EXHIBIT 10.12
STOCK PURCHASE AGREEMENT
AMONG
▇▇▇▇ MOTOR FREIGHT LINE, INC.
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇
▇. ▇. ▇▇▇▇▇▇▇
AND
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ TRUST UNDER TRUST AGREEMENT DATED JANUARY 28, 1998
February 16, 2004
TABLE OF CONTENTS
1. Definitions....................................................................................... 1
2. Purchase and Sale of Company Shares............................................................... 8
(a) Purchase Price.............................................................................. 8
(b) Payment..................................................................................... 8
(c) The Closing................................................................................. 8
(d) Deliveries at the Closing................................................................... 8
3. Representations and Warranties Concerning the Transaction......................................... 8
(a) Representations and Warranties of the Sellers............................................... 8
(b) Representations and Warranties of the Buyer................................................. 9
4. Representations and Warranties Concerning the Company............................................. 10
(a) Organization, Qualification, and Corporate Power............................................ 11
(b) Capitalization.............................................................................. 11
(c) Noncontravention............................................................................ 11
(d) Brokers' Fees............................................................................... 12
(e) Title to Assets............................................................................. 12
(f) Subsidiaries................................................................................ 12
(g) Financial Statements........................................................................ 12
(h) Books and Records........................................................................... 12
(i) Events Subsequent to October 1, 2003........................................................ 13
(j) Undisclosed Liabilities..................................................................... 14
(k) Business Practices.......................................................................... 15
(l) Legal Compliance............................................................................ 15
(m) Tax Matters................................................................................. 15
(n) Real Property............................................................................... 17
(o) Intellectual Property....................................................................... 20
(p) Tangible Assets............................................................................. 22
(q) Inventory................................................................................... 22
(r) Contracts................................................................................... 22
(s) Notes and Accounts Receivable............................................................... 24
(t) Powers of Attorney.......................................................................... 24
(u) Insurance................................................................................... 24
(v) Litigation.................................................................................. 24
(w) Labor Matters............................................................................... 25
(x) Employee Benefits........................................................................... 25
(y) Guaranties.................................................................................. 28
(z) Environmental Matters....................................................................... 28
(aa) Certain Business Relationships With the Company............................................. 30
(bb) Contractors................................................................................. 30
(cc) Customer Relations.......................................................................... 30
(dd) Bank Accounts............................................................................... 31
(ee) No Additional Representations and Warranties................................................ 31
5. Post Closing Covenants............................................................................ 31
(a) General..................................................................................... 31
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(b) Litigation Support.......................................................................... 32
(c) Transition.................................................................................. 32
(d) Confidentiality............................................................................. 32
(e) Miscellaneous............................................................................... 32
(f) Payment of Indebtedness..................................................................... 34
6. Deliveries at Closing............................................................................. 34
(a) Sellers' Deliveries at Closing.............................................................. 34
(b) Buyer's Deliveries at Closing............................................................... 36
7. Remedies for Breaches of this Agreement........................................................... 36
(a) Survival of Representations and Warranties.................................................. 37
(b) Time Limitations............................................................................ 37
(c) Indemnification Provisions for Benefit of the Buyer......................................... 37
(d) Indemnification Provisions for Benefit of the Sellers....................................... 39
(e) Calculation of Adverse Consequences; Limitations on Indemnity Obligations................... 40
(f) Right to Set off; Escrow.................................................................... 42
(g) Matters Involving Third Parties............................................................. 42
(h) Other Indemnification Provisions............................................................ 44
8. Tax Matters....................................................................................... 44
(a) Tax Filings................................................................................. 44
(b) Section 338(h)(10) Election................................................................. 45
(c) Allocation of Purchase Price................................................................ 46
(d) S Corporation Status........................................................................ 46
(e) Cooperation on Tax Matters.................................................................. 46
(f) Tax Sharing Agreements...................................................................... 47
(g) Certain Taxes and Fees...................................................................... 47
9. Miscellaneous..................................................................................... 47
(a) Nature of Certain Obligations............................................................... 47
(b) Press Releases and Public Announcements..................................................... 47
(c) No Third-Party Beneficiaries................................................................ 48
(d) Entire Agreement............................................................................ 48
(e) Succession and Assignment................................................................... 48
(f) Counterparts................................................................................ 48
(g) Headings.................................................................................... 48
(h) Notices..................................................................................... 48
(i) Governing Law............................................................................... 49
(j) Amendments and Waivers...................................................................... 49
(k) Equitable Modification...................................................................... 49
(l) Expenses.................................................................................... 49
(m) Construction................................................................................ 50
(n) Incorporation of Exhibits, Annexes, and Schedules........................................... 50
(o) Specific Performance........................................................................ 50
(p) Submission to Jurisdiction.................................................................. 50
(q) Arbitration................................................................................. 51
(r) Appointment of Sellers' Representative...................................................... 52
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
This Agreement (the "Agreement") entered into on February 16,
2004, by and among ▇▇▇▇ Motor Freight Line, Inc., a Louisiana corporation (the
"Buyer") and ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇, ▇. ▇. ▇▇▇▇▇▇▇ and the
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust Under Trust Agreement dated January 28, 1998
(collectively the "Sellers"). The Buyer and the Sellers are referred to
collectively herein as the "Parties".
The Sellers in the aggregate own all of the outstanding
capital stock of ▇▇▇▇▇ Bros. Transfer, Inc., a Nebraska corporation (the
"Company").
This Agreement contemplates a transaction in which the Buyer
will purchase from the Sellers, and the Sellers will sell to the Buyer, all of
the outstanding capital stock of the Company in return for cash and a promissory
note.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. Definitions.
"AAA" has the meaning set forth in Section 9(q) below.
"Accredited Investor" has the meaning set forth in Regulation
D promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages (excluding, except as otherwise
provided in this Agreement, incidental, consequential, special, enhanced and
punitive damages) dues, diminution in value, penalties, fines, costs (including
costs of investigation and defense, court costs and attorneys' fees, Costs and
Fees and Arbitration Expenses), amounts paid in settlement, liabilities,
obligations, Taxes, liens, losses, expenses and fees.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of state, local, or foreign law.
"Agreement" has the meaning set forth in the preface above.
"Arbitrable Dispute" has the meaning set forth in Section 9(q)
below.
"Arbitration Expenses" has the meaning set forth in Section
9(q) below.
"Arbitrators" has the meaning set forth in Section 9(q) below.
"Basket" has the meaning set forth in Section 7(e) below.
"Buyer" has the meaning set forth in the preface above.
"Capitalized Lease" means a lease under which the obligations
of the lessee should, in accordance with GAAP consistently applied, be included
in determining total liabilities as shown on the liability side of a balance
sheet of the lessee.
"Capitalized Lease Obligations" means the amount of the
liability reflecting the aggregate discounted amount of future payments under
all Capitalized Leases calculated in accordance with GAAP consistently applied
and Statement of Financial Accounting Standards No. 13.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c)
below.
"COBRA" means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and of any similar state law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Retained Property" has the meaning set forth in
Section 5(g) below.
"Company Share" means any issued and outstanding share of the
capital stock of the Company.
"Confidential Information" means any information concerning
the businesses and affairs of the Company that is not generally available to the
public (other than through a breach of a confidentiality obligation or similar
obligation owed to the Company).
"Controlled Groups" has the meaning set forth in Code Section
1563.
"Conveyed Property" has the meaning set forth in Section 5(g)
below.
"Costs and Fees" has the meaning set forth in Section 9(q)
below.
"Covered Breach" has the meaning set forth in Section 7(e)
below.
"Disclosure Schedule" has the meaning set forth in Section 4
below.
"EBITDA Claim Basket" has the meaning set forth in Section
7(e) below.
"EBITDA Reduction Claim" has the meaning set forth in Section
7(e) below.
"Employee Benefit Plan" means any "employee benefit plan" (as
such term is defined in ERISA Section 3(3)) and any other employee benefit plan,
program or arrangement of any
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kind.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Employment Agreement" has the meaning set forth in Section
6(a) below.
"Environmental Law" means any applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings and charges thereunder) as enacted and in effect on or prior to the
Closing Date relating to the protection of health or the environment, including
without limitation: the Clean Air Act, the Federal Water Pollution Control Act,
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Toxic Substance Control Act, any
comparable state or foreign law, and the common law, including the law of
nuisance and strict liability.
"Environmental Permits" means all permits, registrations,
approvals, licenses, filings and submissions to any governmental body or other
authority required by or made by or on behalf the Company under or pursuant to
any Environmental Law.
"Environmental Property" means any assets or property
currently or previously owned, leased, operated or used by the Company.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means each entity which is treated as a
single employer with the Company for purposes of Code Section 414.
"Escrow Agent" means ▇▇▇▇▇ Fargo Bank, N.A.
"Escrow Agreement" means that certain Escrow Agreement dated
as of the Closing Date among Buyer, certain of the Sellers and the Escrow Agent.
"Excepted Real Property" has the meaning set forth in Section
4(z) below.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section
4(g) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Hazardous Materials" shall mean pollutants, contaminants,
hazardous substances, hazardous chemicals, toxic substances, hazardous wastes,
infectious wastes, radioactive materials, petroleum including crude oil or any
fraction thereof, asbestos fibers, or
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solid wastes or other hazardous materials, including without limitation those
defined in any Environmental Law.
"HIPAA" means the Health Insurance Portability and
Accountability Act of 1996, as amended.
"Improvements" has the meaning set forth in Section 4(n)
below.
"Income Tax" means any federal, state, local, or foreign
income tax, including any interest, penalty, or addition thereto, whether
disputed or not.
"Income Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
"Indebtedness" means at a particular time, without
duplication: (a) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money, (b) any indebtedness
evidenced by any note, bond, debenture or other debt instrument; (c) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise, (d) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (e) any obligations for which a Person is
obligated pursuant to a guarantee, (f) any obligations under Capitalized Lease
Obligations with respect to which a Person is liable, contingently or otherwise,
as obligor, guarantor or otherwise, or with respect to which obligations a
Person assures a creditor against loss; (g) any indebtedness secured by a
Security Interest on a Person's assets, (h) any unsatisfied obligation for
Withdrawal Liability to a Multiemployer Plan, (i) all indebtedness of a Person
for which such Person may become liable as a fiduciary or otherwise and (j) all
costs (including prepayment penalties) that would be due as a result of the
payment of any such indebtedness at Closing; provided, however, that all current
liabilities of a Person other than current liabilities attributable to the
current portion of such Person's long term debt shall not be included in the
definition of Indebtedness.
"Indemnified Persons" has the meaning set forth in Section
7(c) below.
"Independent Third Party" means a nationally recognized law
firm or any of the following accounting firms or their successors: Ernst & Young
LLP, KPMG LLP, Deloitte & Touche LLP and PricewaterhouseCoopers LLP.
"Intellectual Property" means all of the following in any
jurisdiction throughout the world: (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations in part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
slogans, trade names, corporate names, Internet domain names, and rights in
telephone numbers, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c)
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all copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including source code, executable
code, data, databases and related documentation), (g) all material advertising
and promotional materials, (h) all other proprietary rights, and (i) all copies
and tangible embodiments thereof (in whatever form or medium).
"IRS" means the Internal Revenue Service.
"Knowledge" means actual knowledge after reasonable
investigation. For purposes of determining whether any Seller has conducted a
reasonable investigation, if such Seller has made inquiry of the officers and
directors of the Company, the investigation shall be deemed to be reasonable
without need for further verification.
"Lease Consents" has the meaning set forth in Section 6(a)
below.
"Leased Real Property" means all leasehold or subleasehold
estates and other rights to use or occupy any land, buildings, structures,
improvements, fixtures or other interest in real property held by the Company.
"Leases" means all leases, subleases, licenses, concessions
and other agreements (written or oral), including all amendments, extensions,
renewals, guaranties and other agreements with respect thereto, pursuant to
which the Company holds any Leased Real Property.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in Section 4(g) below.
"Most Recent Fiscal Period End" has the meaning set forth in
Section 4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Non-Compete Agreements" has the meaning set forth in Section
6(a) below.
"Ordinary Course of Business" means, with respect to the
business of the Company, only the ordinary course of commercial operations
customarily engaged in by the Company consistent with industry norms and the
Company's prior practices, and specifically does not include (a) any activity
(i) involving the purchase or sale of the Company or of any product line or
business unit of the Company, (ii) involving modification or adoption of any
Employee Benefit Plan or (iii) which requires approval by the board of directors
or shareholders of the Company, or (b) the incurrence of any liability for any
tort or any breach or violation of or default under any contract or applicable
law.
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"Owned Real Property" means all land, together with all
buildings, structures, improvements and fixtures located thereon, and all
easements and other rights and interests appurtenant thereto, owned by any of
the Company.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" means with respect to each parcel of
Real Property: (a) real estate taxes, assessments and other governmental levies,
fees or charges imposed with respect to such Real Property which are not due and
payable as of the Closing Date, or which are being contested in good faith and
for which appropriate reserves have been established in accordance with GAAP;
(b) mechanics liens and similar liens for labor, materials or supplies provided
with respect to such Real Property incurred in the ordinary course of business
for amounts which are not due and payable and which would not, individually or
in the aggregate, have a material adverse effect on the business of the Company
as currently conducted thereon; (c) zoning, building codes and other land use
laws regulating the use or occupancy of such Real Property or the activities
conducted thereon which are imposed by any governmental authority having
jurisdiction over such Real Property which are not violated by the current use
or occupancy of such Real Property or the operation of the business of the
Company as currently conducted thereon; (d) easements, covenants, conditions,
restrictions and other similar matters of record affecting title to such Real
Property which do not or would not materially impair the use or occupancy of
such Real Property in the operation of the business of the Company as currently
conducted thereon; and (e) any Security Interests in existence on the Closing
Date securing the Indebtedness of the Company disclosed on the Most Recent
Balance Sheet; and (f) minor imperfections which do not materially detract from
the value, or interfere with the present use, of the property subject thereto or
affected thereby.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(a)
below.
"Real Property" has the meaning set forth in Section 4(n)
below.
"Real Property Laws" has the meaning set forth in Section 4(n)
below.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"S Corporation Sale" has the meaning set forth in Section 8(b)
below.
"Section 338(h)(10) Election" has the meaning set forth in
Section 8(b) below.
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"Section 338(h)(10) Gross-Up" has the meaning set forth in
Section 8(b) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under Capitalized
Leases, and (d) other liens arising in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Subject Documents" has the meaning set forth in Section 9(r)
below.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which: (a) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (b) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control (or have the power to be or control) a
managing director, manager or general partner of such limited liability company,
partnership, association or other business entity.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"WARN Act" has the meaning set forth in Section 4(w) below.
"Withdrawal Liability" means, at any time, the aggregate
amount of the liabilities,
7
if any, pursuant to Section 4201 of ERISA, and any increase in contributions
pursuant to Section 4243 of ERISA with respect to all Multiemployer Plans to
which the Company makes, is making, or is obligated to make contributions on
behalf of participants who are or were employed by any of them or to which such
Person has any current or potential liability.
2. Purchase and Sale of Company Shares.(a) On and
subject to the terms and conditions of this Agreement, the Buyer agrees
to purchase from each of the Sellers, and each of the Sellers agrees to
sell to the Buyer, all of his or her Company Shares for the
consideration specified below in this Section 2.
(a) Purchase Price. The purchase price for the
Company Shares shall be an amount equal to $21,684,241 (the "Purchase
Price").
(b) Payment. Subject to the terms and conditions
of this Agreement, the Purchase Price shall be paid by Buyer as
follows:
(i) $2,500,000 payable by wire transfer
of immediately available funds on the day after the Closing
Date to the Escrow Agent to be held pursuant to the terms of
the Escrow Agreement;
(ii) $6,200,000 by the issuance by the
Buyer on the Closing Date of its promissory note which shall
be guaranteed by SCS Transportation, Inc., a Delaware
corporation, substantially in the form attached hereto as
Exhibit A; and
(iii) the balance on the day after the
Closing Date by wire transfer of immediately available funds
to an account designated by the Sellers.
(c) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of ▇▇▇▇▇ ▇▇▇▇▇▇ P.C. in Omaha, Nebraska, commencing at 1:00
p.m. local time on February 16, 2004 or such other date as the Buyer
and the Sellers may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing,
(i) the Sellers will deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 6(a) below, (ii) the
Buyer will deliver to the Sellers the various certificates,
instruments, and documents referred to in Section 6(b) below, (iii)
each of the Sellers will deliver to the Buyer stock certificates
representing all of such Sellers' Company Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) the Buyer
will deliver to the Sellers and the Escrow Agent the consideration
specified in Section 2(b) above.
3. Representations and Warranties Concerning the
Transaction.
(a) Representations and Warranties of the
Sellers. Each of the Sellers represents and warrants to the Buyer that
the statements contained in this Section 3(a) are correct and complete
as of the Closing Date with respect to such Seller, except as set forth
in Annex I attached hereto. Nothing in Annex I shall be deemed adequate
to disclose an exception to a representation or warranty made herein,
however, unless Annex I identifies the exception with reasonable
particularity and describes the relevant
8
facts in detail. Annex I will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 3(a).
(i) Authorization of Transaction. The
Seller has full power and authority to execute and deliver
this Agreement and to perform such Seller's obligations
hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance
with its terms and conditions, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and to general
principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity. The Seller need
not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(ii) Noncontravention. Neither the
execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court
to which the Seller is subject or (B) conflict with, result in
a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which such
Seller is bound or to which any of his or her assets is
subject (or result in the imposition of any Security Interest
upon any of such Seller's assets, including, without
limitation, any Company Shares).
(iii) Brokers' Fees. The Seller has no
liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Buyer or the
Company could become liable or obligated.
(iv) Company Shares. The Seller holds of
record and owns beneficially the number of Company Shares set
forth next to such Seller's name in Section 4(b) of the
Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act
and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The Seller is not a party to
any option, warrant, purchase right, or other contract or
commitment that could require the Seller to sell, transfer, or
otherwise dispose of any Company Shares (other than this
Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the
voting of any Company Shares.
(b) Representations and Warranties of the Buyer.
The Buyer represents and warrants to the Sellers that the statements
contained in this Section 3(b) are correct and
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complete as of the Closing Date.
(i) Organization of the Buyer. The
Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its
incorporation.
(ii) Authorization of Transaction. The
Buyer has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and
conditions, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally and to general principles of
equity, regardless of whether enforcement is sought in a
proceeding at law or in equity. The Buyer need not give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this
Agreement.
(iii) Noncontravention. Neither the
execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court
to which the Buyer is subject or any provision of its charter
or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to
which the Buyer is a party or by which it is bound or to which
any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no
liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any Seller could
become liable or obligated.
(v) Investment. The Buyer is not
acquiring the Company Shares with a view to or for sale in
connection with any distribution thereof within the meaning of
the Securities Act.
(vi) No Additional Representations and
Warranties. Notwithstanding anything in this Section 3(b) or
any other provision of this Agreement, it is the explicit
intent of each party to this Agreement that the Buyer is not
making any representation or warranty whatsoever, express or
implied, beyond those made in this Agreement or any other
documents or instruments executed in connection with this
Agreement or the transactions contemplated herein.
4. Representations and Warranties Concerning the
Company. The Sellers represent and warrant to the Buyer that the statements
contained in this Section 4 are correct and
10
complete as of the Closing Date, except as set forth in the disclosure schedule
delivered by the Sellers to the Buyer on the date hereof (the "Disclosure
Schedule"). Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein, however,
unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in detail. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate
Power. The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its
incorporation. The Company is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to qualify has not
had, or will not reasonably be expected to have, a material adverse
effect on the business of the Company as currently conducted. The
Company has full corporate power and authority to carry on the business
in which it is engaged and to own and use the properties owned and used
by it. Section 4(a) of the Disclosure Schedule lists the directors and
officers of the Company.
(b) Capitalization. The equity capitalization of
the Company is set forth in Section 4(b) of the Disclosure Schedule
which lists the authorized and issued and outstanding capital stock of
the Company and identifies the record owner of all shares of such
capital stock. All of the Company Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record
by the respective Sellers as set forth in Section 4(b) of the
Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
the Company to issue, sell, or otherwise cause to become outstanding
any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights
with respect to the Company. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the
capital stock of the Company. All of the shares of the Company's
capital stock subject to the pledge agreements listed on Section 4(b)
of the Disclosure Schedule will be cancelled and shall no longer be
issued and outstanding upon payment of all principal and accrued and
unpaid interest under the promissory notes listed on Section 4(b) of
the Disclosure Schedule. Upon the consummation of the transactions
contemplated in this Agreement, Buyer will own all of the issued and
outstanding capital stock of the Company, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands other than any security interests placed thereon by
Buyer or otherwise applicable to Buyer or its assets.
(c) Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency, or
court to which the Company is subject or any provision of the articles
of incorporation or bylaws of the Company or (ii) except as set forth
in Section 4(c) of the Disclosure Schedule, conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create
11
in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Company is a party or by
which it is bound or to which any of its assets is subject (or result
in the imposition of any Security Interest upon any of its assets). The
Company is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(d) Brokers' Fees. The Company does not have any
liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(e) Title to Assets. The Company has good and
marketable title to, or a valid leasehold interest in, the properties
and assets used by it, located on its premises, or shown on the Most
Recent Balance Sheet or acquired after the date thereof, free and clear
of all Security Interests, except for Permitted Encumbrances and
properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. The Company has no
Subsidiaries.
(g) Financial Statements. Attached hereto as
Exhibit B are the following financial statements (collectively the
"Financial Statements"): (i) audited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flows
as of and for the fiscal years ended December 31, 2000, December 31,
2001 and December 31, 2002 for the Company; and (ii) the unaudited
consolidated balance sheet and statements of income, changes in
stockholders' equity, cash flows and footnotes (the "Most Recent
Financial Statements") as of and for the 12 months ended December 31,
2003 (the "Most Recent Fiscal Period End") for the Company. The
Financial Statements (including the notes thereto) have been prepared
in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby except as otherwise disclosed in the notes to
the Financial Statements and present fairly in all respects the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods.
(h) Books and Records. To the Knowledge of the
Sellers, the books of account, and other records of the Company, all of
which have been made available to the Buyer, are complete and correct
and have been maintained in accordance with sound business practices.
The stock record books of the Company, all of which have been made
available to the Buyer, are complete and correct and have been
maintained in accordance with sound business practices. To the
Knowledge of the Sellers, the minute book of the Company contains
records of all meetings held of, and corporate action taken by, the
stockholders, the board of directors, and committees of the board of
directors of the Company, and no meeting of any such stockholders,
board of directors, or committee has been held for which minutes have
not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of
the Company.
12
(i) Events Subsequent to October 1, 2003. Since
October 1, 2003, there has not been any adverse change in the business,
financial condition, operations, results of operations, or future
prospects of the Company and since such date the Company has not
operated outside of the Ordinary Course of Business. Without limiting
the generality of the foregoing, since that date, except as set forth
in Section 4(i) of the Disclosure Schedule:
(i) the Company has not sold, leased,
transferred, or assigned any assets, tangible or intangible,
outside the Ordinary Course of Business;
(ii) the Company has not entered into
any agreement, contract, lease, or license outside the
Ordinary Course of Business;
(iii) the Company has operated its
business in the Ordinary Course of Business regarding the
payment of Indebtedness, payables and other liabilities, as
well as the recording of revenue, expenses, assets,
liabilities and cash flows in its books and records consistent
with its historical accounting policies;
(iv) the Company has applied cash
receipts to notes and accounts receivable in the Ordinary
Course of Business and the Company has not altered the method
or timing of collecting accounts or notes receivable other
than in the Ordinary Course of Business;
(v) no party (including the Company)
has accelerated, terminated, made modifications to, or
canceled any agreement, contract, lease, or license to which
the Company is a party or by which it is bound;
(vi) the Company has not imposed any
Security Interest (other than Permitted Encumbrances) upon any
of its assets, tangible or intangible;
(vii) the Company has invested in assets,
property and equipment consistent with its historical
practices, but has not made any capital expenditures outside
the Ordinary Course of Business;
(viii) the Company has not made any
capital investment in, or any loan to, any other Person
outside the Ordinary Course of Business;
(ix) the Company has not created,
incurred, assumed or guaranteed more than $25,000 in aggregate
Indebtedness other than routine increases in its revolving
credit arrangement in the Ordinary Course of Business;
(x) the Company has not granted any
license or sublicense of any rights under or with respect to
any Intellectual Property;
(xi) there has been no change made or
authorized in the articles of incorporation or bylaws of the
Company;
13
(xii) the Company has not issued, sold,
or otherwise disposed of any of its equity securities, or
granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any
of its equity securities;
(xiii) the Company has not declared, set
aside or paid any dividend or made any distribution with
respect to its equity securities (whether in cash or in kind)
or redeemed, purchased, or otherwise acquired any of its
equity securities;
(xiv) the Company has not experienced any
damage, destruction, or loss (whether or not covered by
insurance) to its property;
(xv) the Company has not made any loan
to, or entered into any other transaction with, any of its
directors, officers, contractors, shareholders or employees or
any of their respective Affiliates;
(xvi) the Company has not entered into
any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any such existing
contract or agreement other than oral employment contracts
entered into in the Ordinary Course of Business;
(xvii) the Company has not granted any
increase in the base compensation of any of its directors,
officers, contractors or employees other than increases to
base compensation to its employees consistent with its
historical practices;
(xviii) the Company has not adopted,
amended, modified, or terminated any bonus, profit sharing,
incentive, severance, or other plan, contract, or commitment
for the benefit of any of its directors, officers, contractors
or employees (or taken any such action with respect to any
other Employee Benefit Plan) and Section 4(i) of the
Disclosure Schedule lists all payments and distributions, if
any, made under any such bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the
benefit of any of its directors or officers, the Sellers or
any of their respective Affiliates since October 1, 2003;
(xix) the Company has not made any other
change in employment terms for any of its directors, officers,
contractors or employees other than normal increases in
compensation to its employees (other than officers) consistent
with their historical practices; and
(xx) the Company has not committed to
any of the foregoing.
(j) Undisclosed Liabilities. The Company does
not have any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and
14
whether due or to become due, including any liability for Taxes),
except for (i) liabilities set forth or reserved against on the Most
Recent Balance Sheet or disclosed in any notes thereto, (ii)
liabilities which have arisen after the Most Recent Fiscal Period End
in the Ordinary Course of Business (none of which are material in
amount) or (iii) liabilities set forth in Section 4(j) of the
Disclosure Schedule.
(k) Business Practices. Since January 1, 2000,
neither the Company nor any director, officer, agent, contractor or
employee of the Company, or any other Person associated with or acting
for or on behalf of the Company, has directly or indirectly (i) made
any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (A) to obtain
favorable treatment in securing business, (B) to pay for favorable
treatment for business secured, (C) to obtain special concessions or
for special concessions already obtained, for or in respect of the
Company or any Affiliate of the Company or (D) in violation of any
applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of any federal, state, local, or foreign governments (and
all agencies thereof) or (ii) established or maintained any fund or
asset that has not been recorded in the books and records of the
Company.
(l) Legal Compliance. The Company has complied
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of all federal, state, local, and foreign governments (and
all agencies thereof) and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or, to the Knowledge of the Sellers, commenced against it
alleging any failure so to comply.
(m) Tax Matters.
(i) The Company has filed all Tax
Returns that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes owed by
the Company (whether or not shown on any Tax Return) have been
paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return.
(ii) There is no dispute or claim
concerning any Tax liability of the Company (A) claimed or
raised by any authority in writing or (B) as to which any of
the Sellers has Knowledge.
(iii) Section 4(m) of the Disclosure
Schedule lists all federal, state, local, and foreign Income
Tax Returns filed with respect to the Company for taxable
periods ended on or after December 31, 2000, indicates all Tax
Returns for taxable periods ended on or after December 31,
2000 that have been audited, and indicates all Tax Returns for
taxable periods ended on or after December 31, 2000 that
currently are the subject of audit. The Sellers have delivered
to the Buyer correct and complete copies of all federal Income
Tax Returns, examination reports, and statements of
deficiencies assessed against, or
15
agreed to by the Company since December 31, 2000. The Company
has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(iv) The Company has not filed a consent
under Code Section 341(f) concerning collapsible corporations.
The Company has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that
under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G.
The Company has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company is not a party to any tax
allocation or sharing agreement. The Company (A) has not been
a member of an Affiliated Group filing a consolidated federal
Income Tax Return (other than a group the common parent of
which was the Company) or (B) has no liability for the Taxes
of any Person under Reg.Section 1.1502 6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(v) The unpaid Taxes of the Company (A)
did not, as of the Most Recent Fiscal Period End, exceed the
reserve for Tax liability (rather than any reserve for
deferred taxes established to reflect timing differences
between book and tax income) set forth on the Most Recent
Balance Sheet and (B) will not exceed that reserve as adjusted
for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company in
filing its Tax Returns.
(vi) The Company will not be required to
include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of
any (A) change in method of accounting for a taxable period
ending on or prior to the Closing Date under Code Section
481(c) (or any corresponding or similar provision of state,
local or foreign income Tax law); (B) "closing agreement" as
described in Code Section 7121 (or any corresponding or
similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (C) deferred
intercompany gain or any excess loss account described in
Treasury Regulations under Code Section 1502 (or any
corresponding or similar provision of state, local or foreign
income Tax law); (D) installment sale or open transaction
disposition made on or prior to the Closing Date; or (E)
prepaid amount received on or prior to the Closing Date.
(vii) The Company (and any predecessor of
the Company) has been a validly electing S corporation within
the meaning of Code Sections 1361 and 1362 at all times since
1999 and, except as to any revocation of such status caused by
the consummation of the transactions contemplated by this
Agreement or any affirmative acts of the Buyer after the
Closing, the Company will be an S corporation up to and
including the Closing Date.
16
(viii) The Company has not, in the past 10
years, (A) acquired assets from another corporation in a
transaction in which the Company's Tax basis for the acquired
assets was determined, in whole or in part, by reference to
the Tax basis of the acquired assets (or any other property)
in the hands of the transferor or (B) acquired the stock of
any corporation which is a qualified subchapter S subsidiary.
(n) Real Property.
(i) Section 4(n)(i) of the Disclosure
Schedule sets forth the address and legal description of each
parcel of Owned Real Property. With respect to each parcel of
Owned Real Property:
(A) The Company has good and marketable
fee simple title, free and clear of all liens and
encumbrances, except Permitted Encumbrances;
(B) except as set forth in Section
4(n)(i)(B) of the Disclosure Schedule, the Company
has not leased or otherwise granted to any Person the
right to use or occupy such Owned Real Property or
any portion thereof; and
(C) there are no outstanding options,
rights of first offer or rights of first refusal to
purchase such Owned Real Property or any portion
thereof or interest therein.
(ii) Section 4(n)(ii) of the Disclosure
Schedule sets forth the address of each parcel of Leased Real
Property, and a true and complete list of all Leases for each
such Leased Real Property (including the date and name of the
parties to such Lease document). The Sellers have delivered to
the Buyer a true and complete copy of each such Lease
document, and in the case of any oral Lease, a written summary
of the terms of such Lease. Except as set forth in Section
4(n)(ii) of the Disclosure Schedule, with respect to each of
the Leases, including the Leases executed and delivered
pursuant to Section 6(a)(v) below:
(A) such Lease is legal, valid,
binding, enforceable and in full force and effect,
subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally and to general principles
of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity;
(B) the transactions contemplated by
this Agreement do not require the consent of any
other party to such Lease (except for those Leases
for which Lease Consents (as hereinafter defined) are
obtained), will not result in a breach of or default
under such Lease, and will not otherwise cause such
Lease to cease to be legal, valid, binding,
enforceable and in full force and effect on identical
terms following the
17
Closing;
(C) the Company's possession and quiet
enjoyment of the Leased Real Property under such
Lease has not been disturbed and, to the Knowledge of
the Sellers, there are no disputes with respect to
such Lease;
(D) Neither the Company nor, to the
Knowledge of the Sellers, any other party to the
Lease is in breach or default under such Lease, and,
to the Knowledge of the Sellers, no event has
occurred or circumstance exists which, with the
delivery of notice, the passage of time or both,
would constitute such a breach or default, or permit
the termination, modification or acceleration of rent
under such Lease;
(E) no security deposit or portion
thereof deposited with respect to such Lease has been
applied in respect of a breach or default under such
Lease which has not been redeposited in full;
(F) the Company does not owe, and will
not owe in the future, any brokerage commissions or
finder's fees with respect to such Lease;
(G) the other party to such Lease is
not an Affiliate of, and otherwise does not have any
economic interest in, the Company;
(H) the Company has not subleased,
licensed or otherwise granted any Person the right to
use or occupy such Leased Real Property or any
portion thereof; and
(I) the Company has not collaterally
assigned or granted any other Security Interest,
except for Permitted Encumbrances, in such Lease or
any interest therein.
(iii) The Owned Real Property identified
in Section 4(n)(i) of the Disclosure Schedule, and the Leased
Real Property identified in Section 4(n)(ii)(collectively, the
"Real Property") comprise all of the real property used or
intended to be used in the business of the Company; and,
except for purchase options granted under the leases described
in Section 6(a)(v) below, the Company is not a party to any
agreement or option to purchase any real property or interest
therein.
(iv) All buildings, structures,
fixtures, building systems, parking lots and equipment, and
all components thereof, included in the Real Property (the
"Improvements") are in condition and repair sufficient for the
operation of the business of the Company consistent with past
practices. To the Knowledge of the Sellers, there are no facts
or conditions affecting any of the Improvements which would,
individually or in the aggregate, interfere in any respect
with the use or occupancy of the Improvements or any portion
thereof in
18
the operation of the business of the Company as currently
conducted thereon.
(v) The Company has not received
written notice of any condemnation, expropriation or other
proceeding in eminent domain, affecting any parcel of Real
Property or any portion thereof or interest therein. There is
no injunction, decree, order, writ or judgment outstanding,
nor any claims, litigation, administrative actions or similar
proceedings, pending or, to the Knowledge of the Sellers,
threatened, relating to the ownership, lease, use or occupancy
of the Real Property or any portion thereof, or the operation
of the business of the Company as currently conducted thereon
or proposed to be conducted.
(vi) The Real Property is in compliance
with all applicable building, zoning, subdivision, health and
safety and other land use Laws, including The Americans with
Disabilities Act of 1990, as amended, and all insurance
requirements affecting the Real Property (collectively, the
"Real Property Laws"). The Company has not received any notice
of violation of any Real Property Law and there is no basis
for the issuance of any such notice or the taking of any
action for such violation.
(vii) To the Knowledge of the Sellers,
each parcel of Real Property has direct access to a public
street adjoining the Real Property or has access to a public
street via insurable easements benefiting such parcel of Real
Property, and such access is not dependent on any land or
other real property interest which is not included in the Real
Property. To the Knowledge of the Sellers, none of the
Improvements or any portion thereof is dependent for its
access, use or operation on any land, building, improvement or
other real property interest which is not included in the Real
Property.
(viii) Except as set forth on Section
4(n)(viii) of the Disclosure Schedule, to the Knowledge of the
Sellers, all water, oil, gas, electrical, steam, compressed
air, telecommunications, sewer, storm and waste water systems
and other utility services or systems for the Real Property
have been installed and are operational and sufficient for the
operation of the business of the Company as currently
conducted thereon.
(ix) To the Knowledge of the Sellers,
the Company's use or occupancy of the Real Property or any
portion thereof and the operation of the business of the
Company as currently conducted thereon is not dependent on a
"permitted non-conforming use" or "permitted non-conforming
structure" or similar variance, exemption or approval from any
governmental authority.
(x) To the Knowledge of the Sellers,
the current use and occupancy of the Real Property and the
operation of the business of the Company as currently
conducted thereon does not violate in any respect any
easement, covenant, condition, restriction or similar
provision in any instrument of record or other unrecorded
agreement affecting such Real Property.
19
(xi) To the Knowledge of the Sellers,
none of the Real Property or any portion thereof is located in
a flood hazard area (as defined by the Federal Emergency
Management Agency).
(xii) The terminations of the Leases set
forth in Section 6(a)(iv) are effective to terminate those
Leases and release the Company from all obligations and
liabilities thereunder. The Leases executed and delivered
pursuant to Section 6(a)(v) below are duly executed by the
landlords, and valid and legally binding obligations of the
landlords, enforceable in accordance with their respective
terms and conditions, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and to general
principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity. Neither the
execution and delivery of any such Lease by the landlords, nor
the consummation of the performance of each landlord's
obligations thereunder will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any
landlord is subject or any provision of the charter or
operating agreement of any landlord or (ii) conflict with,
result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any landlord is a
party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest
upon any of its assets). No landlord under any of the Leases
executed and delivered pursuant to Section 6(a)(v) below is
required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any
government or governmental agency in order for such landlord
to execute, deliver and perform its obligations under each
such Lease.
(o) Intellectual Property.
(i) To the Knowledge of the Sellers,
the Company has not interfered with, infringed upon,
misappropriated, or violated any Intellectual Property rights
of third parties in any respect, and none of the Sellers or
the directors and officers of the Company has ever received
any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or
violation (including any claim that the Company must license
or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of the Sellers, no third party
has interfered with, infringed upon, misappropriated, or
violated any Intellectual Property rights of the Company in
any respect.
(ii) Section 4(o)(ii) of the Disclosure
Schedule identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual
Property, identifies each pending patent application or
application for registration which the Company has made with
respect to any of its Intellectual Property, and identifies
each license, sublicense, agreement, or
20
other permission which the Company has granted to any third
party with respect to any of its Intellectual Property
(together with any exceptions). Section 4(o)(ii) of the
Disclosure Schedule also identifies each trade name or
unregistered trademark, service ▇▇▇▇, corporate name, Internet
domain name, copyright and computer software item currently
owned and used by the Company in connection with its business.
With respect to each item of Intellectual Property required to
be identified in Section 4(o)(ii) of the Disclosure Schedule:
(A) the Company possesses all right,
title, and interest in and to the item, free and
clear of any Security Interest (other than Permitted
Encumbrances), license, or other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
(C) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of the
Sellers, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the
item; and
(D) the Company has not ever agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict
with respect to the item.
(iii) Section 4(o)(iii) of the Disclosure
Schedule identifies each item of Intellectual Property that
any third party owns and that the Company uses pursuant to
license, sublicense, agreement, or permission. The Sellers
have delivered to the Buyer copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property required to
be identified in Section 4(o)(iii) of the Disclosure Schedule:
(A) the license, sublicense, agreement,
or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect in
all respects, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and to
general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in
equity;
(B) to the Knowledge of the Sellers, no
party to the license, sublicense, agreement, or
permission is in breach or default, and no event has
occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) to the Knowledge of the Sellers, no
party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
21
(D) the Company has not granted any
sublicense or similar right with respect to the
license, sublicense, agreement, or permission; and
(E) to the Knowledge of the Sellers, no
loss or expiration of the item is threatened,
pending, or reasonably foreseeable, except for
patents expiring at the end of their statutory terms
(and not as a result of any act or omission by the
Sellers or the Company, including without limitation,
a failure by the Sellers or the Company to pay any
required maintenance fees).
(p) Tangible Assets. To the Knowledge of the
Sellers, the buildings, machinery, equipment, and other tangible assets
that the Company owns and leases have been maintained in accordance
with the past practices of the Company and are in operating condition
and repair (subject to normal wear and tear) sufficient for the
operation of the Company's business consistent with past practices. The
Buyer acknowledges and agrees that the average age of the Company's
fleet of tractors and trailers is older than that of its own fleet and
shall not assert any breach of this representation or warranty or any
similar representation or warranty contained in this Section 4
regarding the same subject matter arising from such fact or the
Company's replacement of the Company's fleet of tractors and trailers
due solely to the relative disparity in the age of the Buyer's and the
Company's fleets.
(q) Inventory. The inventory of the Company
consists of raw materials and supplies, manufactured and processed
parts, work in process, and finished goods, all of which is
merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow moving, obsolete, damaged, or
defective, subject only to the reserve for inventory writedown set
forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the
Company.
(r) Contracts. Section 4(r) of the Disclosure
Schedule lists the following contracts and other agreements to which
the Company is a party:
(i) any agreement (or group of related
agreements) for the lease of personal property to or from any
Person providing for lease payments in excess of $100,000 per
annum;
(ii) any agreement (or group of related
agreements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or
involve consideration in excess of $100,000;
(iii) any agreement concerning a
partnership or joint venture;
22
(iv) any agreement (or group of related
agreements) under which it has created, incurred, assumed, or
guaranteed any Indebtedness in excess of $25,000 or under
which it has imposed a Security Interest (other than Permitted
Encumbrances) on any of its assets, tangible or intangible;
(v) any agreement concerning
confidentiality or noncompetition;
(vi) any agreement with any of the
Sellers and their Affiliates (other than the Company);
(vii) any profit sharing, equity option,
equity purchase, equity appreciation, deferred compensation,
severance, or other plan or arrangement for the benefit of its
current or former directors, officers, contractors or
employees;
(viii) any collective bargaining
agreement;
(ix) any agreement for the employment of
any individual on a full time, part time, consulting, or other
basis (including, without limitation, any agreement for the
lease of employees or similar arrangement) providing annual
compensation in excess of $25,000 or providing severance
benefits;
(x) any agreement under which it has
advanced or loaned any amount to any of its directors,
officers, contractors or employees;
(xi) any agreement under which the
consequences of a default or termination could reasonably be
expected to have an adverse effect on the business, financial
condition, operations, results of operations, or future
prospects of the Company;
(xii) any surety bonds; or
(xiii) any other agreement (or group of
related agreements) the performance of which involves
consideration in excess of $100,000.
The Sellers have delivered to the Buyer a copy of each written agreement listed
in Section 4(r) of the Disclosure Schedule (as amended to date) and a written
summary setting forth the material terms and conditions of each oral agreement
referred to in Section 4(r) of the Disclosure Schedule. With respect to each
such agreement: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect in all respects, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity; (B) none of the
Company or, to the Knowledge of the Sellers, any other party thereto is in
breach or default, and, to the Knowledge of the Sellers, no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration,
23
under the agreement; and (C) no party has repudiated any provision of the
agreement.
(s) Notes and Accounts Receivable. All notes and
accounts receivable of the Company are reflected properly on their
books and records, are valid receivables subject to no set offs or
counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject only to
the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with
the past custom and practice of the Company.
(t) Powers of Attorney. To the Knowledge of the
Sellers, there are no outstanding powers of attorney executed on behalf
of the Company.
(u) Insurance. Section 4(u) of the Disclosure
Schedule sets forth the following information with respect to each
insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety
arrangements) with respect to which the Company is or was a party, a
named insured, or otherwise the beneficiary of coverage within the 5
years prior to the date of this Agreement:
(i) the name, address, and telephone
number of the agent;
(ii) the name of the insurer, the name
of the policyholder, and the name of each covered insured; and
(iii) the policy number.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all respects, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or in equity;
(B) neither the Company nor, to the Knowledge of the Sellers, any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and, to the Knowledge of the Sellers, no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification, or acceleration,
under the policy; and (C) no party to the policy has repudiated any provision
thereof. Section 4(u) of the Disclosure Schedule describes any self insurance
arrangements affecting the Company. The Sellers have delivered to the Buyer a
correct and complete copy of each insurance policy listed in Section 4(u) of the
Disclosure Schedule (as amended to date).
(v) Litigation. Section 4(v) of the Disclosure
Schedule sets forth each instance in which the Company (i) is subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to the Knowledge of the Sellers, is
threatened to be made a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
24
(w) Labor Matters. To the Knowledge of the
Sellers, except as set forth in Section 4(w) of the Disclosure
Schedule, no executive, key employee or contractor, or significant
group of employees (including leased employees) or contractors (other
than Sellers) plans to terminate employment or their relationship with
the Company during the next 12 months. The Company is not a party to or
bound by any collective bargaining agreement, nor has the Company
experienced or been threatened with, any strike, labor dispute, work
stoppage, work slowdown, "work-to-rule" action or similar action or
grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past three years. The Company has not
committed any unfair labor practice. None of the Sellers has any
Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees
(including leased employees) or contractors of the Company. The
National Labor Relations Board has not issued a direction of election
with respect to the Company. No petition seeking a determination of
representation with respect to the Company has been filed with the
National Labor Relations Board and no demand for recognition has been
made regarding the Company or any of their respective facilities by any
union, labor organization or other representative of the employees
(including leased employees) or contractors of the Company. Since the
enactment of the Worker Adjustment and Retraining Notification Act (the
"WARN Act"), (i) the Company has not effected a "plant closing" (as
defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or
facility of the Company, (ii) there has not occurred a "mass layoff"
(as defined in the WARN Act) affecting any site of employment or
facility of the Company, nor has the Company been affected by any
transaction or engaged in layoffs or employment terminations sufficient
in number to trigger application of any similar state, local or foreign
law or regulation and (iii) none of the employees (including leased
employees) or contractors of the Company has suffered any "employment
loss" (as defined in the WARN Act) during the six-month period prior to
the date of this Agreement.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure
Schedule lists each Employee Benefit Plan that the Company
maintains, or to which the Company contributes or has any
obligation to contribute and each Employee Benefit Plan that
at any time during the period commencing three calendar years
prior to the calendar year in which the Closing occurs, the
Company sponsored or maintained, or to which the Company
contributed or had any obligation to contribute.
(A) Each such Employee Benefit Plan
(and each related trust, insurance contract, or fund)
has been maintained, funded and administered in
accordance with the terms of such Employee Benefit
Plan and complies in form and in operation with the
applicable requirements of ERISA, the Code and other
applicable laws.
(B) All required reports and notices
(including annual reports (IRS Form 5500), summary
annual reports, and summary plan descriptions) have
been timely filed and/or distributed in accordance
with
25
the applicable requirements of ERISA and the Code
with respect to each such Employee Benefit Plan. The
requirements of COBRA have been met with respect to
each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan subject to COBRA.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been made within
the time periods prescribed by ERISA and the Code to
each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date which are
not yet due have been made to each such Employee
Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company. All
premiums or other payments for all periods ending on
or before the Closing Date have been timely paid with
respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan and
its related trust which are intended to qualify under
Code Section 401(a) and Code Section 501(a) are so
qualified, have received a determination from the
Internal Revenue Service that they are so qualified,
and the Sellers do not have any Knowledge of any
facts or circumstances that could adversely affect
the qualified status of any such Employee Benefit
Plan.
(E) The market value of assets under
each such Employee Benefit Plan which is an Employee
Pension Benefit Plan equals or exceeds the present
value of all vested and nonvested liabilities
thereunder (determined in accordance with then
current funding assumptions).
(F) With respect to each such Employee
Benefit Plan, the Sellers have delivered to the Buyer
correct and complete copies of the plan documents and
summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service (if applicable), the three most
recent annual reports (IRS Form 5500, with all
applicable attachments), all related trust
agreements, insurance contracts, and other funding
arrangements, all related administrative service
agreements, and all COBRA and HIPAA policies,
procedures and notices.
(ii) With respect to each Employee
Benefit Plan that the Company or any ERISA Affiliate
maintains, to which any of them contributes, or has any
obligation to contribute, or with respect to which any of them
has any liability or potential liability, and with respect to
each Employee Benefit Plan that during the period commencing
three calendar years prior to the calendar year in which the
Closing occurs, the Company or any ERISA Affiliate maintained,
to which any of them contributed, or had any obligation to
contribute, or with respect to which any of them has any
liability or potential liability:
26
(A) No such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or has been, or will be by virtue of the
consummation of the transactions contemplated by this
Agreement, the subject of a Reportable Event as to
which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the
Knowledge of the Sellers, threatened.
(B) There have been no Prohibited
Transactions with respect to any such Employee
Benefit Plan. No fiduciary has any liability for
breach of fiduciary duty or any act or failure to act
or failure to comply with applicable law in
connection with any such Employee Benefit Plan for
any matter, including, without limitation, the
administration or investment of the assets of any
such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to
any such Employee Benefit Plan, including the
administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of the
Sellers, threatened and no facts exist that would
give rise to any action, suit, proceeding, hearing or
investigation, other than routine claims for
benefits.
(C) The Company has not incurred any
liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) under
applicable law with respect to any such Employee
Benefit Plan other than routine liabilities for
contributions and benefits payable in the Ordinary
Course of Business in accordance with the terms of
the plan.
(iii) The Company does not maintain,
contribute to, or have an obligation to contribute to an
Employee Pension Benefit Plan which is subject to Title IV of
ERISA.
(iv) Neither the Company nor any of its
ERISA Affiliates contributes to, has any obligation to
contribute to, have ever had any obligation to contribute to,
or has any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
withdrawal liability (as defined in ERISA Section 4201), under
or with respect to any Multiemployer Plan.
(v) The Company does not maintain,
contribute to or have any obligation to contribute to, or have
any liability or potential liability with respect to, any
Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare type benefits for current or
future retired or terminated employees (including leased
employees) of the Company (or any spouse or other
27
dependent thereof) other than in accordance with COBRA. The
Company has reserved the unqualified right to terminate
retiree health insurance with respect to all employees and
participants, including those in pay status with respect to
such benefits.
(vi) The Company does not maintain,
contribute to or have any obligation to contribute to, or have
any liability or potential liability with respect to, any
Employee Benefit Plan or other benefit arrangement covering
any employee or former employee (including current and former
leased employees) outside of the United States.
(vii) Consummation of the transactions
contemplated by this Agreement, other than by reason of
actions taken by the Buyer following the Closing, will not (A)
entitle any current or former employee (including current and
former leased employees) of the Company to severance pay,
unemployment compensation or any other payment, (B) accelerate
the time of payment or vesting, or increase the amount of any
compensation due to any current or former employee (including
current and former leased employees), or (C) give rise to the
payment of any amount that would not be deductible pursuant to
Code Section 280G.
(y) Guaranties. The Company is not a guarantor
or otherwise is responsible for any liability or obligation (including
Indebtedness) of any other Person. No Seller has personally guaranteed
any liability or obligation (including Indebtedness) of the Company.
(z) Environmental Matters. The representations
and warranties in this Section 4(z), to the extent relating to the
Owned Real Property located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Excepted Real Property"),
are made to the Knowledge of Sellers. All other representations in this
Section 4(z), except as expressly provided otherwise, are made without
such qualification.
(i) Except as set forth in Section 4(z)
of the Disclosure Schedule, all Environmental Property and all
current or previous conditions on and uses of the
Environmental Property while owned, operated or occupied by
the Company, and all current or previous ownership or
operation by the Company of the Environmental Property
(including without limitation transportation and disposal of
Hazardous Materials by or for the Company) comply and have at
all times complied with, and do not cause, have not caused,
and will not cause liability to be incurred by the Company
under any Environmental Law.
(ii) Except as set forth in Section 4(z)
of the Disclosure Schedule, to the Knowledge of the Sellers,
all conditions on and uses of the Environmental Property prior
to the ownership, operation or occupancy of the Environmental
Property by the Company complied with, and have not caused,
and will not cause liability to be incurred by the Company
under any Environmental Law.
28
(iii) Except as set forth in Section 4(z)
of the Disclosure Schedule, the Company is not in violation of
and has not violated any Environmental Law.
(iv) The Company has obtained and is in
compliance with all necessary Environmental Permits, and no
deficiencies have been asserted by any governmental body or
authority with respect to such items.
(v) Except as set forth in Section 4(z)
of the Disclosure Schedule, there has been no spill,
discharge, leak, leaching, emission, migration, injection,
disposal, escape, dumping, or release of any kind on, beneath,
above, or into the Environmental Property or into the
environment surrounding the Environmental Property of any
Hazardous Materials, which has resulted in contamination in
excess of applicable federal, state or local limits or could
require remediation under any Environmental Law.
(vi) The Company is not a treatment
storage disposal facility as defined under the Resource
Conservation and Recovery Act. Except as set forth in Section
4(z) of the Disclosure Schedule, there are and have been no
(A)Hazardous Materials stored, disposed of, generated,
manufactured, refined, transported, produced or treated at,
upon or from the Environmental Property and (B) asbestos
fibers or materials or polychlorinated biphenyls or
underground storage tanks on or beneath the Environmental
Property.
(vii) No expenditure (except in the
Ordinary Course of Business) will be required in order for the
Company to comply with any Environmental Laws in effect at the
time of the Closing in connection with the operation or
continued operation of the business of the Company or the
Environmental Property in a manner consistent with the current
operation thereof by the Company.
(viii) Except as set forth on Section 4(z)
of the Disclosure Schedule, there never has been pending or,
to the Knowledge of any of the Sellers, threatened against the
Company or, to the Knowledge of any of the Sellers, any other
Person to the extent that such other Person from time to time
has owned, leased, occupied or conducted operations on the
Environmental Property, any civil, criminal or administrative
action, suit, summons, citation, complaint, claim, notice,
demand, request, judgment, order, lien, proceeding, hearing,
study, inquiry or investigation based on or related to an
Environmental Permit or any Environmental Law.
(ix) Except as set forth in Section 4(z)
of the Disclosure Schedule, the Company has not transported or
arranged for the transportation of any Hazardous Materials to
any location which is: (A) listed on, or proposed for listing
on, the EPA's National Priorities List published at 40 CFR
Part 300 or on any similar state list; or (B) the subject of
any regulatory action which may lead to claims against the
Company for damages to natural resources, personal injury,
29
clean-up costs or clean-up work.
(x) Except as set forth in Section 4(z)
of the Disclosure Schedule, neither the Company, nor, to the
Knowledge of the Sellers, any other Person to the extent that
such other Person from time to time has owned, leased,
occupied or conducted operations on the Environmental
Property, has ever received from any Person any notice of, or
has any knowledge of, any past, present or anticipated future
events, conditions, circumstances, activities, practices,
incidents, actions, agreements or plans that could: (A)
interfere with, prevent, or increase the costs of compliance
or continued compliance with any Environmental Permits or any
renewal or transfer thereof or any Environmental Law; (B) make
more stringent any restriction, limitation, requirement or
condition under any Environmental Law or any Environmental
Permit in connection with the operations on the Environmental
Property; or (C) give rise to any liability, loss or expense,
or form the basis of any civil, criminal or administrative
action, suit, summons, citation, complaint, claim, notice,
demand, request, judgment, order, lien, proceeding, hearing,
study, inquiry or investigation involving the Environmental
Property or the Company, based on or related to an
Environmental Permit or any Environmental Law or to the
presence, manufacture, generation, refining, processing,
distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, handling, emission, discharge,
release or threatened release of any Hazardous Materials.
(aa) Certain Business Relationships With the Company.
Except as set forth in Section 4(aa) of the Disclosure Schedule, none
of the Sellers or their respective Affiliates have been involved in any
business arrangement or relationship with the Company within the past
12 months, and none of the Sellers and their respective Affiliates own
any asset, tangible or intangible, which is used in the business of the
Company. No Seller or any of their respective Affiliates owes any
Indebtedness to the Company.
(bb) Contractors. The Company utilizes, and has
previously utilized, contractors or other individuals in their
operations for whom the Company has adopted the position that said
parties are not employees for tax reporting and withholding or any
other purpose. The procedures adopted and implemented by the Company
for the utilization of said parties complies in all respects with
criteria set forth in all applicable federal or state statutes, rules,
regulations, orders, opinions and other authority for the treatment by
the Company of said parties as non-employees. Said parties have been
properly considered for purposes of satisfying any coverage,
participation and nondiscrimination requirements under the Code and
ERISA which are applicable with respect to the Employee Benefit Plans
described in Section 4(x)(i) and the Employee Benefit Plans of said
parties' employer.
(cc) Customer Relations. To the Knowledge of the
Sellers, the Company has not received any written or oral notice that
any customer or account of the Company that accounts for more than 1%
of the gross revenues of the Company, (i) has ceased or cancelled or
threatened to cease or cancel or indicated its intention to cease or
cancel or
30
otherwise adversely modify, its relationship with the Company, (ii) has
reduced, threatened to reduce or will reduce the amount of business
such customer conducts with the Company, (iii) has asserted, or
threatened to assert, that any contract with the Company (or any
provision thereof, including the rates set forth therein) is invalid or
unenforceable, (iv) has asserted that it has a right of set off for any
reason of any amount in excess of $5,000, including, in each case,
after the consummation of the transactions contemplated in this
Agreement or (v) requested or threatened to seek a renegotiation of the
terms of any contract with the Company or asserted a right to
renegotiate the same.
(dd) Bank Accounts. Section 4(dd) of the Disclosure
Schedule lists each bank account of the Company setting forth the name
of the bank at which such account is held, the account number, the
purpose for which such account is maintained and each authorized
signatory on each such account.
(ee) No Additional Representations and Warranties.
Notwithstanding anything in this Section 4 or any other provision of
this Agreement, it is the explicit intent of each party to this
Agreement that the Sellers are not making any representation or
warranty whatsoever, express or implied, beyond those expressly made in
this Agreement or any other documents or instruments executed in
connection with this Agreement or the transactions contemplated herein.
5. Post Closing Covenants. The Parties agree as follows
with respect to the period following the Closing.
(a) General. In case at any time after the
Closing any further action is necessary to carry out the purposes of
this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole
cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Section 7 below). The
Sellers acknowledge and agree that from and after the Closing the Buyer
will be entitled to possession of all documents, books, records
(including tax records), agreements, and financial data of any sort
relating to the Company. From and after the Closing, the Buyer shall
afford to the Sellers, and their counsel, accountants and other
authorized agents and representatives, during normal business hours,
reasonable access to the employees, books, records and other data
relating to the Company in its possession with respect to periods prior
to the Closing, and the right to make copies and extracts therefrom, to
the extent that such access may be reasonably required (i) to
facilitate the investigation, litigation and final disposition of any
claims which may have been or may be made against such parties or their
Affiliates (except to the extent related to the transactions
contemplated in this Agreement), (ii) for the preparation of Tax
returns and audits or (iii) for any other reasonable business purpose;
provided, however, Buyer shall be entitled to reimbursement of its
reasonable expenses with respect to such access and such access shall
be subject to Sellers entering into reasonable agreements with respect
to the protection of any Confidential Information.
31
(b) Litigation Support. In the event and for so
long as any Party actively is contesting or defending against any
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving the Company, each of the other Parties will cooperate with
him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to
their books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting
or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 7 below).
(c) Transition. For a period of five years from
and after the Closing Date, none of the Sellers will take any action
that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of
the Company from maintaining the same business relationships with the
Company after the Closing as it maintained with the Company prior to
the Closing.
(d) Confidentiality. Each of the Sellers will
treat as confidential all of the Confidential Information, refrain from
using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in his or its
possession (including, without limitation, computer records and
electronic files). In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information,
that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order
or waive compliance with the provisions of this Section 5(d). If, in
the absence of a protective order or the receipt of a waiver hereunder,
any of the Sellers is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his
or its reasonable best efforts to obtain, at the reasonable request and
the sole cost and expense of the Buyer, an order or other assurance
that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall
designate.
(e) Miscellaneous.
(i) The Buyer shall make available
health insurance coverage for each of ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and their spouses until such
individual reaches the age of 65. Such insurance coverage
shall be equivalent to the coverage provided by Buyer to its
executive officers during such period. Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ shall be responsible for all of the costs, premiums
and Taxes associated with such insurance (which premiums shall
be 140% of the then current monthly COBRA rate applicable to
the Buyer's health insurance coverage). In the event any such
individual elects to
32
discontinue such coverage for any reason all obligations of
the Buyer to offer coverage for such individual and his spouse
shall permanently cease.
(ii) The Company shall transfer title to
▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ for the three
automobiles used by those individuals prior to Closing. Each
of the transferees shall bear all cost and expense of these
transfers, including without limitation all Taxes incurred in
connection with these transfers. The vehicles will be valued
at their basis reflected on the Company's books and records as
of the Closing and these individuals shall report such amount
as ordinary income on their 2004 Income Tax Returns and the
Company will be entitled to a related deduction of the same
amount on its Income Tax Return for the current fiscal year.
(iii) The Company shall pay to each of
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ payments equal to one
year of their respective current annual base salary. These
payments shall be made in 12 equal monthly installments on the
last day of each of the first 12 full calendar months
following the Closing Date; provided, that, all obligations of
the Company under this part (iii) shall cease immediately and
automatically as to each such individual if such individual
breaches or threatens to breach the terms of Section 5(d) or
his Non-Compete Agreement or otherwise commits any act or
omission involving material dishonesty or fraud or
constituting gross negligence or willful misconduct, with
respect to the Company or Buyer or any of their respective
customers or suppliers.
(iv) For a period of 30 days following
the Closing, each of ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇, will have the individual option, exercisable by
written notice to the Company within such 30-day period, to
purchase from the Company (A) in the case of ▇▇▇▇▇ ▇▇▇▇▇, the
life insurance policy issued by New York Life (Policy No.
43493338; cash surrender value of $118,755) and the life
insurance policy issued by First Colony (Policy No. 2164193;
cash surrender value of $63,408) both maintained by the
Company, (B) in the case of ▇.▇. ▇▇▇▇▇▇▇, the life insurance
policy issued by New York Life (Policy No. 44619625; cash
surrender value of $18,148) maintained by the Company and (C)
in the case of ▇▇▇▇▇▇ ▇▇▇▇▇▇, the life insurance policy issued
by New York Life (Policy No. 44619606; cash surrender value of
$23,727) maintained by the Company. The purchase price for
each such policy shall be an amount equal to the cash
surrender value of the policy (noted above) payable in cash
immediately upon receipt of the written assignment of such
policy. Each of the transferees shall bear all cost and
expense of these transfers, including without limitation all
Taxes incurred in connection with these transfers.
Notwithstanding the aforementioned, neither the Company nor
Buyer shall have any obligation to make any payments under or
otherwise take any action or refrain from taking any action in
order to maintain each such policy in full force and effect.
(v) The Buyer will conduct a monthly
review with ▇▇▇▇▇ ▇▇▇▇▇ or ▇.▇. ▇▇▇▇▇▇▇ regarding cargo claims
and bodily injury or property damage and workers' compensation
claims that are outstanding at
33
Closing. Settlements in excess of $2,500 for cargo claims and
$10,000 for bodily injury or property damage or workers'
compensation claims require verbal approval from either of
Messrs. ▇▇▇▇▇ or ▇▇▇▇▇▇▇ (which approval will not be
unreasonably withheld). To the extent any such claims are the
financial responsibility of an insurance carrier the
procedures of the insurance carrier with respect to such
claims shall govern.
(f) Payment of Indebtedness. The Buyer shall
cause the Company to pay in full the Indebtedness of the Company listed
on Schedule 5(f) within 30 days of the Closing Date.
(g) Norfolk Easement. On or about January 20,
2004, the Company filed in Cabinet 5 at Page 34B in the Office of the
Register of Deeds of Madison County, Nebraska, a Lot Boundary Change
between Lots 1 and 2, Clark Brothers' Addition to the City of Norfolk,
Madison County, Nebraska, regarding real property known as ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. Immediately thereafter, by Warranty
Deed filed in Book M2004-1 at Page 1106, in the Office of the Register
of Deeds of Madison County, Nebraska, the Sellers caused the Company to
convey to ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, husband and wife, being
some of the Sellers, a portion of such property, being described as
"Tract B of Lot 1, Clark Brothers' Addition to the City of Norfolk,
Madison County, Nebraska, according to recorded plat thereof and
according to that certain Lot Boundary Change between Lots 1 and 2,
Clark Brothers' Addition to the City of Norfolk, Madison County,
Nebraska, filed in Cabinet 5 at Page 34B in the Office of the Register
of Deeds of Madison County, Nebraska" ("Conveyed Property").
Sellers hereby warrant and represent that such
conveyance of said land to ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ does not
adversely affect the trucking operations and ongoing use of Tract A of
Lot 1, Clark Brothers' Addition to the City of Norfolk, Madison County,
Nebraska, according to recorded plat thereof and according to that
certain Lot Boundary Change between Lots 1 and 2, Clark Brothers'
Addition to the City of Norfolk, Madison County, Nebraska, filed in
Cabinet 5 at Page 34B in the Office of the Register of Deeds of Madison
County, Nebraska ("Company Retained Property"), as a trucking terminal
facility. Sellers, and ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, in
particular, hereby covenant and agree that, in the event that Buyer
and/or Company hereafter determine that such conveyance did, in fact,
adversely affect the trucking operations and use of the Company
Retained Property as a trucking terminal facility, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ will, within twenty-five (25) days of the date of a
request therefor by the Company or Buyer, execute and deliver, free and
clear of any liens or encumbrances, a perpetual and exclusive easement
for pedestrian and vehicular ingress and egress over and across such of
the Conveyed Property as is reasonably necessary to ameliorate the
adverse conditions which resulted from the conveyance of the Conveyed
Property.
6. Deliveries at Closing.
(a) Sellers' Deliveries at Closing. In addition
to the items specified in Section 2 above, the Sellers shall deliver
the following items to the Buyer at the Closing:
34
(i) all authorizations, consents, and
approvals of governments and governmental agencies referred to
in Section 3(a)(ii), and Section 4(c) above;
(ii) a release of liability from each
Seller, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and each fiduciary of the ▇▇▇▇▇ Bros.
Transfer, Inc. Employee Stock Ownership Plan & Trust, if other
than a Seller, in form and substance reasonably satisfactory
to Buyer;
(iii) the Escrow Agreement executed by
Sellers and the Escrow Agent;
(iv) a termination, dated the Closing
Date, for each of the following Leases executed by the Company
and the applicable landlord:
(A) Lease, dated March 1, 2000, by
and between J & J Wichita, L.L.C. and the Company re:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇;
(B) Lease, dated June 1, 2002, by
and between ▇▇▇▇▇ Sioux Falls, L.L.C. and the Company
re: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇;
(C) Net Lease, dated July 1, 1998,
by and between ▇▇▇▇▇-Grand Island, L.L.C. and the
Company re: ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇;
(D) Lease, dated June 19, 1997, by
and between J & J - I, L.L.C. and the Company re:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇; and
(v) lease agreements (with options to
purchase) in form and substance reasonably satisfactory to
Buyer, dated the Closing Date, executed by the Company and the
applicable landlord of the following real estate: ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇; ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇; and
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇;
(vi) an employment agreement between the
Company and ▇▇▇▇▇▇ ▇▇▇▇ (the "Employment Agreement") executed
by the Company and ▇▇▇▇▇▇ ▇▇▇▇ in form and substance
reasonably satisfactory to the Buyer;
(vii) an opinion from counsel to the
Sellers in form and substance reasonably satisfactory to the
Buyer, addressed to the Buyer, and dated as of the Closing
Date;
(viii) the resignations, effective as of
the Closing, of each director and officer of the Company;
35
(ix) a written consent for the
assignment of each of the Leases (other than the Leases
terminated pursuant to Section 6(a)(iv) above) from the
landlord or other party whose consent thereto is required
under such Lease (the "Lease Consents");
(x) non-foreign affidavits dated as of
the Closing Date and in form and substance required under the
Treasury Regulations issued pursuant to Section 1445 of the
Internal Revenue Code so that the Buyer is exempt from
withholding any portion of the Purchase Price thereunder;
(xi) a certified copy of the Company's
articles of incorporation which shall have been amended to
delete Article XII thereof and the Company's 2000 Restated
Bylaws (certified by the Secretary of the Company) which shall
have been amended to delete the restriction on the ownership
of the Company Shares contained in Article 1, Section 12
thereof;
(xii) a non-compete agreement executed by
each Seller (other than the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust Under Trust
Agreement dated January 28, 1998) and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Non-Compete Agreements") in form and substance reasonably
satisfactory to Buyer; and
(xiii) the 338(h)(10) Election executed by
each of the Company and each Seller.
(b) Buyer's Deliveries at Closing. In addition
to the items specified in Section 2 above, the Buyer shall deliver the
following items to the Sellers at the Closing:
(i) all material authorizations,
consents, and approvals of governments and governmental
agencies referred to in Section 3(b)(iii);
(ii) the Escrow Agreement executed by
the Buyer and the Escrow Agent;
(iii) the Non-Compete Agreements executed
by the Buyer;
(iv) the Employment Agreement executed
by the Company and ▇▇▇▇▇▇ ▇▇▇▇ in form and substance
reasonably satisfactory to the Buyer;
(v) an opinion from counsel to the
Buyer in form and substance reasonably satisfactory to the
Sellers, addressed to the Sellers, and dated as of the Closing
Date; and
(vi) the 338(h)(10) Election executed by
each of the Buyer.
7. Remedies for Breaches of this Agreement.
36
(a) Survival of Representations and Warranties.
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, Annex I and any other certificate
or document delivered pursuant to this Agreement will survive the
Closing. The right to indemnification, liability for Adverse
Consequences or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of
being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation.
(b) Time Limitations. Sellers will have no
liability (for indemnification or otherwise) with respect to any
representation or warranty other than those in Sections 3(a)(iv)
(Company Shares), 4(b)(Capitalization), 4(m) (Tax Matters), 4(x)
(Employee Benefits) or 4(z) (Environmental Matters) unless on or before
the second anniversary of the Closing Date, Buyer notifies Sellers of a
claim specifying the factual basis of that claim in reasonable detail
to the extent then known by Buyer; a claim with respect to Sections
3(a)(iv) (Company Shares), 4(b) (Capitalization), 4(m) (Tax Matters),
4(x) (Employee Benefits) and 4(z) (Environmental Matters) may be made
up to 120 days following the expiration of the applicable statutes of
limitation; a claim based on fraud or a claim for indemnification or
reimbursement not based upon any representation or warranty may be made
at any time. Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty unless on or
before the second anniversary of the Closing Date Sellers notify Buyer
of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Sellers.
(c) Indemnification Provisions for Benefit of
the Buyer. ▇▇▇ ▇. ▇▇▇▇, ▇.▇. ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust
Under Trust Agreement dated January 28, 1998, severally in proportion
to their ownership of the Company Shares sold hereunder by Sellers but
not jointly, and each of ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, jointly and
severally with each other and the other Sellers, will indemnify and
hold harmless the Buyer, the Company, and their respective officers,
directors, owners, controlling persons, employees, agents and
Affiliates (collectively, the "Indemnified Persons") for, and will pay
to the Indemnified Persons the amount of, any Adverse Consequences,
arising, directly or indirectly, from or in connection with:
(i) any breach of any representation or
warranty made by any Seller in this Agreement, the Disclosure
Schedule or Annex I or any certificate or document delivered
by Sellers pursuant to this Agreement;
(ii) any breach by any Seller of any
covenant or obligation of such Seller in this Agreement;
(iii) any obligation or liability of the
Company (A) for any Taxes of the Company with respect to any
Tax year or portion thereof ending on or before the Closing
Date (or for any Tax year beginning before and ending after
the Closing Date to the extent allocable to the portion of
such period
37
beginning before and ending on the Closing Date), to the
extent such Taxes are not reflected in the reserve for any
liability for Taxes (rather than any reserve for deferred
Taxes established to reflect timing differences between book
and Tax income) shown on the face of the Most Recent Balance
Sheet (rather than in any notes thereto), as such reserve is
adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in
filing its Tax Returns and (B) for the unpaid taxes of any
Person (other than the Company) under Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise;
(iv) the ▇▇▇▇▇ Bros. Transfer, Inc.
Employee Stock Ownership Plan & Trust. Without limiting the
generality of the foregoing, indemnified losses shall include
those Adverse Consequences resulting from, arising out of, or
relating to the following with respect to the ▇▇▇▇▇ Bros.
Transfer, Inc. Employee Stock Ownership Plan & Trust:
administration and termination; fiduciary obligations;
acquisition and disposition of employer securities;
disclosures and communications; loans, notes or other
extensions of credit; recapitalizations; valuation and
appraisal of employer securities; benefits; filing
obligations; taxes and excise taxes; penalties and fees;
(v) bodily injury or property damage
claims that arises, directly or indirectly, from any act,
omission or occurrence involving the Company on or prior to
the Closing Date to the extent not covered by insurance of the
Company in existence on the Closing Date (including, without
limitation, any matters set forth on Section 4(v) of the
Disclosure Schedule); provided, that, for purposes of
calculating the monetary amount of Adverse Consequences for
which an indemnification claim may be made under this Section
7(c)(v), such monetary amount shall be limited to the amount
of Adverse Consequences arising from these matters over the
aggregate amount of both the aggregate reserves for claims for
these matters recorded in the books and records of the Company
as of December 31, 2003 plus insurance proceeds actually
received by the Company (net of all costs of collection of
such proceeds) with respect to such matters;
(vi) any employment related claims
involving the Company arising, directly or indirectly, from
any act, omission or occurrence on or prior to the Closing
Date, including any claims for workers' compensation, for
breach of contract, or any claims in the nature of employment
discrimination or harassment; provided, that, for purposes of
calculating the monetary amount of Adverse Consequences for
which an indemnification claim concerning workers'
compensation matters may be made under this Section 7(c)(vi),
such monetary amount shall be limited to the amount of Adverse
Consequences arising from claims concerning workers'
compensation matters over the aggregate amount of both the
aggregate reserves for claims concerning workers' compensation
matters recorded in the books and records of the Company as of
December 31, 2003 plus insurance proceeds actually received by
the Company (net of all costs of collection of such proceeds)
with respect to claims concerning such workers' compensation
matters; and
38
(vii) any liabilities arising, in whole
or in part, prior to the Closing Date under any Employee
Benefit Plan under which the Company provides health insurance
benefits; provided, that, for purposes of calculating the
monetary amount of Adverse Consequences for which an
indemnification claim may be made under this Section
7(c)(vii), such monetary amount shall be limited to the amount
of Adverse Consequences arising from these matters over the
aggregate amount of both the aggregate reserves for these
matters recorded in the books and records of the Company as of
the December 31, 2003 plus insurance proceeds actually
received by the Company (net of all costs of collection of
such proceeds) with respect to such matters.
The remedies provided in this Section 7 will be the exclusive remedy that may be
available to Buyer or the other Indemnified Persons for indemnity claims.
Sellers acknowledge and agree that the disclosure and exceptions made by
Sellers, including those contained in Annex I attached hereto and the Disclosure
Schedule and any other exhibit, schedule or attachment to this Agreement, only
limit Sellers' liability for indemnification under Section 7(c)(i) above. Buyer
and the Indemnified Persons have the right to rely fully upon the
representations, warranties, covenants and agreements of Sellers contained in
this Agreement, subject only to the restrictions on the Sellers' indemnification
obligations contained in this Section 7, notwithstanding any such disclosure or
the fact that Buyer has consummated the transactions contemplated in this
Agreement.
(d) Indemnification Provisions for Benefit of
the Sellers. Buyer will indemnify and hold harmless Sellers, and will
pay to Sellers the amount of any Adverse Consequences arising, directly
or indirectly, from or in connection with:
(i) any breach of any representation or
warranty made by Buyer in this Agreement or any certificate or
document delivered by Buyer pursuant to this Agreement;
(ii) any breach by Buyer of any covenant
or obligation of Buyer in this Agreement;
(iii) any guarantee of any Seller of any
Indebtedness of the Company for borrowed money as of the
Closing; or
(iv) any on-site investigation or
on-site remediation of the Excepted Real Property required
under any Environmental Law; provided, that, Buyer shall have
no indemnification obligation under this Section 7(d)(iv) if
any Seller breaches any representation or warranty made by
Sellers in Section 4(z) regarding Excepted Real Property. In
no event shall Buyer have any indemnification obligation for
any Adverse Consequences arising from any investigation on or
remediation of, any real estate other than the Excepted Real
Property (such as claims seeking investigation and remediation
of adjoining properties) or for third party claims regarding
any of the Excepted Real Property (including, without
limitation, claims of adjoining landowners arising from
environmental contamination emanating from the Excepted Real
Property and claims seeking compensation for personal injury
and death).
39
The remedies provided in this Section 7 will be exclusive remedy that may be
available to Sellers or other Indemnified Persons for indemnity claims. Buyer
acknowledges and agrees that the disclosure and exceptions made by Buyer,
including those contained in any exhibit, schedule or attachment to this
Agreement, only limit Sellers' liability for indemnification under Section
7(d)(i) above. Sellers have the right to rely fully upon the representations,
warranties, covenants and agreements of Buyer contained in this Agreement,
subject only to the restrictions on the Buyer's indemnification obligations
contained in this Section 7, notwithstanding any such disclosure or the fact
that Sellers have consummated the transactions contemplated in this Agreement.
(e) Calculation of Adverse Consequences;
Limitations on Indemnity Obligations.
(i) For purposes of calculating the
monetary amount of Adverse Consequences for which any
indemnification claim may be made under this Section 7, such
monetary amount may be decreased to the extent of any
insurance proceeds actually received by the indemnified party
(net of all costs of collection of such proceeds) with respect
thereto under any insurance policies (and in the case of any
claim made as a result of a breach of the representations and
warranties contained in Section 4(z), any amounts actually
received by the indemnified party (net of all costs of
collection) from any claim made by the indemnified party
against any prior owner or operator of the Environmental
Property that is the subject of such claim); provided, that,
if the indemnifying party shall have paid the same or all of
the amount of a payment to the indemnified party prior to the
recovery of such an amount by the indemnified party, the
indemnified party shall promptly remit the amount of such
recovery to the indemnifying party. At the request of the
indemnifying party, the indemnified party shall promptly take
all actions, at the sole cost and expense of the indemnifying
party, including costs arising from any such claim, reasonably
necessary to seek any such insurance proceeds (and in the case
of any claim made as a result of a breach of the
representations and warranties contained in Section 4(z),
prosecute claims against prior owners or operators of
Environmental Property that is the subject of such claim) to
the extent reasonably available to the indemnified party.
(ii) The Sellers will have no liability
(for indemnification or otherwise) with respect to the matters
described in Section 7(c)(i) unless (A) the amount of Adverse
Consequences claimed by an Indemnified Person hereunder for
the particular matter described in Section 7(c)(i) exceeds
$5,000 (a "Covered Breach"), and (B) the total of all Adverse
Consequences with respect to all matters described in Section
7(c)(i), regardless of whether such Adverse Consequences arise
from a Covered Breach or not, exceeds $200,000 (the "Basket"),
in which case the Sellers shall be liable for all Adverse
Consequences in excess of the Basket. However, the limitations
on indemnity obligations contained in this Section 7(e)(ii)
will not apply to any breach of any representations and
warranties made in Sections 3(a)(iv) (Company Shares),
4(b)(Capitalization), 4(i)(xiii), (xv), (xvii) and (xviii)
(Events Subsequent to October 1, 2003), 4(m) (Tax Matters),
4(x) (Employee Benefits), 4(z) (Environmental Matters), the
last sentence of 4(aa) (Certain Business Relationships With
the Company), 5(g)
40
(Norfolk Easement) or 9(l) (Expenses).
(iii) If a breach or breaches of Section
4 would, had the subject matter of such breach or breaches
been properly reflected on the Most Recent Financial
Statements in accordance with GAAP (as applied by the Company
for its fiscal year ending December 31, 2003), cause the
amount of EBITDA (earnings before interest, taxes,
depreciation and amortization) of the Company for the 12
months ending December 31, 2003 to be less than the amount of
EBITDA as determined from the Most Recent Financial Statements
or if it is determined that the Most Recent Financial
Statements constitute a breach of Section 4(g) (in any such
case, an "EBITDA Reduction Claim"), and if the aggregate
reduction in EBITDA as a result of all EBITDA Reduction Claims
(after considering any increases in such EBITDA that are
previously identified) exceeds $250,000 (the "EBITDA Claim
Basket"), Sellers shall pay to Buyer an amount equal to the
amount by which the aggregate reduction in EBITDA as a result
of EBITDA Reduction Claims exceeds the EBITDA Claims Basket
multiplied by 4.2. Sellers liability shall be reduced by the
amounts previously paid to the Indemnified Persons under
Section 7(e)(ii) for any Adverse Consequences arising from the
subject matter of such breach. The determination of whether a
particular breach of Section 4 causes or would if accounted
for as provided above cause, a reduction in EBITDA for the
fiscal year ending December 31, 2003 shall be submitted to and
determined by ▇▇▇▇ & Co. for determination, in its sole and
absolute discretion (absent manifest error).
(iv) Buyer will have no liability (for
indemnification or otherwise) with respect to the matters
described in Section 7(d)(i) unless (A) such matter
constitutes a Covered Breach, and (B) the total of all Adverse
Consequences with respect to all matters described in Section
7(d)(i), regardless of whether such Adverse Consequences arise
from a Covered Breach or not, exceeds the Basket, in which
case the Buyer shall be liable for all Adverse Consequences in
excess of the Basket. However, the limitations on indemnity
obligations contained in this Section 7(e)(iv) will not apply
to any breach of any representations and warranties made in
Section 3(b)(ii) (Authorization of Transaction).
(v) In no event shall the obligation of
the Sellers to indemnify the Indemnified Persons under Section
7(c)(i) exceed the aggregate sum of $5,000,000, except this
restriction shall not apply to claims for any breach of
Sections 3(a)(iv) (Company Shares), 4(b)(Capitalization),
4(i)(xiii), (xv), (xvii) and (xviii) (Events Subsequent to
October 1, 2003), 4(m) (Tax Matters), 4(x) (Employee
Benefits), 4(z) (Environmental Matters), the last sentence of
4(aa) (Certain Business Relationships With the Company), 5(g)
(Norfolk Easement) or 9(l) (Expenses).
(vi) In no event shall the obligation of
the Buyer to indemnify the Sellers under Section 7(d)(i)
exceed the aggregate sum of $5,000,000, except this
restriction shall not apply to claims for any breach of
Section 3(b)(ii) (Authorization of Transaction).
41
(vii) In addition, to the extent an
indemnification claim arises hereunder as a result of a third
party claim against an indemnified party, the Adverse
Consequences shall be deemed to include incidental,
consequential, special, enhanced and punitive damages to the
extent claimed by a third party against an indemnified party.
(f) Right to Set off; Escrow. Upon notice to
Sellers specifying in reasonable detail the basis for such set off,
Buyer may set off (or cause to be set off) any amount to which Buyer,
the Company or any other Indemnified Person may be entitled under
Section 7 against amounts otherwise payable under this Agreement, the
note described in Section 2(b)(ii) and any lease (or option to
purchase) between the Company (or the Buyer or any successor or assign
of the Company or Buyer) and any Affiliate of any of the Sellers
(including the lease agreements (with options to purchase) described in
Section 6(a)(v) above); provided, that, the set off right under the
note described in Section 2(b)(ii) shall be limited to amounts to which
Buyer, the Company or other Indemnified Persons may be entitled
pursuant to an indemnification claim made pursuant to Section 7(c)(iv).
Notwithstanding the preceding sentence, Buyer may only exercise the set
off rights pursuant to this Section 7(f) with respect to amounts
otherwise payable under this Agreement or any lease (or option to
purchase) between the Company (or the Buyer or any successor or assign
of the Company or Buyer) and any Affiliate of any of the Sellers
(including the lease agreements (with options to purchase) described in
Section 6(a)(v) above) if the amount sought, together with all other
claims previously made exceed the amount then held in escrow; provided,
in no event will the restriction in this sentence be deemed to apply to
set offs against the note referred to in Section 2(b)(ii). The exercise
of such right of set off by Buyer in good faith, whether or not
ultimately determined to be justified, will not constitute an event of
default under this Agreement or any other document contemplated herein.
Neither the exercise of nor the failure to exercise such right of set
off or to make a claim against the escrow will constitute an election
of remedies or limit Buyer, the Company and other Indemnified Persons
in any manner in the enforcement of any other remedies that may be
available to any of them. Sellers agree to execute all instructions to
the Escrow Agent and other documents required by the Escrow Agent in
order to release funds held by the Escrow Agent to satisfy Sellers'
indemnity obligations under Section 7 promptly after Sellers either
agree to the validity of such claim or a final nonappealable order is
issued by a court of competent jurisdiction or pursuant to binding
arbitration. Buyer's exercise of set off rights or rights to amounts
held under the Escrow Agreement may be made without regard to the
several nature of the liability of certain Sellers under this
Agreement.
(g) Matters Involving Third Parties.
(i) Promptly after receipt by an
indemnified party under Sections 7(c) or 7(d) above of notice
of the commencement of any matter which may give rise to a
claim against an indemnified party, such indemnified party
will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of
any liability that it may have to any indemnified party,
except to the extent that
42
the indemnifying party demonstrates that the defense of the
matter giving rise to the indemnified party's claim is
prejudiced by the indemnifying party's failure to give such
notice.
(ii) If any proceeding resulting from
the matters referred to in Sections 7(c) or (d) above is
brought against an indemnified party and it gives notice to
the indemnifying party of the commencement of such proceeding,
the indemnifying party will, unless the claim involves Taxes,
be entitled to participate in such proceeding and, to the
extent that it wishes (unless (A) the indemnifying party is
also a party to such proceeding and the indemnified party
determines in good faith that joint representation would be
inappropriate, or (B) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial
capacity to defend such proceeding and provide indemnification
with respect to such proceeding), to assume the defense of
such proceeding with counsel reasonably satisfactory to the
indemnified party (it being agreed that ▇▇▇▇▇ ▇▇▇▇▇▇ P.C. and
▇▇▇▇▇ ▇▇▇▇ LLP are each considered satisfactory for these
purposes) and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of
such proceeding, the indemnifying party will not, as long as
it diligently conducts such defense, be liable to the
indemnified party under Section 7 for any fees of other
counsel or any other expenses with respect to the defense of
such proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such
proceeding, other than reasonable costs of investigation. If
the indemnifying party assumes the defense of a proceeding, no
compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent
unless (1) there is no finding or admission of any violation
of applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of any federal, state, local or foreign
governments (and all agencies thereof) or any violation of the
rights of any Person and no effect on any other claims that
may be made against the indemnified party, (2) the sole relief
provided is monetary damages that are paid in full by the
indemnifying party and (3) the indemnified party will have no
liability with respect to any compromise or settlement of such
claims. If notice is given to an indemnifying party of the
commencement of any proceeding and the indemnifying party does
not, within 10 days after the indemnified party's notice is
given, give notice to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party
will be bound by any determination made in such proceeding or
any compromise or settlement effected by the indemnified
party.
(iii) Notwithstanding the foregoing, if
an indemnified party determines in good faith that there is a
reasonable probability that a proceeding may adversely affect
it or its Affiliates other than as a result of monetary
damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend,
compromise, or settle such proceeding, but the indemnifying
party will not be bound by any determination of a proceeding
so
43
defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
(iv) Sellers and Buyer hereby consent to
the non-exclusive jurisdiction of any court in which a
proceeding is brought against any indemnified party for
purposes of any claim that an indemnified party may have under
this Agreement with respect to such proceeding or the matters
alleged therein, and agree that process may be served on
Sellers with respect to such a claim anywhere in the world.
(h) Other Indemnification Provisions. Each of
the Sellers hereby agrees that he or it will not make any claim for
indemnification against the Company by reason of the fact that he or it
was a director, officer, employee, contractor or agent of the Company
or was serving at the request of the Company as a partner, trustee,
director, officer, employee, contractor, fiduciary or agent of another
entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and
whether such claim is pursuant to any statute, charter document, bylaw,
agreement, or otherwise). This prohibition shall not apply to any
rights a Seller may have to seek indemnification from the Company under
the articles of incorporation or bylaws of the Company, both as in
effect on the date hereof, with respect to any threatened, pending or
completed action, suit or proceeding (other than an action by or in the
right of the Company) not known as of the date hereof by any such
Seller or the Company, against such Seller in his or her capacity as an
officer, director or employee of the Company by reason of the fact that
such Seller was an officer, director or employee of the Company if such
Seller acted in good faith in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company; provided,
that, no such Seller shall have any right to seek indemnification from
the Company (or its successors) if the existence or assertion of such
indemnification claim (or the matter giving rise to any such Seller's
assertion of such indemnification claim) would constitute a breach of a
representation or warranty made by any Seller in this Agreement or if
such Seller is obligated to indemnify Buyer against such
indemnification claim (or the matter giving rise to such Seller's
assertion of such indemnification claim) pursuant to this Agreement.
8. Tax Matters. The following provisions shall govern
the allocation of responsibility as between Buyer and Sellers for certain Tax
matters following the Closing Date:
(a) Tax Filings. Sellers shall prepare or cause
to be prepared and file or cause to be filed all Tax Returns for the
Company for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. Sellers shall permit Buyer to review
and comment on each such Tax Return described in the preceding sentence
prior to filing and shall make such revisions to such Tax Returns as
are reasonably requested by Buyer. To the extent permitted by
applicable law, Sellers shall include any income, gain, loss, deduction
or other tax items for such periods on their Tax Returns in a manner
consistent with the Schedule K-1s prepared for such periods. Sellers
shall be liable for and pay any Taxes of the Company with respect to
such periods.
44
(b) Section 338(h)(10) Election. The Company and
each of the Sellers will join with the Buyer in making an election
under Section 338(h)(10) of the Code in connection with the purchase of
the Company Shares hereunder (and any corresponding elections under
state, local, or foreign tax law) (collectively a "Section 338(h)(10)
Election"). Buyer shall prepare or cause to be prepared and file or
cause to be filed the Section 338(h)(10)) Election. Buyer shall permit
Sellers to review and comment on the Section 338(h)(10) Election prior
to filing and shall make such revisions to the Section 338(h)(10)
Election as are reasonably requested by Sellers. Sellers will include
any income, gain, loss, deduction, or other tax item resulting from the
Section 338(h)(10) Election on their Tax Returns to the extent required
by applicable law.
(i) Section 338(h)(10) Gross-Up.
Notwithstanding any other provision of this Agreement, the
Buyer shall be responsible for an amount equal to: (i) the
excess of (A) the amount of Taxes actually payable by the
Sellers (net of any Tax benefits received by the Sellers) as a
result of the sale by the Sellers to the Buyer of the Company
Shares (the "S Corporation Sale") and the making by the Buyer
and the Sellers of the Section 338(h)(10) Election, over (B)
the amount of Taxes that would have been payable by the
Sellers as a result of the S Corporation Sale had the Section
338(h)(10) Election not been made; divided by (ii) 80.4%;
provided, however, that the Buyer shall not have any
obligation with respect to any portion of such excess that
results from the breach or inaccuracy of any representation or
warranty of the Sellers made in Sections 3(a) or 4 of this
Agreement or from the application of Section 1374 of the Code
to the extent the amount of built in gains exceeds $5,747,961
as of December 31, 2003. The amount for which the Buyer is
responsible shall be referred to as the "Section 338(h)(10)
Gross-Up". Buyer shall pay the Sellers $2,500,000 on the
Closing Date to be applied against the Section 338(h)(10)
Gross-Up.
(ii) Preparation of Tax Returns and
Section 338(h)(10) Gross-Up Computation. No later than April
1, 2004, Sellers shall deliver to Buyer (A) all Tax Returns
for the Company for all periods ending on or prior to the
Closing Date, (B) a detailed reconciliation showing (a) the
final computation of the Section 338(h)(10) Gross-Up, and (b)
the amount of cash that is to be exchanged between Buyer and
Sellers in settlement of the Section 338(h)(10) Gross-Up, and
(C) all supporting schedules.
(iii) Review of Section 338(h)(10)
Gross-Up. Buyer shall have 30 days to review the final
computation of the Section 338(h)(10) Gross-Up, and the amount
of cash that is to be exchanged between Buyer and Sellers in
settlement of the Section 338(h)(10) Gross-Up. If within 30
days of receiving the computation of the Section 338(h)(10)
Gross-Up pursuant to Section 8(b)(ii) hereof, Buyer provides
written notice to Sellers that it disagrees with any item
reflected in the Section 338(h)(10) Gross-Up computation or
the amount of cash that is to be exchanged between Buyer and
Sellers in settlement of the Section 338(h)(10) Gross-Up, the
parties shall in good ▇▇▇▇▇ ▇▇▇▇▇▇ with each other to resolve
any such disagreement. The failure of Buyer to provide the
notice described in the preceding sentence within the 30 day
period specified shall be
45
deemed to indicate that Buyer agrees with the Section
338(h)(10) Gross-Up computation. If within 10 days of receipt
by Sellers of the notice from Buyer described in Section
8(b)(iii), any disputed item remains unresolved, the parties
will have another 10 days to retain an Independent Third Party
to resolve any such dispute whose decision will be binding on
both parties.
(iv) Payment Procedures. Once the
parties have agreed on, or the Independent Third Party has
resolved any disputed items with respect to, the Section
338(h)(10) Gross-Up described in Section 8(b)(i), any amount
required to be paid pursuant to the Section 338(h)(10)
Gross-Up, less all payments already made pursuant to Section
8(b)(i), shall be paid within 10 days of the agreement on or
resolution of such documents.
(c) Allocation of Purchase Price. (d) Buyer, the
Company and Sellers agree that the Purchase Price, the Section
338(h)(10) Gross-Up and the liabilities of the Company (plus other
relevant items) will be allocated to the assets of the Company for all
purposes (including Tax and financial accounting) as follows: the
Purchase Price, the Section 338(h)(10) Gross-Up and the liabilities of
the Company (plus other relevant items) will be allocated in a manner
consistent with Code Section 338 and the regulations thereunder; the
fair market value of the real property will be based on fair market
value appraisals performed by ▇▇▇▇ & ▇▇▇▇▇▇▇ dated August 23, 2003; the
fair market value of the revenue equipment and all other fixed assets
will be based on net book value of assets at January 31, 2004 adjusted
to the extent necessary for any purchases, sales and depreciation from
January 31, 2004 through the Closing Date; the allocation to all other
current assets and liabilities will be based on the applicable book
value of the current assets and liabilities at January 31, 2004,
adjusted to the extent necessary for any income or loss from January
31, 2004 through the Closing Date; and any remaining Purchase Price
including Section 338(h)(10) Gross-Up not allocable to tangible assets
of the Company will be allocated to any identifiable intangible assets
and goodwill. Buyer will provide to Sellers on or before March 22, 2004
the final allocation per the agreement set forth in the previous
sentence. Buyer, the Company and the Sellers will file all Tax Returns
(including amended returns and claims for refund) and information
reports in a manner consistent with such allocation.
(d) S Corporation Status. Other than entering
into the transaction contemplated by this Agreement, the Company and
Sellers will not revoke the Company's election to be taxed as an S
corporation within the meaning of Code Sections 1361 and 1362. The
Company and Sellers will not take or allow any action that would result
in the termination of the Company's status as a validly elected S
corporation within the meaning of Code Sections 1361 and 1362.
(e) Cooperation on Tax Matters.
(i) Buyer and Sellers shall, and Buyer
shall cause the Company to, cooperate fully, as and to the
extent reasonably requested by the other party, in connection
with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to
Taxes. Such
46
cooperation shall include the retention and (upon the other
party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The Buyer
shall cause the Company (A) to retain all books and records
with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the
extent notified by Buyer or Sellers, any extensions thereof)
of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority,
and (B) to give the Sellers reasonable written notice prior to
transferring, destroying or discarding any such books and
records and, if the Sellers so request, the Buyer shall cause
the Company to allow the Sellers to take possession of such
books and records.
(ii) Buyer and Sellers further agree,
upon request, to provide one another with all information that
any of them may be required to report pursuant to Section 6043
of the Code and all Treasury Department Regulations
promulgated thereunder.
(f) Tax Sharing Agreements. All tax sharing
agreements or similar agreements with respect to or involving the
Company shall be terminated as of the Closing Date and, after the
Closing Date, the Company shall not be bound thereby or have any
liability thereunder.
(g) Certain Taxes and Fees. All transfer,
documentary, sales, use, stamp, registration and other such Taxes, and
all conveyance fees, recording charges and other fees and charges
(including any penalties and interest) incurred in connection with the
consummation of the transaction contemplated by this Agreement shall be
the responsibility of the Sellers.
9. Miscellaneous.
(a) Nature of Certain Obligations. The
representations, warranties, and covenants of Sellers in this Agreement
are several and not joint obligations among each of the Sellers other
than ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇. This means that each Seller other
than ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ will be responsible to the extent
provided in Section 7 above for only a proportionate amount of any
Adverse Consequences the Buyer may suffer as a result of any breach
thereof which proportionate amount shall be calculated on a pro rata
basis with respect to the percentage of Company Shares owned by the
Sellers. The representations, warranties, and covenants of Sellers in
this Agreement are joint and several obligations with respect to ▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇. This means that each of ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇ will be responsible to the extent provided in Section 7 above for
the entirety of any Adverse Consequences the Buyer may suffer as a
result of any breach thereof.
(b) Press Releases and Public Announcements. No
Party shall issue any
47
press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the Buyer and the Sellers; provided, however, that Buyer
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly traded securities (or that of its parent) (in which case the
Buyer will use its commercially reasonable best efforts to advise ▇▇▇▇▇
▇. ▇▇▇▇▇ prior to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including
the documents referred to herein) constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement
shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written approval
of the Buyer and the Sellers; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more
of its Affiliates, (ii) designate one or more of its Affiliates to
perform its obligations hereunder and (iii) assign any or all of its
rights and interests hereunder to any of its lenders or otherwise in
connection with a sale of substantially all of the assets of the
Company (in any or all of which cases (i), (ii) and (iii) above, the
Buyer nonetheless shall remain responsible for the performance of all
of its obligations hereunder).
(f) Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument.
(g) Headings. The section headings contained in
this Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
(h) Notices. All notices, requests, demands,
claims, and other communications hereunder will be in writing. Any
notice, request, demand, claim, or other communication hereunder shall
be deemed duly given if (and then two business days after) it is sent
by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
48
If to the Sellers: Copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Buyer: Copy to:
▇▇▇▇ Motor Freight Line, Inc. ▇▇▇▇▇ ▇▇▇▇ LLP
11465 ▇▇▇▇▇ Creek Parkway ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Attention: President ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic laws of the
State of Nebraska without giving effect to any choice or conflict of
law provision or rule (whether of the State of Nebraska or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Nebraska.
(j) Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall be in
writing and signed by the Buyer and the Sellers. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty
or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(k) Equitable Modification. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid or unenforceable
under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity or unenforceability, without
invalidating the remainder of this Agreement, and shall be reformed and
enforced to the maximum extent permitted under applicable law.
(l) Expenses. The Buyer will bear its own costs
and expenses
49
(including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Sellers represent
and warrant that attached as Schedule 9(l) is a true and correct list
of all invoices for costs and expenses of the Sellers or the Company
(and their respective Affiliates) (including legal fees and expenses)
in connection with the transactions contemplated hereby that have on or
before the date hereof been paid by the Company or received by the
Company. Except with respect to the invoices listed on Schedule 9(l),
the Sellers will bear the cost and expenses of the Company and Sellers
(and their respective Affiliates) (including legal fees and expenses)
in connection with the transactions contemplated hereby.
(m) Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and
no presumption or burden of proof shall arise favoring or disfavoring
any Party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without
limitation. Reference to any gender includes each other gender, the
masculine, the feminine and neuter. The Parties intend that each
representation, warranty, and covenant contained herein shall have
independent significance, provided, however, in no event shall any
Party incur duplicate liability for the same Adverse Consequences by
reason of the facts that the same result from the breach of more than
one representation, warranty or covenant. If any Party has breached any
representation, warranty, or covenant contained herein in any respect,
the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of
the first representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and
Schedules. The Exhibits, Annexes, and Schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.
(o) Specific Performance. Each of the Parties
acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to temporary, preliminary and permanent
injunctive relief to prevent any breach or threatened breach of the
provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction
over the Parties and the matter (subject to the provisions set forth in
Section 9(p) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(p) Submission to Jurisdiction. Subject
to Section 9(q), each of the Parties submits to the exclusive venue and
jurisdiction of any federal court sitting in Omaha, Nebraska, in any
action or proceeding arising out of or relating to this Agreement and
50
agrees that all claims in respect of the action or proceeding may be
heard and determined exclusively in any such court. Each Party also
agrees not to bring any action or proceeding arising out of or relating
to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a
copy of the process to the Party to be served at the address and in the
manner provided for the giving of notices in Section 9(h) above.
Nothing in this Section 9(p), however, shall affect the right of any
Party to serve legal process in any other manner permitted by law or at
equity.
(q) Arbitration. Except for disputes,
controversies, or claims arising under Section 2, 5(b), 5(c), 5(d) or
9(p) above, any dispute, controversy, or claim arising under or
relating to this Agreement or any breach or threatened breach thereof
("Arbitrable Dispute") shall be resolved by final and binding
arbitration administered by the American Arbitration Association
("AAA") under its Commercial Arbitration Rules, subject to the
following:
(i) Any Party may demand that any
Arbitrable Dispute be submitted to binding arbitration. The
demand for arbitration shall be in writing, shall be served on
the other party in the manner prescribed herein for the giving
of notices, and shall set forth a short statement of the
factual basis for the claim, specifying the matter or matters
to be arbitrated.
(ii) The arbitration shall be conducted
by a panel of three arbitrators, one selected by Buyer, one
selected by Sellers and the third to be selected jointly by
the arbitrators selected by Buyer and Sellers (collectively,
the "Arbitrators") who shall conduct such evidentiary or other
hearings as they deem necessary or appropriate and thereafter
shall make their determination as soon as practicable. Any
arbitration pursuant hereto shall be conducted by the
Arbitrators under the guidance of the Federal Rules of Civil
Procedure and the Federal Rules of Evidence, but the
Arbitrators shall not be required to comply strictly with such
Rules in conducting any such arbitration. All such arbitration
proceedings shall take place in Des Moines, Iowa.
(iii) Except as provided herein
(including pursuant to Section 7 to the extent such items
constitute Adverse Consequences):
(A) each party shall bear its own
"Costs and Fees," which are defined as all reasonable
pre-award expenses of the arbitration, including
travel expenses, out-of-pocket expenses (including,
but not limited to, copying and telephone) witness
fees, and reasonable attorney's fees and expenses;
(B) the fees and expenses of the
Arbitrators and all other costs and expenses incurred
in connection with the arbitration ("Arbitration
Expenses") shall be borne equally by the parties
thereto; and
51
(C) notwithstanding the foregoing, the
Arbitrators shall be empowered to require any one or
more of the parties thereto to bear all or any
portion of such Costs and Fees and/or the Arbitration
Expenses in the event that the Arbitrators determine
such party has acted unreasonably or in bad faith.
(iv) The Arbitrators shall have the
authority to award any remedy or relief that a court of the
State of Nebraska could order or grant, including, without
limitation, specific performance of any obligation created
under this Agreement, the awarding of amounts in respect of
Adverse Consequences and punitive damages, the issuance of
temporary, preliminary and permanent injunctive relief, or the
imposition of sanctions for abuse or frustration of the
arbitration process. The Arbitrators shall render their
decision and award upon the concurrence of at least two of
their number. Such decision and award shall be in writing and
counterpart copies thereof shall be delivered to each party
hereto. The decision and award of the Arbitrators shall be
binding on all parties hereto. In rendering such decision and
award, the Arbitrators shall not add to, subtract from or
otherwise modify the provisions of this Agreement, except as
provided in Section 9(k) above and shall make its
determinations in accordance therewith. Any party to the
arbitration may seek to have judgment upon the award rendered
by the Arbitrators entered in any court described in Section
9(p) above having jurisdiction thereof.
(v) Each of the Parties agrees that it
will not file any suit, motion, petition or otherwise commence
any legal action or proceeding for any matter which is
required to be submitted to arbitration as contemplated herein
except in connection with the enforcement of an award rendered
by the Arbitrators. Upon the entry of an order dismissing or
staying any action or proceeding filed contrary to the
preceding sentence, the Party which filed such action or
proceeding shall promptly pay to the other Party the
attorneys' fees, costs and expenses incurred by such other
Party prior to the entry of such order and shall be liable for
such fees, costs and expenses of any subsequent appeals.
(r) Appointment of Sellers' Representative.
(i) Sellers hereby appoint ▇▇▇▇▇ ▇.
▇▇▇▇▇ as their representative, to be their true and lawful
attorney-in-fact for all matters in connection with this
Agreement, the Escrow Agreement and the promissory note
described in Section 2(b)(ii) (the "Subject Documents"),
including without limitation the acceptance of any claim by
Buyer, and the compromise of any disputes between Buyer and
Sellers relating to any Subject Document. The power of
attorney granted to the Sellers' representative appointed
hereunder is coupled with an interest and will continue in
full force and effect notwithstanding the subsequent death or
incapacity of a Seller. The representative appointed hereunder
will act on behalf of Sellers with respect to all matters
requiring action by Sellers under the Subject Documents. ▇▇.
▇▇▇▇▇ hereby accepts such appointment. In the event of the
incapacity of ▇▇. ▇▇▇▇▇, a successor representative for
Sellers will be
52
appointed by the holders or former holders of a majority of
the Company Shares.
(ii) The Sellers' representative
appointed hereunder shall take all actions required to be
taken by Sellers under the Subject Documents and may take any
action contemplated by the Subject Documents.
(iii) In the event that Buyer gives
notice to the Sellers' representative appointed hereunder of a
claim for which indemnification may be sought, the Sellers'
representative shall have the authority to determine, in his
or her sole judgment, whether to retain counsel (and to select
that counsel) to protect Sellers' interests, whether to assume
the defense of or otherwise to control the handling of the
claim, whether to consent to indemnification and to make all
other decisions required to be made by Sellers pursuant to the
Subject Documents, including without limitation whether to
consent or withhold his or her consent to any settlement or
compromise of a claim.
(iv) The Sellers' representative
appointed hereunder shall not be liable to any Seller for any
act or omission taken pursuant to or in conjunction with the
Subject Documents, except for his or her own gross negligence
or willful misconduct. Sellers shall indemnify and hold the
Sellers' representative, and each successor thereof, harmless
from any and all liability and expenses (including, without
limitation, counsel fees) which may arise out of any action
taken or omitted by him or her as Sellers' representative in
accordance with the Subject Documents, as the same may be
amended, modified or supplemented, except such liability and
expense as may result from the gross negligence or willful
misconduct of the Sellers' representative.
(v) The Sellers' representative
appointed hereunder agrees that within a reasonable time after
receipt of notice of a claim, he or she shall give each Seller
notice of same and shall from time to time keep Sellers
apprised as to developments with respect to such claim. Such
notices shall be sent to Sellers at his or her addresses as
may be communicated to the Sellers' representative in writing
by Sellers.
(vi) Any action taken by the Sellers'
representative appointed hereunder may be considered by Buyer
to be the action of Sellers for whom such action was taken for
all purposes of the Subject Documents.
*****
53
EXECUTION COPY
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement on the date first above written.
▇▇▇▇ MOTOR FREIGHT LINE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. O'Dell
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. O'Dell
Title: President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
/s/ ▇▇▇ ▇. ▇▇▇▇
---------------------------------------
▇▇▇ ▇. ▇▇▇▇, an individual
/s/ ▇.▇. ▇▇▇▇▇▇▇
---------------------------------------
▇. ▇. ▇▇▇▇▇▇▇, an individual
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ TRUST UNDER TRUST
AGREEMENT DATED JANUARY 28, 1998,
Shareholder
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
▇▇▇▇▇ BROS. TRANSFER, INC.
(for purposes of the Section 338(h)(10)
election provisions and Section 5(e))
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Signature Page for Stock Purchase Agreement
SPOUSAL CONSENT
The undersigned, spouses of Sellers, consent to and agree that his/her
interest in any property (marital or otherwise) that is subject to this
Agreement is subordinate and subject to the rights of Buyer.
/s/ ▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
Print Name: ▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Signature Page for Stock Purchase Agreement
2