prepared by ▇▇▇▇▇▇▇▇ & Company (the "Latest Year-End
Balance Sheet"). The Company and the Shareholder have also delivered to the
Buyer a copy of the unaudited balance sheet of the Company at March 31, 1998,
and the related unaudited statements of income and cash flows for the period
from the Latest Year-End Balance Sheet Date to March 31, 1998, prepared by
▇▇▇▇▇▇▇▇ & Company (the "Interim Financial Statements"). March 31, 1998, is
referred to as the "Interim Balance Sheet Date" in other parts of this
Agreement. All Liabilities of the Company as of the Interim Balance Sheet Date
required to be reflected or reserved for by GAAP are fully reflected or reserved
for in the Company's consolidated balance sheet prepared by ▇▇▇▇▇▇▇▇ & Company
at the Interim Balance Sheet Date (the "Interim Balance Sheet"). All of the
financial statements prepared by ▇▇▇▇▇▇▇▇ & Company referred to in this Section
4.7 were prepared in accordance with GAAP and fairly present the financial
position and results of operations of the Company at the dates and for the
periods covered and include all adjustments that are necessary for a fair
presentation of the information shown.
4.8 BOOKS OF ACCOUNT; RETURNS AND REPORTS; TAXES. The books of
account of the Company fairly reflect, in accordance with GAAP, (1) all
transactions relating to the Company and (2) all items of income and expense,
assets and liabilities and accruals relating to the Company. The Company has not
engaged in any transaction, maintained any bank account or used any corporate
funds except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the Company. The
Company has duly filed all federal, state and local tax reports and returns and
all other reports and returns required to be filed by it pursuant to any
Regulation. The Company has duly made all deposits required by law to be made
with respect to employees' withholding taxes. The Company has duly paid or
accrued on its books of account all taxes, duties and charges (including
penalties and interest thereon) payable by it, and the amounts established as
provisions for taxes on the Latest Year-End Balance Sheet and the Interim
Balance Sheet are sufficient for the payment of all taxes (including penalties
and interest thereon) due as a result of activities which occurred during
periods covered by the Latest Year-End Balance Sheet and the Interim Balance
Sheet, respectively. The Company has not received any notice of assessment or
deficiency or proposed assessment from or by the IRS or any other taxing
authority in connection with its tax returns or reports and there is no pending
tax examination of or tax claim asserted against the Company or any of the
Assets. There is no tax lien on any of the Assets except for liens for real
estate taxes not yet due and payable. All federal income tax returns filed by
the Company have been audited and/or settled through 1996, and the Company has
obtained an extension of time to file its 1997 tax returns. No agreement for a
waiver of the statute of limitations for the assessment of any deficiency or
adjustment for any year is in effect. True and correct copies of all federal and
state
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income tax returns filed by the Company for 1996 have been delivered to Buyer
and, further, any tax liability assessed against the Company thereunder or for
subsequent periods up to and including the Closing Date is or will be a
liability of the Shareholder, and any cost or expense related to the preparation
and filing of any tax returns covering such period, is or will be a liability of
the Shareholder and the Shareholder Parties shall indemnify the Buyer from such
liability.
4.9 UNDISCLOSED LIABILITIES. The Company does not have any
Liabilities except for:
(a) those Liabilities adequately and specifically set
forth or reserved for on the Interim Balance Sheet and not heretofore paid or
discharged;
(b) those Liabilities arising in the ordinary course of
its business consistent with past practice under any Contract specifically
disclosed on the Disclosure Schedule (or not required to be disclosed because of
the term or amount involved); and
(c) those Liabilities incurred, consistent with past
business practice in the ordinary course of its business since the Interim
Balance Sheet Date and not heretofore paid or discharged.
4.10 ACCOUNTS RECEIVABLE. All accounts receivable as set forth
on the Interim Balance Sheet or arising since the Interim Balance Sheet Date (1)
have arisen only in the ordinary course of business consistent with past
practice for goods sold and delivered or services performed and (2) are
collectible in full at the recorded amounts thereof (free of any, and subject to
no, defenses, setoffs, counterclaims, or costs of collection) in the ordinary
course of business (without resort to Litigation or assignment to a collection
agency), but in no event later than 90 days after the Closing Date, net of any
allowance for doubtful accounts reflected in the Interim Balance Sheet.
4.11 INVENTORY. The inventory as set forth on the Interim
Balance Sheet or arising since the Interim Balance Sheet Date was acquired and
has been maintained in accordance with the regular business practices of the
Company, consists of new and used, and unused items of a quality and quantity
usable or saleable in the ordinary course of business of the Company consistent
with past practice, and is valued at reasonable amounts based on the ordinary
course of business of the Company within the past six months at prices equal to
the lower of cost or market value on a first-in-first-out basis. To the best of
the Company's Knowledge, none of such inventory is obsolete, unusable, slow
moving, damaged or unsalable in the ordinary course of the Company's business
consistent with past practice.
4.12 TITLE TO ASSETS. Except as set forth on the Disclosure
Schedule, the Company owns outright and has good and marketable title to all of
the Assets, including without limitation the assets and properties set forth on
the Interim Balance Sheet (except for such as may have been disposed of in the
ordinary course of business since the Interim Balance Sheet Date), free and
clear of all Liens except Permitted Liens, and the liens of the NationsBank Loan
and the ▇▇▇▇▇▇▇▇ Loans.
11
4.13 ALL TANGIBLE ASSETS. The Disclosure Schedule sets forth
accurate lists and summary descriptions of all tangible Assets where the value
of an individual item exceeds $500 or where an aggregate of similar items
exceeds $500, and of all leases, Licenses and other Contracts to which the
Company is a party or is otherwise bound which relate in whole or in part to
such Assets. In the Disclosure Schedule, such Assets listed have been grouped by
type and assigned location. The Assets listed on the Disclosure Schedule
constitute substantially all of the tangible assets used in or necessary to the
conduct of the Business.
4.14 CONDITION OF ASSETS. All tangible assets and properties
which are part of the Assets and presently used and/or necessary to conduct the
Business are in good operating condition and repair subject to normal wear, and
are usable in the ordinary course of the Business consistent with past practice
and, to the best of the Company's Knowledge, conform in all material respects to
all applicable Regulations relating to their construction, use and operation.
There are no developments materially affecting any such Asset which might
curtail the present or future use thereof for the purpose for which it was
acquired. Except pursuant to leases described on the Disclosure Schedule, no
person other than the Company owns any vehicles, equipment or other tangible
Assets situated on the facilities used by the Company in the Business (other
than immaterial items of personal property owned by the Company's employees) or
necessary to the operation of the Business.
4.15 REAL PROPERTY.
(a) TITLE. The Company owns outright, and has good and
marketable title to, all of the Real Property, free and clear of all Liens,
except the defects, Liens, adverse claims and other matters affecting the
Company's title to or possession of the Real Property, expressly set forth in
Schedule B to Title Insurance Policy No. J-730967, dated March 19, 1997, issued
by First American Title Insurance Company (the "Title Policy") and the survey
prepared by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, dated January 7, 1998, which will be delivered
separately to Buyer.
(b) OPERATION OF RAILROAD. The Company owns all right,
title and interest in the Real Property and has all permits, including, without
limitation, the permit necessary to operate through the San ▇▇▇▇ National
Forest, necessary to operate the Railroad.
(c) ZONING. To the best of the Company's Knowledge, there
are no existing violations of zoning regulations.
(d) UTILITY SERVICES. To the best of the Company's
Knowledge, the water, electric, gas and sewer utility services and the septic
tank and storm drainage facilities currently available to the Real Property are
adequate for the present use of the Real Property by the Company in conducting
the Business, and there is no condition which will result in the termination of
the present access from the Real Property to such utility services and other
facilities.
(e) ACCESS. To the best of the Company's Knowledge: (i)
the Company has obtained all Licenses and rights-of-way, including
proof-of-dedication, over the Real Property
12
or from private parties, necessary to ensure vehicular and pedestrian ingress
and egress to and from the Real Property and, (ii) there are no restrictions on
entrance to or exit from the Real Property to adjacent public streets and no
conditions which will result in the termination of the present access from the
Real Property to existing highways and roads.
(f) ASSESSMENTS OR HAZARDS. The Company has received no
written notices, from any governmental body that the assessed value of the Real
Property has been determined to be greater than that upon which county, township
or school tax was paid for the 1996 tax year applicable to each such tax, or
from any insurance carrier of the Company of fire hazards with respect to the
Real Property.
(g) EMINENT DOMAIN. The Company has received no notices,
oral or written, and has no reason to believe, that any governmental body having
jurisdiction over the Real Property intends to exercise the power of eminent
domain or a similar power with respect to all or any part of the Real Property.
(h) NO VIOLATIONS. The Company has received no notices,
oral or written, from any governmental body, and has no reason to believe, that
the Real Property or any improvements erected or situate thereon, or the uses
conducted thereon or therein, violate any Regulations of any governmental body
having jurisdiction over the Real Property.
(i) IMPROVEMENTS. The improvements located on the Real
Property are in good condition and are structurally sound, and all mechanical
and other systems located therein and presently used in the Business are in good
operating condition, subject to normal wear, and no condition exists requiring
material repairs, alterations or corrections.
(j) ENVIRONMENTAL MATTERS. No Hazardous Substances or
materials subject to governmental regulation have been disposed of or otherwise
come to be located upon or beneath the Real Property. Except as provided in the
Disclosure Schedules and to the best of the Company's Knowledge, the Real
Property has not been investigated by any governmental environmental agency,
Board of Health or the public media for, and the Company has received no inquiry
from any governmental environmental agency, Board of Health or the public media
with respect to, possible storage or disposal of any such Hazardous Substances
or any such materials subject to regulation by the Nuclear Regulatory
Commission.
4.16 CONTRACTS.
(a) The Disclosure Schedule sets forth complete and
accurate lists or descriptions of:
(1) all Employee Benefit Plans; and
13
(2) all consents or approvals required under any
Contracts that are necessary for the Shareholder
to complete the Acquisition or to avoid a Default
under such Contracts arising from the Acquisition.
(b) Except as set forth on the Disclosure Schedule, none
of the Assets is leased by the Company from any third party, whether affiliated
or unaffiliated with the Company.
(c) Except as set forth on the Disclosure Schedule, the
Company is not a party to any:
(1) Contract with any present or former employee or
consultant;
(2) Contract for the future purchase of, or payment
for, supplies or products or services;
(3) Contract to sell or supply products or to perform
services;
(4) Representative or sales agency contract;
(5) Contract limiting or restraining it from engaging
or competing in any lines of business with any
person, firm, corporation or other entity;
(6) license, franchise, distributorship or other
agreement, including those which relate in whole
or in part to any ideas, technical assistance or
other know-how of or used by the Company; or
(7) material Contract not otherwise disclosed herein.
(d) All of the Contracts (including all customer
Contracts) to which the Company is a party or by which it or any of the Assets
is bound or affected are valid, binding and enforceable in accordance with their
terms. The Company has fulfilled, or taken all action necessary to enable it to
fulfill when due, all of its obligations under each of such Contracts. All
parties to such Contracts have complied in all material respects with the
provisions thereof, no party is in Default thereunder and no notice of any claim
of Default has been given to the Company. There are no provisions of, or
developments materially affecting, any such Contract which might prevent the
Company from realizing the benefits thereof whether before or after the
completion of the Acquisition. With respect to any of such Contracts that are
leases, the Company has not received any notice of cancellation or termination
under any option or right reserved to the lessor, or any notice of Default,
thereunder.
14
4.17 EMPLOYEES. The Disclosure Schedule sets forth the names
and current annual salary rates or current hourly wages of all present employees
of the Company, together with the average number of hours worked per week, the
date of the last salary increase, the date of commencement of employment of each
employee with the Company, or its predecessor, and a summary of salary, bonuses
and other compensation, if any, paid or payable to each of such persons for or
in respect of that portion of the 1997 calendar year ending on the Interim
Balance Sheet Date. The Disclosure Schedule also sets forth the earnings for
each of such employees as reflected on Form W-2 for the 1997 calendar year.
4.18 LICENSES. The Disclosure Schedule sets forth a complete
list of all Licenses used in the operation of the Business or otherwise held by
the Company. The Company owns, possesses or lawfully uses in the operation of
its Business all Licenses which are necessary to conduct the Business as now or
previously conducted or to the ownership of the Assets, free and clear of all
Liens. The Company is not in Default, nor has it received any notice of any
claim of Default, with respect to any such License. Except as otherwise governed
by law, all such Licenses are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification procedures
or to pay any amounts other than routine and nominal filing fees and will not be
adversely affected by the completion of the Acquisition. To the best of the
Company's Knowledge, no present or former shareholder, director, officer or
employee of the Company or any affiliates of the Company, owns or has any
material proprietary, financial or other interest (direct or indirect) in any
License which the Company owns, possesses or uses to conduct its business.
4.19 INTELLECTUAL PROPERTY.
(a) To the best of the Company's Knowledge, no employee
of the Company is, or is now expected to be, in default under any term of any
employment contract, agreement or arrangement relating to any Intellectual
Property or noncompetition arrangement, or any other Contract or any restrictive
covenant relating to the right of any such officer or employee to be employed by
the Company because of the nature of the business conducted or to be conducted
by the Company or relating to the use of any Intellectual Property of others,
and the continued employment of the Company's officers and employees does not
subject the Company to any liability resulting from such a violation. To the
best of the Company's knowledge, the Intellectual Property of the Company was
developed entirely by its employees during the time they were employees only of
the Company and such Intellectual Property does not include any inventions of
the employees made prior to the time such employees became employees of the
Company nor any Intellectual Property of any previous employers of such
employees.
(b) The Company owns or has a valid right to use the
Intellectual Property being used by the Company to conduct the Business; and the
conduct of the Business as now operated does not, and to the best of the
Company's Knowledge, will not conflict with valid Intellectual Property rights
of others. The Company has not received any communication alleging that the
Company has violated or, by conducting its business as proposed would violate
any of the Intellectual Property rights of any other person or entity. The
Company does not have any obligation to compensate any person for the use of any
such Intellectual Property rights nor has the Company
15
granted to any person any license, option or other rights to use in any manner
any of the Intellectual Property of the Company, whether requiring the payment
of royalties or not.
(c) All Patents, Copyrights, Trademarks and computer
software used in the Business or owned by the Company are listed in the
Disclosure Schedule.
(d) The computer software of the Company included in the
Intellectual Property functions sufficiently for current operation of the
Business, and is the only software used by the Company in the conduct of its
business.
4.20 COMPLIANCE WITH REGULATIONS AND COURT ORDERS. The Company
is not in violation of any Court Order or Regulation, and the Assets have not
been used or operated by the Company in violation of any Regulation or Court
Order. All Court Orders to which the Company is a party or subject are described
in the Disclosure Schedule. The Company has made all filings or notifications
required to be made by it under any Regulations applicable to the Company, the
Business or the Assets. Neither the Company, nor, to the best of the Company's
Knowledge, any officer, employee or agent of, nor any consultant to, the
Company, has unlawfully offered, paid, or agreed to pay, directly or indirectly,
any money or anything of value to, or for the benefit of, any individual who is
or was a candidate for public office, or an official or employee of any
governmental or regulatory body or authority or an officer or employee of any
client, customer or supplier of the Company.
4.21 CLAIMS. Except as listed in the Disclosure Schedule,
there is no Litigation pending or threatened against the Company, the Business
or the Assets. To the best of the Company's Knowledge, no claim has been
asserted and no event has occurred that might result in Litigation against the
Company, the Business or the Assets. To the best of the Company's Knowledge,
there is no reasonable basis for any such claim.
4.22 INSURANCE. The Company will provide Buyer with complete
copies (including endorsements) of all applicable insurance policies. The
Disclosure Schedule contains a true and complete description of the insurance
coverage applicable to the Company, the Business and the Assets for the past
year, including amounts and lines of coverage, loss experience history by line
of coverage for the past year, and a description of all claims in excess of
$5,000 for the past year. All insurance coverage applicable to the Company, the
Business and/or the Assets is in full force and effect, is valid, binding and
enforceable in accordance with its terms against the respective insurers,
insures the Company in reasonably sufficient amounts against all risks usually
insured against by persons operating similar businesses or properties in the
localities where such businesses or properties are located and has been issued
by insurers of recognized responsibility. There is no Default under any such
coverage nor has there been any failure to give notice or present any claim
under any such coverage in a due and timely fashion. There are no outstanding
unpaid premiums except in the ordinary course of business and no notice of
cancellation or nonrenewal of any such coverage has been received. To the best
of the Company's Knowledge, there are no provisions in such insurance policies
for retroactive or retrospective premium adjustments. Neither the Company nor
the Shareholder knows or has reason to know of the occurrence of any event which
reasonably might
16
form the basis of any claim against the Company, the Business or the Assets or
which might materially increase the insurance premiums payable for any such
coverage.
4.23 LABOR MATTERS. There are no collective bargaining
agreements between the Company and any labor union or other representative of
employees. No strike, slowdown, picketing or work stoppage by any union or other
group of employees against the Company, or the Assets wherever located, and no
secondary boycott with respect to the Company's products or services, lockout by
the Company of any of its employees or any other labor trouble or other
occurrence, event or condition of a similar character, has occurred or been
threatened.
4.24 PENSION PLANS; EMPLOYEE BENEFIT PLANS.
(a) DISCLOSURE. Except as set forth on the Disclosure
Schedule, there are no Employee Benefit Plans.
(b) DISCLOSED PLANS. With respect to any such Employee
Benefit Plans disclosed, the Company has made all contributions thereto which
have accrued on its financial statements and other books and records as a
liability and the Company has delivered to the Buyer copies of (1) all documents
governing such Plans, and all amendments thereto, (2) all reports filed by the
Company or Plan officials with respect to such Plans with the United States
Department of Labor, the IRS and any other federal or state regulatory agency,
(3) all summary plan descriptions, notices and other reporting and disclosure
material furnished to participants in any of such Plans, (4) all actuarial,
accounting and financial reports prepared with respect to any of such Plans, and
(5) all currently effective IRS ruling or determination letters on any of such
Plans; however, the Company has not made a contribution to the Durango &
Silverton Narrow Gauge Railroad Company Pension Plan for the current plan year
that began January 1, 1997. To the extent required contributions, along with
accrued interest and penalties thereon are payable in connection with such plan,
such amounts shall be the paid by the Shareholder.
(c) COMPLIANCE WITH LAW. The provisions of each Employee
Benefit Plan and the administration of each Employee Benefit Plan are and have
been in all material respects in compliance with all applicable Regulations, and
neither the Company nor the Shareholder has received or is aware of any claim or
notice alleging to the contrary with respect to any Employee Benefit Plan, nor
do any facts or circumstances exist which could give rise to any such claim.
(d) TAX OR CIVIL LIABILITY. Neither the Company nor any
Shareholder Party has participated in any conduct, and neither the Company nor
any Shareholder Party will participate in any conduct to the Closing Date or
thereafter, that could result in the imposition upon the Company or the Buyer of
either excise tax under Section 4975 (relating to prohibited transactions) of
the Code, or civil liability under Section 502(i) of ERISA (also relating to
prohibited transactions).
17
(e) CLAIMS LIABILITY. There is no action, claim or demand
of any kind (other than routine claims for benefits) which has been brought or
threatened, against any Employee Benefit Plan or the assets thereof, or against
any fiduciary of any such Plan.
(f) FIDUCIARY APPOINTMENTS AND CONDUCT. There have not
occurred any circumstances by reason of which the Company, the Shareholder or
the Buyer may be liable for:
(1) Appointment by the Company of any person or
entity as a fiduciary with respect to any
Employee Benefit Plan where such person or entity
was legally disqualified from serving in such
capacity;
(2) Failure by the Company to monitor the performance
of its appointees as fiduciaries with respect to
any Employee Benefit Plan or failure of the
Company to timely replace any such fiduciary
whose performance failed to meet the standards
imposed by ERISA with respect to fiduciary
duties; or
(3) Action taken by a fiduciary with respect to any
Employee Benefit Plan upon the direction of, or
with the acquiescence of, the Company.
(g) MULTI-EMPLOYER PLANS. The Company does not maintain
or participate in, nor has it ever maintained or participated in, any "multi
employer plans" as defined in Section 3(37) of ERISA.
(h) CONTROLLED GROUPS. The Company is not presently or
potentially liable with respect to any employee benefit plan sponsored by any
entity which, together with the Company, is a member of a controlled group of
corporations within the meaning of Section 414(b) of the Code, a group of trades
or businesses under common control within the meaning of Section 4(c) of the
Code, or an affiliated service group within the meaning of Section 414(m) of the
Code, whether such plan is a single employer plan, a multiple employer plan or a
multi employer plan. Liability to which reference is made herein includes, but
is not limited to, liability for the under funding of such plan, whether or not
such plan is terminated; liability for unamortized funding deficiencies (whether
or not waived); liability to or on account of any multi employer plan under any
circumstances; penalties, late payment fees or taxes with respect to any plan or
the administration of any plan; or liability with respect to fiduciary conduct
in connection with any such plan.
(i) REPORTING AND DISCLOSURE. The Company has filed or
caused to be filed on a timely basis each and every return, report, statement,
notice, declaration and other documents required by any governmental agency with
respect to each Employee Benefit Plan; however, the Company has not filed the
IRS form 5500 for the Durango & Silverton Narrow Gauge Railroad Company Pension
Plan for the plan year that began January 1, 1997, or the PBGC Form 1
18
for that plan for that plan year. Buyer shall be obligated to pay any amounts
due, including, without limitation, penalties due related to the failure to file
such statements.
(j) PARTICIPANT AND BENEFICIARY NOTIFICATIONS. The
Company has delivered or caused to be delivered to every participant,
beneficiary and other party entitled to such material, all plan descriptions,
returns, reports, schedules, notices, statements and similar materials.
4.25 TRANSACTIONS WITH AFFILIATES. No shareholder or director
or officer of the Company or Shareholder Party, or any member of his or her
immediate family or any other of its, his or her affiliates, owns or has an
ownership interest in any corporation or other entity other than the Company or
such Shareholder Party of which such person is a shareholder, director or an
officer, or its affiliates or subsidiaries of such party, that is or was during
the last three years a party to, or in any property which is or was during the
last three years the subject of, Contracts, business arrangements or
relationships of any kind with the Company. No transaction between the Company
and the Shareholder or any other person or affiliate described in this Section
4.25 will continue after Closing except as disclosed on the Disclosure Schedule.
4.26 DELIVERY OF DOCUMENTS. The Company and the Shareholder
have delivered to the Buyer true, correct and complete copies of the Company's
charter documents and By-Laws and all written Contracts and other documents and
summaries of any material oral Contracts (including all amendments, supplements,
modifications or waivers currently in effect) described in this Agreement or in
the Disclosure Schedule.
4.27 NO MATERIAL ADVERSE DEVELOPMENTS. Since the Interim
Balance Sheet Date, there has been no actual or threatened change in the
Business, any event, condition or state of facts, that is or might be material
and adverse to the Company, the Business or the Assets.
4.28 MATERIAL TRANSACTIONS. Since the Interim Balance Sheet
Date, the Business has been operated in the substantially the same manner as it
was operated prior to such date.
4.29 HAZARDOUS WASTE. The Company does not generate,
transport, store, dispose of or treat solid wastes, or Hazardous Substances
within the meaning of any applicable Regulation in violation of Applicable Law.
The Company has provided to the Buyer true and correct copies of all permits,
filings and related correspondence with, to or from any environmental or safety
agency.
4.30 ADDITIONAL INFORMATION. The Disclosure Schedule contains
accurate lists and summary descriptions of the following:
(a) all accounts receivable of the Company reflected on
the Interim Balance Sheet, specifying in each case the account debtor and the
face amount of each receivable and reconciling the aggregate value of all
accounts receivable as of the Interim Balance Sheet Date to the amount of such
category set forth on the Interim Balance Sheet;
19
(b) all accounts payable and accrued expenses of the
Company reflected on the Interim Balance Sheet, specifying in each case the
payee, the face amount of each payable, the age of each payable regardless of
classification on the balance sheet account, any defenses, setoffs or
counterclaims that may exist with respect thereto, and reconciling the aggregate
value of all accounts payable as of the Interim Balance Sheet Date to the amount
of such category set forth on the Interim Balance Sheet;
(c) the names of all present officers and directors of
the Company;
(d) the names and addresses of every bank and other
financial institution in which the Company maintains an account (whether
checking, savings or otherwise), lock box or safe deposit box, and the account
numbers and names of persons having signing authority or other access thereto;
(e) the names of all persons authorized to borrow money
or incur or guarantee indebtedness on behalf of the Company; and
(f) the names of all persons holding powers of attorney
from the Company and a summary statement of the terms thereof.
4.31 CORPORATE RECORDS. The minute books of the Company are
current and contain correct and complete copies of all charter documents of the
Company, including all amendments thereto and restatements thereof, and, except
with respect to the period during which Buyer owned the Shares, contain all
minutes of meetings, resolutions and other actions and proceedings of its
shareholders and board of directors and all committees thereof, duly signed by
the Secretary or an Assistant Secretary, and the stock record book of the
Company is also current, correct and complete and reflects the issuance of all
of the Shares to the Shareholder.
4.32 LIMITED MANUFACTURING/PRODUCT WARRANTIES. The Company
does not manufacture and has not manufactured any product for sale, except in
the ordinary course of its business, and there are no warranties, express or
implied, written or oral, with respect to the products of the Business, and
there are no pending or threatened claims with respect to any such warranty, and
the Company has no liability with respect to any such warranty, whether known or
unknown, absolute, accrued, contingent or otherwise, and whether due or to
become due.
4.33 NO GOVERNMENTAL APPROVALS REQUIRED. The transactions
contemplated by this Agreement will not require the approval of the Interstate
Commerce Commission.
4.34 PARTICULATE AIR EMISSIONS. The amount of particulate air
emissions and volatile organic compounds generated by the Company do not violate
Colorado clean air standards and do not require that the Company obtain a permit
to generate such emissions.
20
4.35 ON THE JOB CLAIMS. There are no pending or contingent
employee on-the-job injury claims regardless of the basis under which such a
claim may be asserted.
4.36 RAILROAD CARS. The purchase by Buyer of the Shares will
not trigger the repurchase option for the Cinco Animas and Nomad railroad cars
contained in that certain Agreement for Sale of Railroad Cars dated August 4,
1982 between the Cinco Animas Corporation and the Company.
4.37 FULL DISCLOSURE. There are and will be no materially
misleading misstatements in any of the representations and warranties made by
any Shareholder Party in this Agreement or in any of the certificates and
instruments delivered or to be delivered by the Company or any Shareholder Party
pursuant to this Agreement, including (without limitation) in the Disclosure
Schedule, and no Shareholder Party has omitted to state any fact necessary to
make such representations and warranties not materially misleading.
4.38 ROADBED AND BRIDGE. To the best of Company's Knowledge,
nothing has come to the attention of the Company that would materially adversely
impact the findings of the inspection report of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, dated May 22,
1998, regarding the structural soundness and sufficiency of the railroad bed and
bridges.
5. INTENTIONALLY OMITTED.
6. INTENTIONALLY OMITTED.
7. SURVIVAL OF REPRESENTATION AND WARRANTIES. All of the
representations, warranties, covenants and agreements made by each party in this
Agreement or in any attachment, exhibit, the Disclosure Schedule, certificate,
document or list delivered by any such party pursuant hereto or in connection
with the Acquisition shall survive the Closing and each party hereto shall be
entitled to rely upon the representations and warranties of the other party set
forth in this Agreement for a period of two (2) years following Closing.
8. INDEMNIFICATION.
8.1 INDEMNIFICATION OBLIGATIONS.
(a) The Shareholder Parties, jointly and severally (an
"indemnifying party") shall indemnify and hold harmless the Buyer and the
Company, and the Buyer (another "indemnifying party") shall indemnify and hold
harmless the Shareholder Parties; and each person who "controls" the Shareholder
within the meaning of the Securities Act of 1933, as amended, and each officer
and director of the Shareholder and any such controlling person from, against
and in respect of any and all damages, losses, deficiencies, liabilities, costs,
claims and expenses resulting from, relating to or arising out of any (1)
misrepresentation, (2) breach of warranty or (3) non-fulfillment of any
agreement or covenant on the part of such indemnifying party or parties
hereunder, except
21
Shareholder shall have no obligation to indemnify Buyer against and in respect
of any such matters arising during the period that Buyer owned the Company,
which matters shall remain the obligation of the Buyer.
(b) Notwithstanding anything herein to the contrary, the
Shareholder Parties shall also indemnify and hold harmless the Buyer and the
Company, at all times after the date hereof from and against:
(1) any claim by any former shareholder
of the Company involving the
transactions contemplated hereby or
any prior transaction involving any
shares of capital stock of the
Company or any predecessor
corporation;
(2) without limiting the generality of
anything contained in this Section
8.1, any and all damages, losses,
deficiencies, liabilities, costs and
expenses of, or claims against, the
Buyer, or the Company, resulting
from, relating to or arising out of
the business, operations or assets
of the Company prior to the Closing
Date or the actions or omissions of
the Company's officers, directors,
shareholders, employees or agents
arising prior to the Closing Date
(including, without limitation, any
liability relating to, and any claim
which arises out of or is based
upon, negligence, strict liability,
or any express or implied
representation, warranty, agreement
or guarantee made by or on behalf of
the Company, or alleged to have been
made by or on behalf of the Company,
or which is imposed or asserted to
be imposed on the Company by
operation of law, in connection with
any product designed, used, rented,
sold, manufactured, shipped or
installed by or on behalf of the
Company, or for any service
performed by or on behalf of the
Company, prior to the Closing Date
and irrespective of the date that
any claim, suit or other cause of
action related to any of the
foregoing is filed or otherwise
instituted against the Company;
provided, however, that the
foregoing shall not apply to the
Liabilities of the Company disclosed
on the Disclosure Schedule or
referred to in Section 4.9(a)
through (c)); and
(3) any and all costs, judgments,
claims, actions at law or in equity,
interest charges and reasonable
attorneys' fees with respect to any
cause of action or proceeding, by
any participant or dependent or
beneficiary of any participant,
arising out of or by reason of the
sponsorship by the Company
22
of any Employee Benefit Plan or
Pension Plan prior to the Closing
Date.
(c) The maximum aggregate liability of the Shareholder
Parties under subsections (a) and (b) above shall be $2,000,000.
(d) Notwithstanding anything herein to the contrary,
Buyer shall indemnify and hold harmless the Shareholder Parties at all times
after the Closing Date from and against:
(1) any and all damages, losses,
deficiencies, liabilities, costs and
expenses of, or claims against, the
Shareholder, resulting from,
relating to or arising out of the
business, operations or assets of
the Company after the Closing Date
or the actions or omissions
occurring after the Closing Date of
the Company's officers, directors,
shareholders, employees or agents;
and
(2) any and all costs, judgments,
claims, actions at law or in equity,
interest charges and reasonable
attorneys' fees with respect to any
cause of action or proceeding, by
any participant or dependent or
beneficiary of any participant,
arising out of or by reason of the
sponsorship by the Company of any
Employee Benefit Plan or Pension
Plan after the Closing Date.
(e) Each indemnifying party or parties hereto will
indemnify and hold harmless the indemnified party or parties hereto from,
against and in respect of any and all actions, suits, proceedings, demands,
assessments, judgments, costs (including attorneys' fees at the arbitration,
pre-trial, trial and appellate levels) and legal and other expenses incident to
any of the foregoing or to the enforcement of this Section 8.
8.2 WAIVER. Each Shareholder Party irrevocably waives and
agrees that neither of the Shareholder Parties nor any of them individually,
will make any claim against the Company of any kind or character, whether by way
of subrogation, indemnity, contribution, breach of contract, or any other theory
regarding any claim made by the Buyer, the Company or any other person under
this Section 8, or otherwise, and each Shareholder Party irrevocably releases
and discharges the Company from any such claim.
8.3 PAYMENT.
(a) The Shareholder Parties shall pay to the Buyer the
amount of any indemnification obligation under this Agreement within five (5)
Business Days following the Shareholder Parties' receipt of notice from the
Buyer stating the amount of the required indemnification payment (an
"Indemnification Notice").
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(b) If there should be a dispute as to the amount or
manner of determination of any indemnification obligation owed under this
Agreement, the Shareholder Parties shall nevertheless pay when due such portion,
if any, of the obligation as shall not be subject to dispute. The parties shall
work promptly and in good faith to seek a resolution of their dispute over the
indemnification obligation as quickly as possible; provided, however, that
either party may at any time pursue any remedy available to it at law to resolve
that dispute. The difference, if any, between the amount of the obligation
ultimately determined as properly payable under this Agreement and the portion,
if any, theretofore paid shall bear interest at the rate of 15 percent per
annum.
(c) If all or part of the indemnification obligation
under this Agreement is not paid on or before the fifth (5th) Business Day
following Shareholder Parties' receipt of the Indemnification Notice, the amount
of the required indemnification shall bear interest at the Interest Rate from
the date of receipt of the Indemnification Notice.
8.4 SERVICE OF PROCESS, CONSENT TO JURISDICTION, ETC.
The Shareholder Parties irrevocably and unconditionally
(a) agree that any suit, action or other legal proceeding arising out of this
Agreement may be brought in the United States District Court for Florida or if
such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in Dade County, Florida, (b) consent to the
jurisdiction of any such court in any suit, action or proceeding, and (c) waive
any objection which any Shareholder Party may have to the laying of venue of any
such suit, action or proceeding in any such court.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. Subject to waiver
as set forth in Section 11.3, the obligations of the Buyer under this Agreement
are subject to the fulfillment prior to or at the Closing of each of the
following conditions:
9.1 REPRESENTATIONS TRUE AT CLOSING. The representations and
warranties of the Shareholder set forth in Section 4 shall be true and correct
on the Closing Date with the same effect as if made at that time.
9.2 PERFORMANCE BY THE SHAREHOLDER. The Shareholder shall have
performed and satisfied all agreements and conditions that they are required by
this Agreement to perform or satisfy prior to or on the Closing Date.
9.3 CERTIFICATE(S). The Buyer shall have received
certificate(s) from the Shareholder dated the Closing Date certifying in such
detail as the Buyer may reasonably request that each of the conditions described
in Sections 9.1 and 9.2 has been fulfilled.
9.4 FORM AND CONTENT OF DOCUMENTS. The form and content of all
documents, certificates and other instruments to be delivered by the Shareholder
Parties shall be reasonably satisfactory to the Buyer.
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9.5 OPINION OF COUNSEL. Within 10 Business Days following
closing, the Buyer shall have received the written opinion dated as of the
Closing Date, counsel for the Shareholder, in form and substance reasonably
satisfactory to both said firm and the Buyer.
9.6 LITIGATION AND OTHER MATTERS AFFECTING CLOSING. No Court
Order shall have been issued or entered which would be violated by the
completion of the Acquisition. No person who or which is not a party to this
Agreement shall have commenced or threatened to commence any Litigation seeking
to restrain or prohibit, or to obtain substantial damages in connection with,
this Agreement or the transactions contemplated by this Agreement, no Litigation
shall be pending against the Company.
9.7 INTENTIONALLY OMITTED.
9.8 REGULATORY COMPLIANCE AND APPROVALS. The Buyer shall be
satisfied that all approvals required under any Regulations to carry out the
Acquisition shall have been obtained and that the parties shall have complied
with all Regulations applicable to the Acquisition.
9.9 CONSENTS. The Shareholder or the Company shall have
delivered to the Buyer all consents required to be obtained in connection with
the Acquisition in order to avoid a Default under any Contract (including any
customer Contract) to or by which the Company is a party or may be bound. The
Company shall be free from burdensome restrictions and conditions not applicable
to the Company prior to the date of this Agreement.
9.10 CONSENTS AND APPROVALS. The Shareholder and the Company
shall have obtained all consents and approvals necessary to complete the
Acquisition and related transactions, or shall have waived such consents and
approvals.
9.11 LICENSES. All Licenses applicable to the Company and the
Business shall be in full force and effect and the consummation of the
transactions contemplated hereunder shall not constitute a default thereunder or
affect the operation of the Company or the Business.
9.12 APPROVAL OF NATIONSBANK. NationsBank shall have approved
the transfer of the Shares and a fairness opinion shall have been issued in
connection with the consummation of this transaction, or the parties shall have
waived such approval.
9.13 ANCILLARY DOCUMENTS. Each entity other than the Buyer
which is a party to any of the Ancillary Documents shall have executed and
delivered such of the Ancillary Documents as it is a party thereto.
If the conditions precedent to the obligations of the Buyer to
close have not been satisfied on or before the Closing Date, Buyer may either
(i) waive such condition(s) precedent and proceed to close or (ii) terminate the
Agreement.
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDER. Subject to
waiver as set forth in Section 11.3, the obligations of the Shareholder under
this Agreement are subject to the fulfillment prior to or at the Closing of each
of the following conditions:
10.1 PERFORMANCE BY THE BUYER. The Buyer shall have performed and
satisfied all agreements and conditions which it is required by this Agreement
to perform or satisfy prior to or on the Closing Date.
10.2 INTENTIONALLY OMITTED.
10.3 FORM AND CONTENT OF DOCUMENTS. The form and content of all
documents, certificates and other instruments to be delivered by the Buyer shall
be reasonably satisfactory to the Shareholder.
10.4 OPINION OF COUNSEL. Intentionally omitted.
10.5 LITIGATION AFFECTING CLOSING. No Court Order shall have been
issued or entered which would be violated by the completion of the Acquisition.
No person who or which is not a party to this Agreement shall have commenced or
threatened to commence any Litigation seeking to restrain or prohibit, or to
obtain substantial damages in connection with, this Agreement or the
transactions contemplated by this Agreement.
10.6 REGULATORY COMPLIANCE AND APPROVAL. The Shareholder shall be
satisfied that all approvals required under any Regulations to carry out the
acquisition shall have been obtained and that the parties have complied with all
Regulations applicable to the Acquisition.
10.7 ANCILLARY DOCUMENTS. The Buyer and any other applicable person
or entity shall have executed and delivered each of the Ancillary Documents to
which it is a party.
11. MISCELLANEOUS.
11.1 BROKERS' AND FINDERS' FEES. The Shareholder Parties and the
Buyer each to the other represents and warrants that all negotiations relative
to this Agreement have been carried on by them directly without the intervention
of any person, firm, corporation or other entity who or which may be entitled to
any brokerage fee or other commission in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby, and each
of them shall indemnify and hold the other or any affiliate of them harmless
against any and all claims, losses, liabilities or expenses which may be
asserted against any of them as a result of any dealings, arrangements or
agreements by the indemnifying party with any such person, firm, corporation or
other entity.
26
11.2 ASSIGNMENT AND BINDING EFFECT. This Agreement may be assigned
by Buyer. Subject to the foregoing, all of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the heirs, executors, legal representatives, successors and assigns of the
Shareholder and by the successors and assigns of the Buyer.
11.3 WAIVER. Any term or provision of this Agreement may be waived
at any time by the party entitled to the benefit thereof by a written instrument
executed by such party.
11.4 NOTICES. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally, or by a
nationally recognized overnight courier service (e.g., Federal Express or United
Parcel Service) to the address set forth below (to the attention of the person
identified below), as follows:
If to Shareholder or First American: Destination Railways, Inc.
c/o First American Railways, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Buyer: American Heritage Railways, Inc.
c/o ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
First Reserve, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With required
copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇, P.A..
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
or to such other address as the addressee may have specified in a notice duly
given to the sender and to counsel as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date so delivered or faxed or, if mailed, three business
days after the date so mailed.
11.5 FLORIDA LAW TO GOVERN. This Agreement shall be governed by and
interpreted and enforced in accordance with the substantive laws of Florida.
27
11.6 NO BENEFIT TO OTHERS. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and the Company and their heirs, executors, legal
representatives, successors and assigns, and they shall not be construed as
conferring and are not intended to confer, any rights on any other persons.
11.7 CONTENTS OF AGREEMENT. This Agreement, together with any
documents referred to herein, sets forth the entire agreement of the parties
hereto with respect to the transactions contemplated hereby. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto,
and no claimed amendment, modification, termination or waiver shall be binding
unless in writing and signed by the party against whom such claimed amendment,
modification, termination or waiver is sought to be enforced.
11.8 SECTION HEADINGS AND GENDER. All section headings and the use
of a particular gender are for convenience only and shall in no way modify or
restrict any of the terms or provisions hereof. Any reference in this Agreement
to a Section, Exhibit or Disclosure Schedule shall be deemed to be a reference
to a Section, Exhibit or Disclosure Schedule of this Agreement unless the
context otherwise expressly requires.
11.9 DISCLOSURE SCHEDULES AND EXHIBITS. All attachments, Exhibits
and the Disclosure Schedule referred to herein are intended to be and hereby are
specifically made a part of this Agreement.
11.10 COOPERATION. Subject to the provisions hereof, the parties
hereto shall use their best efforts to take, or cause to be taken, such action,
to execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement.
11.11 SEVERABILITY. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.12 LITIGATION; PREVAILING PARTY. In the event that any party
hereto brings suit for any matter arising out of or in connection with a breach
of any of the terms or provisions of this Agreement, then the prevailing party
shall be entitled to recover from the non-prevailing party all reasonable court
costs and attorneys' fees and expenses incurred by the prevailing party in
connection with such litigation at the arbitration, pre-trail, trial and
appellate levels.
11.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which is an original and all of which together shall be
deemed to be one and the same instrument. This Agreement shall become binding
when one or more counterparts taken together
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shall have been executed and delivered by all of the parties. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
11.14 PUBLIC ANNOUNCEMENT. Shareholder and Buyer will agree to and
jointly prepare all press releases and public announcements relating to the
transaction under this Agreement.
11.15 PAYMENT OF EXPENSES. The Shareholder will pay all legal
accounting and other fees and expenses incurred with respect to the consummation
of the transactions contemplated hereby, except for Buyer's legal fees.
11.16 RIGHT OF FIRST REFUSAL. First American shall have the
right-of-first refusal to purchase the Shares. This right-of-first refusal shall
terminate three years after the Closing Date; provided, however such right shall
not apply to transfers by Buyer to his affiliates or transfers of less than 50%
in the aggregate of the outstanding shares of common stock of the Company. In
the event any third party offers to purchase the Shares, and Buyer desires to
accept that offer, then Buyer shall provide written notice to First American
stating the price and payment terms of such offer and First American shall have
thirty days from the date of its receipt of such notice to notify Buyer of its
desire to exercise its right of first refusal under this Section 11.16. In the
event First American fails to deliver notice within such 30-day period, First
American shall be deemed to have waived its right of first refusal hereunder. In
the event First American elects to exercise its right, the Buyer or his
successor shall enter into an agreement in substantially the same form as
proposed by the third party, and the sale pursuant to the right of first refusal
shall close on the first business day following the thirtieth day after the date
of the notice to Buyer of such election.
11.17 FURTHER ASSURANCES. The parties hereto agree to cooperate and
execute any additional documents necessary to accomplish the purposes of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
THE BUYER:
AMERICAN HERITAGE RAILWAYS, INC.
A FLORIDA CORPORATION
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, PRESIDENT
THE SHAREHOLDER:
DESTINATION RAILWAYS, INC.,
A FLORIDA CORPORATION
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
CHAIRMAN OF THE BOARD
FIRST AMERICAN RAILWAYS, INC.,
A NEVADA CORPORATION
SOLE SHAREHOLDER OF DESTINATION RAILWAYS, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, VICE PRESIDENT,
SECRETARY AND CHIEF FINANCIAL OFFICER
30