EXHIBIT 2.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made on August 12, 2004, between
Xxxxxx X. Xxxxx (the "Seller") and Universal Truckload Services, Inc., a
Michigan corporation ("Buyer").
BACKGROUND
A. AFA Enterprises, Inc. ("Company") is a Pennsylvania corporation and
through its subsidiaries is engaged in the business of providing trucking,
transportation brokerage and logistics services between points in the
forty-eight (48) states and Canada, with primary operations being
conducted between points east of the Mississippi River (the "Business"),
and having terminals and other facilities at the sites listed on attached
Exhibit A (collectively, the "Premises").
B. Seller has been engaged in the Business for several decades, including
periods of time prior to his ownership of the capital stock of the Company
and has, through his personal contacts with customers, agents and others,
built up considerable and valuable relationships, reputation and personal
goodwill in the industry (the "Seller's Personal Goodwill"). Seller has
used Seller's Personal Goodwill in the Business as well as in certain
predecessor businesses with which Seller has been associated. Seller has
never transferred Seller's Personal Goodwill to the Company, any of its
subsidiaries or any such predecessor businesses (or agreed to do so), nor
has Seller heretofore executed any covenant not to compete or employment
agreement with the Company or any of its subsidiaries, but has been an "at
will" employee within the Corporate Group (as hereafter defined).
C. The future success of the Business, during the period of Buyer's
ownership, is dependent, during the transition period, upon the effective
transfer of Seller's Personal Goodwill to Buyer.
D. Seller owns all of Company's issued and outstanding capital stock, being
shares of common stock. Buyer desires to purchase from Seller and Seller
desires to sell to Buyer, all of the issued and outstanding shares of the
Company's common stock (the "Purchased Shares") and the Seller's Personal
Goodwill on the terms and subject to the conditions of this Agreement.
E. As a condition to Buyer's willingness to purchase the Purchased Shares and
Seller's Personal Goodwill from Seller, Seller has agreed, in order to
assure the smooth transition of the Business and the transfer of Seller's
Personal Goodwill,
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to provide consulting services to Buyer for four (4) years after the
Closing (as defined below) pursuant to a Consulting Agreement
substantially in the form of attached Exhibit B (the "Consulting
Agreement").
F. As a further condition to Buyer's willingness to purchase the Purchased
Shares and Seller's Personal Goodwill, Seller has agreed to not compete
with Buyer or Company (or its subsidiaries) in the conduct of the
Business, as provided in a Covenant Not to Compete in substantially the
form of attached Exhibit C (the "Covenant Not to Compete ").
G. The Company has various wholly owned subsidiaries, all of which are listed
on Schedule 8.7 (hereafter, the Company and its subsidiaries shall
sometimes be collectively referred to as the "Corporate Group" and members
of the Corporate Group shall sometimes be referred to as the "Corporate
Group Members").
H. Buyer hereby represents and Seller acknowledges that a material reason for
Buyer entering into the transactions contemplated hereby is the various
business relationships built up by Seller over the years (the "Key
Relationships") and the continuation of the Key Relationships after the
closing of said transactions is of utmost importance to Buyer.
I. Seller hereby represents and Buyer acknowledges that a material objective
of Seller is that the Key Relationships continue to be maintained for the
benefit of the Corporate Group Members prior to the closing of said
transaction and if the transaction is not closed the Key Relationships
continue without change after the termination of this Agreement, all of
which is of utmost importance to Seller.
AGREEMENTS
NOW, THEREFORE, in consideration of the Background and the terms and
conditions set forth in this Agreement, the Seller and Buyer agree as follows:
1. Agreement of Purchase and Sale.
1.1 On the terms and subject to the conditions set forth in this
Agreement, Seller agrees to sell, assign, transfer, set over,
convey, and deliver to Buyer the Purchased Shares, and Seller's
Personal Goodwill, on the Closing Date but effective as of 12:01
A.M. on August 8, 2004 (the "Effective Date"), and Buyer agrees to
purchase the Purchased Shares and Seller's Personal Goodwill from
Seller. The sale and transfer of the Purchased Shares shall be made
free, clear, and discharged of and from all Encumbrances (as defined
in Section 8.4), and the sale and transfer of Seller's Personal
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Goodwill shall be made free, clear and discharged of all
Encumbrances created by an act of Seller.
2. Purchase Price.
2.1 Purchase Price. The purchase price Buyer will pay to Seller for the
Purchased Shares and the Seller's Personal Goodwill (the "Purchase Price")
is Thirteen Million Five Hundred Thousand Dollars ($13,500,000.00),
subject to adjustment as provided for in Section 2.3. The Purchase Price
is allocated, as between the Purchased Shares and Seller's Personal
Goodwill, $8,500,000 to the Purchased Shares and $5,000,000 to Seller's
Personal Goodwill.
2.2 Payment of Purchase Price. The Purchase Price shall be paid by Buyer on
the Closing Date against receipt of the certificates for the Purchased
Shares duly endorsed for transfer or accompanied by a duly executed stock
power, and Seller's xxxx of sale transferring Seller's Personal Goodwill
(the "Xxxx of Sale") in the form of attached Exhibit D. Eleven Million
($11,000,000) Dollars of the Purchase Price, shall be paid to Seller on
the Closing Date by wire transfer of funds. Two Million Five Hundred
Thousand ($2,500,000) Dollars of the Purchase Price (the "Escrowed
Amount") shall be deposited into escrow on the Closing Date with U.S. Bank
National Association, of Detroit, MI, as Escrow Agent (the "Escrow Agent")
by wire transfer of funds. The Escrowed Amount shall be held, invested,
administered and disbursed as provided in Section 2.3 and pursuant to an
Escrow Agreement between Buyer, Seller and the Escrow Agent, in form as
per attached Exhibit E. The Escrowed Amount shall be divided into two (2)
distinct and separate escrow accounts as follows:
(a) One in the amount of One Million Dollars ($1,000,000) to serve as
security only for the balance sheet adjustment provisions under
Section 2.3(a) and the indemnification adjustment provisions under
Section 2.3(c) (the "Balance Sheet Escrow").
(b) One in the amount of One Million Five Hundred Thousand Dollars
($1,500,000) to serve only as security for any Loss of Business
Reduction under Section 2.3(b) (the "Loss of Business Escrow")
(subject to the provisions, however, of Section 2.3(a)(5)).
(c) The Balance Sheet Escrow shall not serve as security for any
Purchase Price adjustment under Section 2.3(b) and the Loss of
Business Escrow shall not serve as security for any Purchase Price
adjustment under Section 2.3(a) (subject to the provisions, however,
of Section 2.3(a)(5)).
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(d) The Escrow Agreement shall provide that all interest earned on the
Escrowed Amount will be paid to Seller.
2.3 Purchase-Price Adjustments.
(a) Balance Sheet Adjustments.
(1) Seller shall cause Company to prepare an estimated
consolidated balance sheet of the Corporate Group as of the
Effective Date or another date agreed on by Buyer and Seller
(the "Preliminary Balance Sheet"). The Preliminary Balance
Sheet (i) shall contain line items substantially consistent
with the line items in Seller's Balance Sheet dated December
31, 2003 (a true copy of which is contained in Schedule 8.10),
and (ii) shall be prepared on a basis consistent with the
Corporate Group's prior interim statements, and (iii) shall be
accompanied by a calculation of the Company's Net Worth (as
defined below).
(2) If the Preliminary Balance Sheet is completed on the Closing
Date and the Company's Net Worth as shown on the Preliminary
Balance Sheet is less than $1,995,892, the Purchase Price paid
on the Closing Date shall be reduced by the amount of such
difference.
(3) Seller shall cause, at Seller's sole expense, Xxxxxx Xxxxxxxxx
(the "Closing Auditor") to prepare a Closing Audit ("Closing
Audit") certified to Buyer, Seller and the Corporate Group,
which shall consist of the Corporate Group's consolidated
balance sheet as of the Effective Date (the "Closing Balance
Sheet"). The Closing Balance Sheet (i) shall contain line
items substantially consistent with the line items in Seller's
Balance Sheet dated December 31, 2003; (ii) shall be prepared
in accordance with generally accepted accounting principles
consistently applied ("GAAP") and (iii) shall be accompanied
by a calculation of the Company's Net Worth.
(4) In preparing the Closing Audit, the Closing Auditor shall
conduct the examination of the Corporate Group in accordance
with generally accepted auditing standards issued by the
American Institute of Certified Public Accountants. The
Closing Auditor shall use its best efforts to complete the
Closing Audit not later than 60 days after the Closing Date.
All adjustments proposed by the Closing Auditor shall be
booked by the Closing Auditor as part of the Closing Balance
Sheet. The Closing Balance Sheet and income statement, shall
be delivered to Buyer and Seller
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immediately upon its completion, together with the Closing
Auditor's opinion that the Closing Balance Sheet was prepared
in accordance with this Section 2.3(a), a calculation of
Company's Net Worth and a schedule of any required adjustment
to the Purchase Price (the "Closing Audit Deliverables").
Buyer and its authorized representative shall have access to
the Closing Auditor's work papers. Seller and Buyer shall have
30 days after receiving the Closing Audit Deliverables to
deliver a written notice to the other party of any objections
to the Closing Balance Sheet, the calculation of Company's Net
Worth and any adjustment of the Purchase Price. Any such
notice of objections shall be in writing and shall state in
reasonable detail the basis for each objection and the amount
of adjustment that the party giving the notice believes is
required. If Buyer and Seller cannot agree with respect to the
Closing Balance Sheet, the calculation of Company's Net Worth
or the adjustment of the Purchase Price within 15 days after
the delivery of a notice of objections or such later date as
Buyer and Seller may agree on, the disputed items shall be
resolved by one of the so-called Big 4 accounting firms,
excluding Deloitte & Touche, LLP, as mutually selected by
Buyer and Seller (the "Independent Accounting Firm"). Any
items not in dispute shall be deemed stipulated by Buyer and
Seller and shall not be determined by the Independent
Accounting Firm. The determination of the Independent
Accounting Firm shall be made within thirty (30) days after
the Independent Accounting Firm has been engaged and shall be
binding and conclusive. Buyer and Seller shall pay equally all
costs and expenses relating to the services provided by the
Independent Accounting Firm.
(5) If Company's Net Worth as set forth on the Closing Balance
Sheet is less than $1,995,892, then the Purchase Price shall
be reduced, to the extent it has not already been reduced
pursuant to Section 2.3(a)(2), by the difference. The Escrow
Agent shall be instructed to deliver the amount of the
Purchase Price reduction to Buyer from the Balance Sheet
Escrow, and to deliver to Seller an amount (if any) sufficient
to reduce the remaining balance of the Balance Sheet Escrow to
Five Hundred Thousand ($500,000) Dollars. In the event that
such Purchase Price reduction shall exceed the Balance Sheet
Escrow, the Escrow Agent shall be instructed to deliver the
amount of the deficiency to Buyer from the Loss of Business
Escrow.
If the Company's Net Worth as set forth on the Closing Balance
Sheet is more than $1,995,892, then the Purchase Price shall
be
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increased by the sum of the (i) amount of any reduction
previously made pursuant to Section 2.3(a)(2) and (ii) the
difference between the Company's Net Worth as set forth on the
Closing Balance Sheet and $1,995,892, and the amount of the
Purchase Price increase shall be paid by Buyer to Seller. The
Escrow Agent shall be instructed to deliver to Seller an
amount sufficient to reduce the remaining balance of the
Balance Sheet Escrow to Five Hundred Thousand ($500,000)
Dollars.
The aforesaid payments shall be made by the Escrow Agent or
Buyer, as applicable, within five (5) business days after the
Closing Balance Sheet has been accepted by Seller and Buyer or
any disputes have been resolved by the Independent Accounting
Firm. If, after the disbursements described above have been
made, the balance of the Balance Sheet Escrow is less than
Five Hundred Thousand ($500,000) Dollars, the Escrow Agent
shall be instructed to transfer from the Loss of Business
Escrow to the Balance Sheet Escrow an amount sufficient to
restore the Balance Sheet Escrow to $500,000. In the event the
balance in the Loss of Business Escrow is not adequate to
restore the balance of the Balance Sheet Escrow to Five
Hundred Thousand ($500,000) Dollars or the Loss of Business
Escrow has been disbursed pursuant to the provisions of
2.3(b), Seller shall deliver to the Escrow Agent an amount
sufficient to restore the Balance Sheet Escrow to Five Hundred
Thousand ($500,000) Dollars within seven (7) days after
receiving notice of the aforesaid deficiency from Buyer.
(6) Any instructions to the Escrow Agent under Section 2.3(a)(5)
shall be executed and delivered jointly by Seller and Buyer,
or, if they cannot agree on such instructions, by the
Independent Accounting Firm.
(7) Any Purchase Price adjustments under this Section 2.3(a) shall
first be allocated to the Purchase Price allocated to the
Purchased Shares and then to the Seller's Personal Goodwill
(without limitation as to the right to offset the amount of
any Purchase Price reduction, if in excess of such allocation,
to the balance of the Purchase Price).
(8) The term Company's Net Worth shall mean an amount equal to the
total assets minus the total liabilities reflected on the
Preliminary Balance Sheet or the Closing Balance Sheet, as the
context indicates, prepared on a consolidated basis for the
Corporate Group, and
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with respect to the Closing Balance Sheet, prepared in
accordance with GAAP.
(b) Adjustments for Loss of Business.
During the forty five (45) day period following the Representation Date
[as hereafter defined] ("Forty Five Day Measuring Period"), each of Buyer
and Seller shall notify the other in writing by facsimile, overnight
letter or email, within two (2) business days after being advised or
obtaining knowledge that any Member of the Corporate Group has lost
Business because one or more Major Customers, Major Agents, Major Fleets,
or Major Company Offices, as defined below (collectively, the "Key
Parties"), have discontinued or intend to discontinue doing business with
any member of the Corporate Group or Buyer during the Forty Five Day
Measuring Period as a result of Seller's sale of the Purchased Shares and
Seller's Personal Goodwill under this Agreement ("Business Lost Due to the
Sale"). Business Lost Due to the Sale shall not include any loss of
business (i) caused by changes in the business methods, policies,
procedures, payment amounts and terms, and similar changes made by the
Corporate Group or Buyer after the Representation Date that apply to the
Key Parties, excluding changes brought about by or due to requirements of
law or governmental regulation (or changes therein) or arising by virtue
of correcting or addressing any matter involving any material
misrepresentation by Seller under this Agreement, or (ii) occurring in the
ordinary course of business due to bankruptcy or death of Key Parties, or
(iii) caused by fluctuations in the economy resulting in the Key Party
involved ceasing all business operations as a result of a substantial
customer ceasing all or part of an operation, or (iv) resulting from the
decision by a member of the Corporate Group or Buyer to discontinue the
Business relationship with any of the Key Parties for any reason. As used
herein, the following terms are defined as follows:
(1) "Major Customer" shall mean any customer who generated One
Million ($1,000,000) Dollars or more in revenue (the
"Threshold Revenue Amount") to the Corporate Group during
calendar year 2003 and who did not discontinue doing business
with the Corporate Group before the Representation Date;
(2) "Major Agent" shall mean any commission or other agent who
generated the Threshold Revenue Amount to the Corporate Group
during calendar year 2003 and who did not discontinue doing
business with the Corporate Group before the Representation
Date;
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(3) "Major Fleet" shall mean any fleet of ten (10) or more trucks
which are under common ownership and who did not discontinue
doing business with the Corporate Group before the
Representation Date;
(4) A "Major Company Office" shall mean any terminal owned by the
Corporate Group which generated the Threshold Revenue Amount
to the Corporate Group during calendar year 2003 and who did
not discontinue doing business with the Corporate Group before
the Representation Date.
Seller and Buyer acknowledge that the above definitions may involve some
overlap or duplication in the calculation of the revenues generated by the
defined parties. For example, revenue generated by a Major Customer may also be
included in revenue generated by a Major Agent. Seller and Buyer agree that it
is the intention of the parties that for purposes of determining the
applicability of this Section and the calculation of the amount of the Business
Lost Due to the Sale, no overlapping or duplicate revenue shall be included or
taken into account and such amounts shall be calculated solely on the basis of
the 2003 revenue actually generated by the Key Parties involved for the
Corporate Group.
A written list of the Key Parties and the respective revenue generated in
2003 shall be compiled by Seller as Schedule 2.3(b) and delivered to Buyer at
Closing, shall be warranted by Seller as being complete and accurate as to the
identity of the Key Parties and the amounts of revenue indicated thereon.
In the event that there has been Business Lost Due to the Sale during the
Forty Five Day Measuring Period, the Purchase Price shall be reduced by nineteen
and 28/100 (19.28%) percent of the revenue received by the Corporate Group
during calendar year 2003 and generated by the applicable Key Parties involved
that have resulted in Business Lost Due to the Sale. For any Business Lost Due
to the Sale with respect to a loss of Major Fleet, as defined above, the revenue
involved for 2003 would be the actual revenue produced by the trucks involved
during 2003. Any Purchase Price reduction under this Section 2.3(b) shall be
referred to as a "Loss of Business Reduction." Notwithstanding any language
contained herein, in no event will the Loss of Business Reduction exceed Three
Million Five Hundred Thousand Dollars ($3,500,000).
For example, if a Customer generated $1,500,000 in Revenue to the
Corporate Group during 2003, and that Customer shall discontinue its business
relationship with the Corporate Group for a reason that comes within the
definition of Business Lost Due to the Sale, then the Purchase Price shall be
reduced by $289,200, subject to adjustment for overlapping or duplicate revenue.
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Upon the expiration of the Forty Five Day Measuring Period, if Buyer or
Seller have not delivered to the other any notices of Business Lost Due to the
Sale during the Forty Five Day Measuring Period or within two (2) business days
thereafter, the Escrow Agent shall be instructed to deliver the Loss of Business
Escrow to Seller (subject to any prior transfers to the Balance Sheet Escrow
provided for in subparagraph 2.3(a)(5)).
If any notices of Business Lost Due to the Sale have been delivered by
Buyer or Seller during the time periods provided above, within ten (10) business
days after the expiration of the Forty Five Day Measuring Period, Buyer shall
deliver to Seller (i) a complete list of all Key Parties which have discontinued
doing business with the Corporate Group and which allegedly constitute Business
Lost Due to the Sale (to the extent such information has not already been
provided to Seller), (ii) all correspondence and documents relating to the
Business Lost Due to Sale, (iii) a calculation of the 2003 revenue attributable
to each such Key Party, adjusted for overlapping or duplicate revenue, (iv) a
calculation of the net amount of Business Lost Due to the Sale and (v) the
proposed Loss of Business Reduction.
Seller shall have ten (10) business days after receipt of the required
information from Buyer within which to object in writing to any or all of the
claims set forth in Buyer's notice.
If Seller accepts Buyer's conclusions or fails to submit written
objections within the aforesaid ten (10) business day period, the Escrow Agent
shall be instructed to deliver the uncontested Loss of Business Reduction to
Buyer and to deliver the balance of the Loss of Business Escrow to Seller
(subject to any prior transfers pursuant to Section 2.3(a)(5)). If the Loss of
Business Reduction exceeds the Loss of Business Escrow, then Seller shall pay
the deficiency to Buyer upon written demand, together with interest at the prime
rate of interest from time to time charged by First Tennessee Bank National
Association from and after the date which is seven (7) days after the date of
such written demand.
If Seller objects to any or all of the Loss of Business Reduction claimed
by Buyer, the Escrow Agent shall be instructed to deliver any undisputed portion
of the Loss of Business Reduction to Buyer, to continue to hold the disputed
portion of the Loss of Business Reduction in the Loss of Business Escrow pending
resolution of the dispute, and to distribute any balance of the Loss of Business
Escrow to Seller (subject to any prior transfers pursuant to Section 2.3(a)(5)).
If the parties are not able to resolve any disputes with respect to
Buyer's claim for a Loss of Business Reduction within ten (10) business days
after Seller's objections referred to above:
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(i) If the total amount in dispute is $1,000,000 or less, the matter
will be submitted to binding arbitration to the Transportation ADR
Council, Inc. ("ADR Council"). The matter shall be disposed of in
accordance with the Administrative Rules for Arbitration (the
"Arbitration Rules") promulgated by ADR Council following an
evidentiary hearing, unless the parties mutually agree to a more
expedited ADR Council procedure. Michigan substantive law, however,
shall be applied in the arbitration and shall govern the arbitrator,
and all references in the Rules to the law of the State of Missouri
(or any other state) shall be deemed to refer to Michigan law.
(ii) The dispute will be determined by a single arbitrator selected
within ten (10) business days after the expiration of the aforesaid
ten (10) business day period. Seller and Buyer shall each use their
respective best efforts to conclude the arbitration within sixty
(60) days after the arbitrator is selected. The arbitrator's
decision shall be final and binding on the parties. The fees and
expenses of the arbitration proceeding shall be shared equally by
Seller and Buyer, except that each party shall be responsible for
the fees and expenses of its respective legal counsel and witnesses.
A judgment on the arbitration award may be entered by any court of
competent jurisdiction permitted under Section 13.5.
(iii) If the amount in dispute is more than $1,000,000, and the parties do
not agree to submit such dispute to the arbitration procedures set
forth above, either party shall have the right to litigate the
matter before any court of competent jurisdiction permitted under
Section 13.5.
Within five (5) business days after any dispute is finally resolved
either by agreement of the parties, binding arbitration decision or a final,
nonappealable court order, the Escrow Agent shall distribute the balance of the
Loss of Business Escrow in accordance with any such settlement agreement,
arbitration award or court order (subject to any prior transfers pursuant to
Section 2.3(a)(5)). If the Loss of Business Reduction exceeds the Loss of
Business Escrow, then Seller shall pay the deficiency to Buyer upon written
demand, together with interest at the prime rate of interest from time to time
charged by First Tennessee Bank National Association from and after the date
which is seven (7) business days after the date of such written demand.
Any Loss of Business Reduction pursuant to this Section 2.3(b) shall, in
the absence of circumstances clearly establishing whether the Loss of Business
Reduction should be allocated to the purchase of the Seller's Personal Goodwill
or the Purchased
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Shares (due to corporate goodwill), be allocated thirty seven (37%) percent to
the portion of the Purchase Price allocated to the purchase of Seller's Personal
Goodwill and sixty-three (63%) percent to the portion of the Purchase Price
allocated to the Purchased Shares (without limitation as to the right to offset
the amount of any Purchase Price reduction, if in excess of such allocation, to
the balance of the Purchase Price).
Except as necessary to resolve disputes under this Agreement or as
otherwise required by law or governmental regulation, notwithstanding any other
provisions of this Agreement, including Section 12, the provisions of this
Section 2.3(b) and any actions of the parties pursuant thereto shall remain
strictly confidential and shall survive the Representation Date for a period of
ninety (90) days or the final determination of any disputes hereunder, whichever
is later.
The remedies provided for in this Section 2.3(b) shall constitute Buyer's
sole and exclusive remedy in the event of any Business Lost Due to the Sale and
any other loss of business by the Corporate Group subsequent to the
Representation Date.
(c) Adjustments for Indemnification.
Any liability of Seller for indemnification pursuant to Section 10.1 in
excess of the Indemnification Basket, as defined in Section 10.2, shall
constitute a reduction in the Purchase Price, which reduction shall first be
allocated to the Purchased Shares and then to the Seller's Personal Goodwill.
After completion of any Purchase Price adjustments and disbursements from the
Balance Sheet Escrow pursuant to Section 2.3(a) above, the remaining Balance
Sheet Escrow of Five Hundred Thousand ($500,000) Dollars shall continue to be
held by the Escrow Agent for a period of one (1) year following the
Representation Date as security for Seller's indemnification obligations.
Within ten (10) business days after the first (1st) annual anniversary of
the Representation Date, Buyer shall deliver to Seller a schedule of Losses and
amounts claimed against the Balance Sheet Escrow as of said anniversary date,
subject to the Indemnification Basket, together with all non-privileged
correspondence and documents supporting Buyer's position that such claims are
subject to indemnification under Section 10.1. Within ten (10) business days
after receipt of the required information from Buyer, Seller shall submit to
Buyer any written objections to any or all of the conclusions set forth in
Buyer's Notice.
In the event that Buyer's notice indicates that any amounts are due to it
from the Balance Sheet Escrow, if Seller accepts Buyer's conclusions or fails to
submit written objections within the aforesaid ten (10) business day period, the
Escrow Agent shall be instructed to deliver the uncontested amounts to Buyer and
to deliver the balance of the Balance Sheet Escrow to Seller.
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If Seller objects to any or all of the indemnification claims asserted by
Buyer (including those falling within the Indemnification Basket), or if any
such claims are pending and unresolved, the Escrow Agent shall be instructed to
continue to hold the disputed or pending amounts which exceed the
Indemnification Basket in escrow, to deliver any undisputed portion due to Buyer
and to distribute any balance of the Balance Sheet Escrow to Seller.
Within five (5) business days after any dispute is finally resolved
either by agreement of the parties or a final, nonappealable court order, the
Escrow Agent shall distribute the balance of the Balance Sheet Escrow to Seller
and/or Buyer, in a manner consistent with such agreement or court order.
(d) For the purpose of this Section 2.3, time shall be of the essence with
respect to all indicated time periods.
3. Related Agreements. At the Closing, Seller shall execute and deliver to
Buyer the Consulting Agreement, the Xxxx of Sale, and the Covenant Not to
Compete and Buyer, Seller and the Escrow Agent shall execute and deliver the
Escrow Agreement (hereafter sometimes collectively referred to as the "Related
Agreements"). In addition, at the Closing, Seller shall deliver the written
opinion from legal counsel for Seller referred to in Section 8.25 and Buyer
shall deliver the written opinion from legal counsel for Buyer referred to in
Section 9.10.
Seller shall deliver to Buyer certificates representing all of the
Purchased Shares registered in the name of the Seller (without any restrictive
legend or together with such instruments and items that shall permit, in the
reasonable opinion of Buyer's counsel, the sale and transfer of such shares
free, clear, and discharged of any restrictions relating to any such legend).
The certificates shall be duly endorsed in blank or with accompanying stock
powers or assignments duly signed. Seller shall also deliver to Buyer such other
instruments or documents that shall, in the reasonable opinion of the Buyer's
counsel, be reasonably required to vest good and marketable title in Buyer to
the Purchased Shares and to Seller's Personal Goodwill, free, clear, and
discharged of any and all Encumbrances (except that any Encumbrances applicable
to Seller's Goodwill shall be limited to those created by an act of Seller),
provided Buyer has provided Seller with notice in advance of the closing
concerning the production of any other such instruments or documents. All
directors and officers of each Corporate Group Member specified by Buyer, except
L. Xxxxxxx Xxxxxxx, Xx., shall deliver to Buyer resignations from their
positions and any other positions held in, or by appointment by or from, Company
or any other Corporate Group Member.
4. Due Diligence Cooperation. On or prior to February 25, 2004, and up to
the Closing Date, except for contacts with the Key Parties, Seller has caused
the
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Corporate Group Members to permit Buyer and its representatives to perform
certain due diligence investigation of the financial, accounting, environmental
and legal aspects of the Corporate Group, the Business and the assets and
liabilities of the Corporate Group and represents that he has provided full
access to such documents and other information as requested by Buyer and its
representatives, including, but not limited to, corporate records; financial
statements and accounting records; tax returns; environmental documents and
information; real estate documents and title records; and any other records or
documents other than those identifying the Key Parties.
5. Environmental Matters.
Seller makes no warranties or representations regarding the environmental
condition of the Premises and Buyer takes the Premises in their respective
conditions, subject to the following provisions:
5.1 Seller represents to Buyer that it has disclosed and delivered to Buyer
all environmental reports, assessments and investigations in the Corporate
Group's possession relating to the Premises, including any Phase I or
Phase II environmental reports (the "Environmental Reports"), and that
there are no other Environmental Reports relating to the Premises in the
possession of the Corporate Group Members.
5.2 Buyer has had a reasonable opportunity to review all Environmental Reports
delivered by Seller and have its consultant visit the sites referred to
therein. Buyer has indicated that it is satisfied, as to the environmental
condition of the Premises covered by the Environmental Reports, as the
result of its review of the Environmental Reports and such site visits.
6. Excluded Assets. Seller owns certain items of tangible personal property
located on the Premises which are not owned by any Corporate Group Member,
nor reflected on any of the Financial Statements (as defined in Section
8.10) and are not included in this transaction. Buyer has agreed that
Seller shall have sixty (60) days from the Closing Date to remove from the
Premises any such personal property which he owns.
7. Closing Matters.
7.1 Closing. The closing of the transactions contemplated in this Agreement
(the "Closing") shall take place at a location to be mutually agreed upon
by the Parties on the date hereof (the "Closing Date"), and shall be
effective as of the Effective Date. As used in this Agreement, the later
to occur of the Closing Date and the Effective Date shall be referred to
as the "Representation Date".
13
7.2 Certain Closing Expenses. All federal, state, and local sales, use,
excise, and documentary stamp taxes and all other taxes, duties, or other
like charges properly payable on and in connection with the conveyance and
transfer of the Purchased Shares to Buyer shall be paid by the Party upon
whom they are imposed by law. Any real estate transfer taxes or other fees
applicable to the transfer of the Premises resulting from this transaction
shall be borne fifty (50%) percent by Seller and fifty (50%) percent by
Buyer.
7.3 Further Assurances. Seller shall cooperate with and assist Buyer and take
all other reasonable actions to ensure a smooth transition of the
Corporate Group and Seller's Personal Goodwill to Buyer (including the
maintenance of the Key Relationships). From time to time after the Closing
Date, Seller shall, at the request of Buyer, execute and deliver
additional conveyances, transfers, documents, instruments, assignments,
applications, certifications, papers, and other assurances and take such
further actions, that Buyer requests as reasonably necessary or
appropriate to effectively carry out this Agreement's intent and to
transfer the Purchased Shares and Seller's Personal Goodwill to Buyer with
the Key Relationships intact.
7.4 Post Closing Xxxx Payments. Subsequent to the Effective Date, Buyer will
cause the Corporate Group to pay when and as due, all liabilities,
including accounts payable and accrued expenses of the Corporate Group, as
shown on the Closing Balance Sheet.
8. Seller's Representations and Warranties. . For the purposes of this
Agreement, the phrases "Best Knowledge of Seller," "Best Knowledge of
Buyer", or words of similar import, mean the knowledge the Seller (or any
officer or director of any Corporate Group Member) or Buyer (or any
officer or director of Buyer), as applicable, has or would have after a
reasonable and diligent inquiry into the matter in question. As of the
date of this Agreement and as of the Representation Date, the Seller
represents and warrants to Buyer, and acknowledges and confirms that Buyer
is relying on these representations and warranties in entering into this
Agreement, as follows:
8.1 Organization and Standing. Company and each of its subsidiaries is a
corporation duly organized, validly existing, and in good standing under
the laws of their respective states of incorporation, have all requisite
power and authority (corporate and otherwise) to own their properties and
conduct their business as now conducted. Company and each of its
subsidiaries possess licenses and have qualified as a foreign corporation
under the laws of all other jurisdictions where such licenses or
qualifications are required by law and the failure to so qualify would
cause a material adverse impact upon the Corporate Group Member involved.
Except as set forth in Schedule 8.1, neither Company
14
nor any of its subsidiaries has in the last five years used or assumed any
other name in connection with the conduct of its business.
8.2 Articles and Bylaws. Prior to the Closing Date, Seller has delivered
copies of the Articles of Incorporation and Bylaws, as amended, of Company
and each of its subsidiaries which are and as of the Representation Date
will be true, correct and complete.
8.3 Capitalization. The authorized, issued and outstanding capital stock of
Company and each of its subsidiaries is as set forth in Schedule 8.3. All
of the issued and outstanding capital stock of Company is owned of record
and beneficially by the Seller and all of the capital stock of each
subsidiary is owned of record and beneficially by the Company. A true and
complete list of the certificate numbers and number of shares held by the
Seller is set forth in Schedule 8.3. There are no options, calls,
subscriptions, warrants, agreements, or other securities or rights
outstanding for the purchase, exchange or other acquisition of the capital
stock of Company or any of its subsidiaries; or that are convertible into,
exercisable for, or relate to said capital stock; or that have any voting
rights with respect thereto. Neither Company nor any of its subsidiaries
has any outstanding contractual obligations to repurchase, redeem, or
otherwise acquire any outstanding shares of its capital stock.
8.4 Company Common Stock and Seller's Personal Goodwill. Seller is the lawful
owner of the Purchased Shares and Seller's Personal Goodwill, free, clear,
and discharged of and from all pledges, liens, security interests,
encumbrances, mortgages, adverse claims, charges, options, equity
interests, proxies, voting agreements or trusts, leases, tenancies,
easements, or other interests ("Encumbrances") (provided that the Seller's
representation as to Seller's Personal Goodwill is that it is free, clear
and discharged of all Encumbrances created by an act of Seller). All
shares of the Purchased Shares have been duly authorized and validly
issued and are fully paid, nonassessable, and free of preemptive rights.
On delivery to Buyer at the Closing of the Purchased Shares, duly endorsed
for transfer, Buyer will be the absolute owner of the Purchased Shares,
free, clear, and discharged of and from all Encumbrances, and thus the
sole shareholder of the Company.
8.5 Authorization. Seller has the requisite legal capacity to execute,
deliver, and perform this Agreement as well as the Related Agreements.
Seller has duly executed and delivered this Agreement. This Agreement is,
and the Related Agreements when executed and delivered by the parties to
them will be, legal, valid, and binding obligations of Seller, enforceable
against him in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium, or
similar laws relating to the enforcement
15
of creditors' rights and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in
equity).
8.6 Existing Agreements and Governmental Approvals.
(a) Except as set forth in Schedule 8.6, the execution, delivery, and
performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated by them (i) do not and
will not violate any provisions of law applicable to Company, any
subsidiary thereof or to the Seller; (ii) do not and will not
conflict with, result in the breach or termination of any provision
of, or constitute a default under (in each case whether with or
without the giving of notice or the lapse of time, or both) the
Company's (or any subsidiary's) Articles of Incorporation or Bylaws
or any indenture, mortgage, lease, deed of trust; other instrument,
contract, or agreement; or any order, judgment, arbitration award,
or decree to which Company (or any subsidiary) or the Seller is a
party or by which any of them or any of their respective assets and
properties are bound; and (iii) do not and will not result in the
creation of any Encumbrance on any of the properties, assets, or
business of Company, any subsidiary thereof or the Seller.
(b) Except as set forth in Schedule 8.6, no approval, authority, or
consent of or filing by Company (or any subsidiary thereof) or the
Seller with, or notification to, any federal, state, or local court,
authority, or governmental or regulatory body or agency, or any
other corporation, partnership, individual, or other entity is
necessary to authorize the execution and delivery of this Agreement
or any of the Related Agreements or the consummation of the
transactions contemplated by them.
8.7 No Subsidiaries. Neither Seller nor the Company, directly or indirectly,
owns any interest or has any investment in any other corporation,
partnership, limited liability company or other entity engaged in the
Business, as defined herein, except as listed on Schedule 8.7.
8.8 No Insolvency. No insolvency proceeding of any character, including,
without limitation, bankruptcy, receivership, reorganization, composition,
or arrangement with creditors, voluntary or involuntary, affecting Company
or any of its subsidiaries, or the assets or properties of Company or any
subsidiary, is pending or, to the Best Knowledge of Seller threatened.
Neither Company, any of its subsidiaries or the Seller has taken any
action in contemplation of, or that would constitute the basis for, the
institution of any such insolvency proceedings.
16
8.9 Permits and Licenses. Company and each of its subsidiaries has all
necessary permits, certificates, licenses, approvals, consents, motor
carrier authorities and other authorizations (collectively, the
"Licenses") required to carry on and conduct its business and to own,
lease, use, and operate its assets at the places and in the manner in
which its business is conducted, and none of the Licenses will be rendered
void or no longer fully in effect as the result of the sale and transfer
of the Purchased Shares. A complete list of the motor carrier operating
authorities and current insurance filings required of common carriers for
each Corporate Group Member is included in Schedule 8.9.
8.10 Financial Statements. Seller has delivered to Buyer the audited and
interim financial statements listed in Schedule 8.10, including the
audited statement dated December 31, 2003, a copy of which is attached to
Schedule 8.10, and Company shall deliver on or before the Closing copies
of all interim financial statements that Company has prepared or will
prepare for each full accounting period completed subsequent to March 20,
2004 and prior to and including the Effective Date (the "Financial
Statements"). The interim Financial Statements which are prepared by the
Company are prepared on a basis consistent with prior interim statements.
The audited Financial Statements have been and will be prepared in
accordance with GAAP. All Financial Statements do and will fairly and
accurately present the financial position of Company, on a consolidated
basis with its subsidiaries, as of the dates indicated and the results of
operations as of the dates indicated and for the periods covered thereby,
and are and will be true and correct in all material respects. Adequate
provision has been and will be timely made in the Financial Statements for
doubtful accounts or other receivables on a basis consistent with past
practices; sales are stated in the Financial Statements net of discounts,
returns, and allowances; all Taxes (as defined in Section 8.22) due or
paid are and will be timely reflected in the Financial Statements; and all
Taxes not yet due and payable are and will be fully accrued or otherwise
provided for in the Financial Statements. Any items of income or expense
that are unusual or of a nonrecurring nature during any such period or at
any such balance sheet date are and will be separately disclosed in the
Financial Statements. Except as otherwise disclosed on Schedule 8.10,
books, records, and work papers of the Company and each of its
subsidiaries are complete and correct; have been maintained on an accrual
basis, in accordance with GAAP; and accurately reflect, and will
accurately reflect, the basis for the financial condition and the results
of the operations of Company and its subsidiaries that are set forth in
the Financial Statements. The Corporate Group Members have maintained
adequate books and records, on an easily retrievable basis, to address
matters that may arise, within the applicable statutes of limitations, in
connection with the Business, including, without limitation, contractual
matters, matters regarding Taxes and government safety requirements. All
such books and records shall be turned over to Buyer on the
17
Closing Date. The Corporate Group Members do not have a record retention
and destruction policy. There is set forth in Schedule 8.10, a description
of the location at and medium in which each category of records is stored.
8.11 No Undisclosed Liabilities. Except as otherwise disclosed on Schedule 8.11
or Schedule 8.23 or in the Financial Statements, neither the Company nor
any subsidiary have any liabilities or obligations, whether accrued,
absolute, contingent (including disputed litigation or arbitration
matters), or otherwise, and to the Best Knowledge of Seller there exists
no fact or circumstance that could give rise to any such liabilities or
obligations in excess of $5,000 in the future.
8.12 Conduct of Business. Except as otherwise disclosed on attached Schedule
8.12, since December 31, 2003, through the Representation Date, neither
Company nor any subsidiary has:
(a) Issued any capital stock or other securities convertible into or
exchangeable or exercisable for capital stock or having voting
rights; declared or paid any dividend or made any other payment from
capital or surplus or other distribution of any nature, except
distributions of net income and bonuses to Seller; or directly or
indirectly redeemed, purchased, or otherwise acquired,
recapitalized, or reclassified any of its capital stock.
(b) Merged or consolidated with any other entity.
(c) Altered or amended its Articles of Incorporation or Bylaws.
(d) Entered into, materially amended, or terminated any contract,
license, lease, commitment or permit, including, without limitation,
with any customer, agent or contractor, except in the ordinary
course of business consistent with past practices.
(e) Experienced any labor disturbance of any type or nature, including,
without limitation, by way of strike, lockout, grievance, slowdown,
shortage of labor or other labor disputes.
(f) To the Best Knowledge of Seller incurred or become subject to any
obligation or liability (absolute, accrued, contingent, or
otherwise), except in the ordinary course of business consistent
with past practices.
(g) Discharged or satisfied any lien or Encumbrance or paid or satisfied
any obligation or liability (absolute, accrued, contingent, or
otherwise) other
18
than (i) liabilities shown or reflected in Company's Balance Sheet
dated December 31, 2003 or (ii) liabilities incurred since the date
of the balance sheet, in each such case only in the ordinary course
of business consistent with past practices and in accordance with
the express terms of such obligation or liability.
(h) Mortgaged, pledged, or subjected to any lien or Encumbrance any of
its assets, except in the ordinary course of business consistent
with past practices.
(i) Sold, transferred, or agreed to sell or transfer any asset,
property, or business; cancelled or agreed to cancel any debt or
claim; or waived any right, except in the ordinary course of
business consistent with past practices.
(j) Disposed of or permitted to lapse any Intellectual Property, except
in the ordinary course of business consistent with past practices.
(k) Granted any increase in employee rates of pay or any increases in
salary or other compensation payable or to become payable to any
officer, employee, consultant, Contractor (including owner-operators
and fleet owners) or Agent, or by means of any bonus or pension
plan, contract, or other commitment increased the compensation of
any officer, director, employee, consultant, Contractor or Agent, or
hired or engaged any new officer, employee, consultant, Contractor
or Agent, except in the ordinary course of business consistent with
past practices and except that Xxxxxxx X. Xxxxxxx'x status as a
consultant has been changed to a full-time employee as has his
compensation.
(l) Made or authorized any capital expenditures for additions to plant
or equipment accounts in excess of $10,000, except for purchases of
tractors and trailers ("Transportation Equipment") and Company
automobiles in the ordinary course of business consistent with past
practices.
(m) Entered into any transaction (including, without limitation, any
contract or other arrangement providing for employment, furnishing
of services, rental of real or personal property, or otherwise
requiring payments) with any shareholder, officer, or director; any
member of their immediate families; or any of their affiliates.
(n) Experienced any material damage, destruction, or loss (whether or
not covered by insurance) affecting its properties, assets, or
business, except
19
with respect to Transportation Equipment in the ordinary course of
business consistent with past practices.
(o) Failed to regularly maintain and repair its assets in the ordinary
course of business consistent with past practices.
(p) Instituted, settled or been named as a party in any litigation,
action, or arbitration or other proceeding before any court or
governmental agency or other body relating to it or its property,
except as disclosed on Schedule 8.23.
(q) Suffered or made any material change in any method of accounting or
any accounting practice or accounting controls.
(r) Varied, cancelled, or allowed to expire any insurance coverage,
except in the ordinary course of Business consistent with past
practices.
(s) Made any payment or disbursement of moneys or property or declared
or paid any dividend or other distribution to or on behalf of any
officer, director, or shareholder or any member of the immediate
families of the Seller, or any affiliate, other than for payment of
compensation or reimbursement of expenses in accordance with past
practices, except for dividends, distributions of net income and
bonuses to Seller.
(t) Entered into any other material transaction other than in the
ordinary course of business consistent with past practices.
(u) Agreed or committed to do any of the foregoing, subject to the
"ordinary course of Business consistent with past practices"
exception, where and to the extent applicable.
Notwithstanding any provisions of this Agreement, since Seller is
guaranteeing the Net Worth of the Corporate Group as of the
Effective Date as provided in Section 2.3(a), any payments or
accruals made by the Corporate Group applicable to periods
subsequent to December 31, 2003 and prior to the Effective Date,
including subchapter S distributions or dividends to Seller, bonuses
and other payments to Seller and other employees of the Corporate
Group and expenses, including legal and accounting fees and
expenses, whether or not made in the ordinary course of business,
shall not constitute a breach of any of the warranties and
representations or other provisions of this Agreement. For the
purposes of this Agreement, transactions of the Corporate Group of
the type normally occurring at the end of the fiscal year shall be
deemed to be in
20
the ordinary course of the Corporate Group's business,
notwithstanding the fact that such transactions occur prior to the
Effective Date.
8.13 No Adverse Changes. Except as otherwise disclosed in Schedule 8.13, since
December 31, 2003 there has not been any occurrence, event, condition, or
development that has materially adversely affected, or to the Best
Knowledge of Seller is likely to materially adversely affect, Company (or
any subsidiary thereof) its prospects, condition (financial or otherwise),
assets, affairs, operations, or the Business.
8.14 Employees. Except as disclosed in Schedule 8.14, there is not now, nor has
there been at any time during the past five years, any strike, lockout,
grievance, other labor dispute, pending or, to the Best Knowledge of
Seller, threatened, nor have there been any allegations of sexual
harassment or other unlawful employment related conduct or discrimination,
with respect to any Corporate Group Member. Company and each subsidiary is
and has been in compliance with all rules regulating employee wages and
hours. On or before the Effective Date, Company and each subsidiary shall
have paid when and as due all its accrued obligations relating to
employees (whether arising by operation of law, by contract, or by past
service) or payments to trusts or other funds, to any governmental agency,
or to any individual employee (or his or her legal representatives) with
respect to unemployment compensation benefits, profit sharing, or
retirement benefits, or Social Security benefits.
8.15 Employee Benefit Plans. With respect to Company and each of its
subsidiaries:
(a) Schedule 8.15 contains a true and complete list of all plans,
contracts, programs, and arrangements (including, but not limited
to, collective bargaining agreements, pensions, bonuses, deferred
compensation, retirement, severance, hospitalization, insurance,
salary continuation, and other employee benefit plans, programs, or
arrangements) maintained currently or at any time within the
previous five (5) years or under which any of them has any
obligations to provide benefits or compensation (other than current
wages or salary) to an employee of any Corporate Group Member (the
"Plans").
(b) Each employee pension benefit plan, as defined in Section 3(2) of
ERISA, and its related trust ("Pension Plan and Trust") adopted or
sponsored by any Corporate Group Member have, since their inception
and at all times thereafter, met, the requirements for qualification
under Sections 401(a) and 401(k) of the Internal Revenue Code of
1986, as amended (the "Code"), and, since their inception, were
exempt from taxation under Section 501(a) of the Code, and the
Internal Revenue Service (IRS) issued a favorable
21
determination letter with respect to the qualified status of each
Pension Plan and Trust, and did not take any action to revoke such
letter, through the entire period of time such Plan and Trust was in
existence. No Corporate Group Member currently maintains any Pension
Plan and Trust. Except as specifically set forth on Schedule 8.15,
(i) all obligations required to be performed by any Corporate Group
Member under the Plans (including, but not limited to, the making of
all contributions) have been performed, and there is no default
under the Plans by any party; (ii) Company and each subsidiary is in
compliance with the requirements of all statutes, orders, and
governmental rules and regulations applicable to such Plans,
including, but not limited to, ERISA and the Code; (iii) neither
Company, any subsidiary thereof, nor, to the Best Knowledge of
Seller, any other disqualified person or party in interest, within
the meaning of Section 4975 of the Code or Section 3(14) of ERISA,
has engaged in any prohibited transaction, as this term is defined
in Section 4975 of the Code or Section 406 of ERISA, that could,
following the Representation Date, subject any Plan (or its related
trust), Buyer, Company (or any subsidiary) or any officer, director,
or employee of Buyer or Company (or any subsidiary), to any tax or
penalty imposed under the Code or ERISA; (iv) there are no actions
or claims pending (other than routine claims for benefits) or, to
the Best Knowledge of Seller, threatened against any Plan or against
the assets of any Plan; (v) no Plan is subject to Part 3 of Title I
of ERISA, Section 412 of the Code, or Title IV of ERISA; (vi) each
Plan's plan official, as defined in Section 412 of ERISA, is bonded
to the extent required by Section 412; (vii) no proceeding has been
initiated to terminate any Plan, and any such termination will not
subject Company (or any subsidiary thereof) or Buyer to liability to
any person; (viii) no Plan is a multiemployer plan, as defined in
Section 3(37) of ERISA, nor will the Company or any subsidiary have
any responsibility or liability exposure for any so-called
withdrawal liability from any such multiemployer plan under the
Code, ERISA or otherwise as of the Representation Date [and neither
the Company, any subsidiary thereof or any affiliate under ERISA has
ever contributed to or had an obligation to contribute to any such
multiemployer plan]; (ix) no retiree benefits are payable under any
employee welfare benefit plan ("Welfare Plan"), as this term is
defined in Section 3(1) of ERISA; and (x) each Welfare Plan that is
a group health plan within the meaning of Section 5000 of the Code
complies with and in each case has complied with the applicable
requirements of Sections 601 through 608 of ERISA, Section 162(k) of
the Code (through December 31, 1988), and Section 4980B of the Code
(commencing January 1, 1989).
8.16 Certain Employees; Owners-Operators, Fleet Owners and Agents. With respect
to Company and each of its subsidiaries, each of the following is included
in the
22
list of Plans in Schedule 8.15: all collective bargaining agreements,
written employment and consulting agreements, executive compensation
plans, bonus plans, deferred compensation plans, employee pension or
retirement plans, employee profit-sharing plans, employee stock purchase
and stock option plans, hospitalization insurance, and other plans and
arrangements providing for employee benefits to the employees of the
Corporate Group Members. There are no unwritten Plans except as disclosed
on Schedule 8.15.
(a) With respect to Company and each of its subsidiaries Schedule 8.16
contains or references a true and complete list of the following:
the names, positions, and compensation of the present directors,
officers, and employees. All employees are employees-at-will, may be
terminated at any time in accordance with the written policies set
forth in the Employee Handbook and Drivers and Independent
Contractor's Handbook, (collectively, "the Handbooks") (copies of
which have been delivered to Buyer on or before the date of
execution of this Agreement) of their employer for any lawful reason
or for no reason, and are not entitled to employment by virtue of
any oral or written contract, employer policy, or otherwise.
(b) No retired employees of any Corporate Group Member are receiving or
are entitled to receive any payments of health or other benefits.
(c) Seller shall deliver to Buyer a Schedule 8.16(c) listing all
contractors and agents (including owner-operators and fleet owners),
and certain other available information (which includes a
description of any contractor compensation arrangement which
deviates from the standard arrangement). A list of Transportation
Equipment, including that of owner-operators and fleet owners, is
listed on Schedule 8.17(d). Seller has previously delivered to Buyer
the standard form or forms of independent contractor agreement(s) to
which the various contractors and agents are a party. Except as
disclosed on Schedule 8.16(c) no Contractor or Agent utilized by the
Company or any subsidiary has been cited and fined to the extent of
$10,000 or more by any Corporate Group Member or any governmental
entity for violating traffic laws, the Company's or subsidiary's
rules and regulations, or any law, rule or regulation applicable to
motor carriers. Seller has previously delivered to Buyer copies of
the Handbooks which include drug and safety compliance testing
policies, and the other rules and regulations applicable to the
categories of parties covered thereby.
8.17 Contracts and Commitments.
23
(a) With respect to Company and each subsidiary thereof, Schedule 8.17
references, with particularity, other relevant schedules hereto
which contain true and complete lists of all Employee Benefit Plans,
contractors and agents, equipment leases and vendors and suppliers
except for:
(i) Inter-Company lease agreements between Corporate Group
Members;
(ii) individual purchase contracts with customers made in the
ordinary course of business consistent with past practices;
(iii) individual purchase commitments made in the ordinary course of
business at prevailing prices, consistent with past practices
(the "Contracts and Commitments").
Schedule 8.17 also contains a list of all customers billed or with
outstanding accounts receivable balances as of July 19, 2004.
All Contracts and Commitments are in full force and effect without
amendment (unless the amendments are clearly noted), and Company
and/or the subsidiary involved are and shall be entitled to all
benefits from any contracts.
(b) All Contracts and Commitments are the result of bona fide,
arm's-length transactions and are legal, valid, and binding
obligations of the parties to them enforceable in accordance with
their respective terms, subject to laws generally governing
bankruptcy and the enforcement of creditor's rights.
(c) Except as set forth in Schedule 8.17, no default or alleged default
exists on the part of Company or any subsidiary nor, to the Best
Knowledge of Seller, on the part of any other person, under any
Contract or Commitment.
(d) Simultaneously with the execution of this Agreement, Seller shall
deliver to Buyer Schedule 8.17(d) which lists all leases of
Transportation Equipment (including owner-operator leases) to which
the Company or any subsidiary is a party, describing the make, model
and type of equipment and the serial numbers as of August 10, 2004.
As of that date, except as described in Schedule 8.17(d), all such
leases are in full force and effect without notice of or knowledge
of any default with respect thereto, or any fact or condition which
would lead to a default through the passage of time or otherwise.
24
(e) Seller has previously delivered to Buyer a description of the
standard liability limits (i.e., Xxxxxxx Amendment liability or
other agreed-upon limits) applicable to Great American Lines, Inc.
("GAL") for transportation services. GAL has no established
policies, procedures and pricing methodology to establish such
standard liability limits. Virtually all customer contracts of GAL
utilizes liability limits which differ from such standard limits.
8.18 Title to Assets. Seller or the applicable subsidiary thereof is the sole
and absolute owner of all the assets reflected in Company's Balance Sheet
dated December 31, 2003, as well as those to be set forth on the
Preliminary Balance Sheet and the Closing Balance Sheet, and has good and
marketable title to all such assets, free and clear of any and all liens
and Encumbrances, except as set forth on the Financial Statements and the
financing documents delivered to Buyer. The Corporate Group Members do not
maintain a list of all property used in the conduct of the Business,
except for the Transportation Equipment shown on Schedule 8.17(d), which
shows the Transportation Equipment owned by the Company, a subsidiary
thereof, or a Contractor, Agent or other third party, and all real estate
owned by the Company or one of its subsidiaries as shown on Exhibit A.
8.19 Condition of Assets. All items of personal property reflected in Company's
Balance Sheet dated December 31, 2003, as well as those to be set forth on
the Preliminary Balance Sheet and the Closing Balance Sheet, are not
subject to any warranties or representations (other than title), including
their condition, merchantability or fitness for an intended use or purpose
and are in their AS IS AND WHERE IS condition, except the computer
hardware and software, which will be in good working order and repair on
the Representation Date. On or before the end of the ninety day period
beginning on the Representation Date (the "Ninety Day Measuring Period"),
Buyer shall determine which items of Transportation Equipment owned by the
Corporate Group Members shall have incurred Extraordinary Maintenance
Expenses, as defined below, during the Ninety Day Measuring Period. To the
extent that any such items of Transportation Equipment shall have incurred
Extraordinary Maintenance Expenses during the Ninety Day Measuring Period,
Seller will reimburse Buyer on the basis set forth herein. For this
purpose, "Extraordinary Maintenance Expenses" shall be limited to
expenses, per unit, in excess of Five Thousand ($5,000) Dollars only for
frame repairs or engine replacement or rebuilding. If such a repair cost
were, for example, Four Thousand Nine Hundred ($4,900) Dollars, it would
not be considered an Extraordinary Maintenance Expense. If the repair
expense were, however, Six Thousand ($6,000) Dollars, the entire Six
Thousand ($6,000) Dollars would be considered an Extraordinary Maintenance
25
Expense. Any Extraordinary Maintenance Expense shall be subject to
indemnification pursuant to Section 10.1.
The failure of Buyer to advise Seller of any claim under this Section
within the period ending ten (10) business days after the expiration of
the Ninety Day Measuring Period will constitute a waiver of Buyer's rights
hereunder as to Extraordinary Maintenance Expenses of which Seller has not
been notified.
8.20 Receivables. The accounts and other receivables reflected in Company's
Balance Sheet dated December 31, 2003, or arising thereafter (including
those to be set forth on the Preliminary Balance Sheet and the Closing
Balance Sheet), are and will be the result of bona fide sales or other
transactions. Regardless of whether any reserve against the possible
uncollectibility of such accounts and other receivables has been
established and is reflected on Company's Balance Sheet dated December 31,
2003, or on the Preliminary Balance Sheet and Closing Balance Sheet on a
basis consistent with past practices, all of the accounts and other
receivables of the Company and each subsidiary are fully collectible
within one (1) year of the Representation Date. Any accounts or other
receivables not collected within one (1) year of the Representation Date
will be subject to indemnification pursuant to Section 10.1.
8.21 Sufficiency of Assets. The assets reflected in Company's Balance Sheet
dated December 31, 2003 (and to be set forth on the Preliminary Balance
Sheet and Closing Balance Sheet), or reflected on a Schedule attached
hereto, constitute and will constitute all of the property and assets,
real, personal, and mixed, tangible and intangible (including, without
limitation, contract rights), that are used or useful in, or are necessary
for the conduct of, the Business in accordance with present practices.
8.22 Taxes.
(a) For the purposes of this Agreement, Tax or Taxes shall mean all
federal, state, county, local, and other taxes (including, without
limitation, income taxes; premium taxes; business taxes; excise
taxes; fuel taxes; sales taxes; use taxes; personal property taxes;
single business taxes; value-added taxes; gross receipts taxes;
franchise taxes; ad valorem taxes; real estate taxes; severance
taxes; capital levy taxes; transfer taxes; stamp taxes; employment,
unemployment, and payroll-related taxes; withholding taxes; and
governmental charges and assessments), and include interest,
additions to tax, and any penalties.
(b) Except as otherwise disclosed on Schedule 8.22, Company and each
subsidiary has filed on a timely basis all Tax returns it is
required to file
26
under any federal, state, or local law and has paid, accrued or
established an adequate reserve with respect to all Taxes for the
periods covered by such returns or will do so on the Closing Balance
Sheet. No agreements have been made by or on behalf of Company or
any subsidiary for any waiver or for the extension of any statute of
limitations governing the time of assessment or collection of any
Taxes. Company, each subsidiary and their respective officers have
received no notice of any pending or threatened audit by the IRS, or
any state or local agency, related to such Tax returns or Tax
liability for any period, and no claim for assessment or collection
of Taxes has been asserted against Company or any subsidiary. There
are no federal, state, or local tax liens outstanding against any
assets, properties, or business of Company or any subsidiary. Except
as set forth on Schedule 8.22, neither the Company nor any
subsidiary has been subjected to any Tax audit, or been a party to
any Tax litigation or appeal, during the past five (5) years.
(c) The status of the Company for federal income tax purposes ("Tax
Status") is as a so-called S Corporation and the Tax Status of each
of the subsidiaries is as a Qualified Subchapter S Subsidiary. The
period of time that the Tax Status of the Company and each
subsidiary has continuously been in effect is as set forth on
Schedule 8.22.
8.23 Litigation. Except as set forth and described on Schedule 8.23 (including
any loss run cross-referenced thereon), there are no claims, disputes,
actions, suits, proceedings, or investigations pending or, to the Best
Knowledge of the Seller, threatened against or affecting Company, any
subsidiary, or the Business or assets of any of them, including, without
limitation, proceedings before any court, administrative agency or other
governmental body, arbitrator(s) or mediator(s). Schedule 8.23 includes
all such matters in which any Corporate Group Member is the plaintiff or
complaining party.
8.24 Equipment Modifications. None of the equipment owned, leased or otherwise
used in the conduct of the Business by any Corporate Group Member (whether
owned by a Corporate Group Member, or a Contractor, Agent or third party),
including, without limitation, trucks, tractors, trailers and material
handling equipment, has been modified in such a manner as to render same
unsafe or to adversely affect any warranty or insurance coverage with
respect thereto. Provided, however, that the representations in this
Section 8.24, as they relate to equipment provided to the Business by a
Contractor (including any owner-operator) or Agent, are based upon the
Best Knowledge of Seller.
27
8.25 Opinion of Counsel for Seller. On the Representation Date, Seller will
deliver to Buyer a written opinion from legal counsel for Seller
substantially in the form attached hereto as Schedule 8.25.
8.26 Compliance with Laws. At all times prior to the Representation Date, to
the Best Knowledge of Seller, Company and its subsidiaries have complied
with all laws, orders, regulations, rules, decrees, and ordinances
affecting to any extent or in any manner any aspects of the Business or
its assets.
8.27 Suppliers, Customers, Contractors and Agents. With respect to Company and
its subsidiaries:
(a) A complete and accurate list of all suppliers or vendors of products
or services to Company and its subsidiaries in connection with the
Business (other than legal or accounting services) is set forth in
Schedule 8.27.
(b) A complete and accurate list of the ten (10) largest customers of
the Corporate Group Members based on total gross revenue generated
for the year-to-date through June 12, 2004, is set forth in Schedule
8.27.
(c) A complete and accurate list of each Contractor (including
owner-operators and fleet owners) and Agent, the address of each
such Contractor and Agent, and Carrier Revenue Report and Period
Revenue Reports, by terminal, as well as a schedule of all
Contractor escrows and deposits, are set forth or referenced in
Schedule 8.27 for the current year to date status as of July 10,
2004. There are no Agent escrows or deposits.
(d) Neither Seller nor, to the Best Knowledge of Seller, any Corporate
Group Member has any information that might reasonably indicate that
any customer, supplier, Contractor or Agent intends to cease
purchasing from, selling to, or dealing with any Corporate Group
Member (or to otherwise materially alter or reduce the scope of its
business relationship with any of the Corporate Group Members).
Seller represents and warrants that he makes diligent inquiry of all
appropriate parties as to the issues covered by this Section 8.27(d)
on a regular basis in the ordinary course of business.
8.28 No Brokers. Neither Company, any subsidiary or Seller have engaged, or are
responsible for any payment to any finder, broker, or consultant in
connection with the transactions contemplated by this Agreement.
8.29 Insider Transactions. A complete and accurate list and a brief description
of all contracts or other transactions involving Company or any subsidiary
in which
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any officer, director, employee, or shareholder thereof; any member of
their immediate families; or any affiliate has any interest is set forth
in Schedule 8.29.
8.30 Bank Accounts. Attached Schedule 8.30 contains a true and complete list of
the names and locations of all banks or other financial institutions that
are depositories for funds of Company or any subsidiary, the names of all
persons authorized to draw or sign checks or drafts on or otherwise access
the accounts, the number of the accounts, and the names and locations of
any institutions in which Company or any subsidiary has any safe-deposit
boxes or brokerage accounts and the names of the individuals having access
to them or control over the disposition of their contents. Neither Company
nor any subsidiary has any outstanding powers of attorney.
8.31 Intellectual Property. Schedule 8.31 lists or briefly describes all
material intellectual property (including, without limitation, know-how,
trade secrets, confidential and proprietary processes, and technology,
whether or not patentable) that Company or any subsidiary directly or
indirectly owns, licenses, uses, requires for use or controls in whole or
in part ("Intellectual Property") and all licenses and other agreements
allowing the Company or any subsidiary to use the intellectual property of
third parties (other than licenses for off-the-shelf software). Neither
Company nor any subsidiary owns, directly or indirectly, or uses any
patents, copyrights, trademarks, or service marks, or applications for any
of the foregoing, in the Business except as set forth on Schedule 8.31.
Except as set forth in Schedule 8.31, Company or a listed subsidiary
thereof is the sole and exclusive owner of the Intellectual Property, free
and clear of all Encumbrances. None of such Intellectual Property
infringes on any other person's intellectual property, and, to the Best
Knowledge of the Seller, no activity of any other person infringes on any
of the Intellectual Property. To the Best Knowledge of Seller, the Company
and its subsidiaries have been and are now conducting the Business in a
manner that has not been and is not now in violation of any other person's
intellectual property rights and they do not require a license or other
proprietary right to so operate the Business. Schedule 8.31 also lists all
Internet domain names used or registered by Company or any subsidiary, the
registrar, and the date of registration. With respect to the domain names,
(a) the domain names have been registered in the name of the Company or
one of its subsidiaries and are in compliance with all formal legal
requirements; (b) the domain names have not and are not involved in any
dispute, opposition, invalidation, or cancellation proceeding and, to the
Best Knowledge of the Seller, there are no threatened actions with respect
to the domain names; (c) the domain names are not being infringed or, to
the Best Knowledge of the Seller, have not been challenged, interfered
with, or threatened in any way, and do not infringe, interfere with, or
are not alleged to have interfered with or infringe, the trademark,
copyright, or domain name of any
29
third party; and (d) to the Best Knowledge of the Seller, there is no
domain name application pending that would interfere with or infringe the
domain names of the Corporate Group.
8.32 Insurance. Seller has previously delivered to Buyer copies of all
currently effective insurance policies covering the real and personal
property of Company or its subsidiaries or providing for business
interruption, general, personal and automotive liability coverage, cargo
coverage, workers compensation and other insurance. Based on its prior
experience, Seller believes that such insurance is in amounts sufficient
with respect to the assets, properties, business, operations, products,
and services of Company and its subsidiaries as the same are presently
owned or conducted, and all such policies are in full force and effect and
the premiums have been paid or will be paid when and as due. There are no
claims, actions, suits, or proceedings arising out of or based on any of
these insurance policies, and to the Best Knowledge of Seller no basis for
any such claim, action, suit, or proceeding exists, provided that this
sentence is not intended to include claims, actions, suits or proceedings
for which insurance coverage is provided in the policies and which are
disclosed or referenced on Schedule 8.23 or elsewhere in this Agreement.
To the Best Knowledge of Seller, the insured party is not in default with
respect to any provisions contained in any such insurance policies and has
not failed to give any notice or present any claim under any such
insurance policy in due and timely fashion. A list of all insurance
policies owned or in the name any Corporate Group Member is attached as
Schedule 8.32.
8.33 Materiality. No statement in this Agreement or in any Schedule,
certificate or other document delivered to Buyer pursuant to or in
contemplation of this Agreement contains or will contain any untrue
statement of a material fact, or fails or will fail to contain any
material fact necessary to make the statements not misleading.
Notwithstanding any of the provisions of this Agreement, the failure of
Seller to include any documents and other information in this Agreement or
the Schedules attached to the Agreement, which documents and information
have previously been delivered by Seller to Buyer in connection with
Buyer's due diligence investigation, or to provide any requested
information that is not available to Seller or the Corporate Group Members
after reasonable effort to procure same, shall not constitute a material
breach of this Agreement.
8.34 Forms of Agreements/Handbooks. Seller has previously delivered to Buyer
true and accurate copies of all forms of agreements, and the Handbooks,
used by Company or any subsidiary thereof. Schedule 8.34 describes any
tariffs currently in effect.
30
8.35 Fuel, Safety and Other Audits. Except as set forth on Schedule 8.35, no
Corporate Group Member has been subjected to any fuel, safety or other
audits by any governmental or other entity during the past five (5) years.
The results of any such audit are set forth on or attached to Schedule
8.35.
8.36 Safety Rating. GAL, which is the only Corporate Group Member which
operates as a for-hire motor carrier, currently has, and at all times
during the preceding five (5) years has had, a satisfactory safety rating
with the Federal Motor Carrier Safety Administration (FMCSA). Schedule
8.36 contains a description of each audit or other form of review
conducted by FMCSA, an agency of the U.S. Department of Transportation, or
any other federal, state or local government agency regarding the motor
carrier operations during the preceding 5 years, including the results of
such audits or reviews. Except as set forth on Schedule 8.36, GAL has not
been required to pay any fine, penalty or other form of damage of $10,000
or more to any federal, state or local governmental entity during the
preceding five (5) years as a result of GAL's violation of any applicable
law, rule or regulation pertaining in any way to GAL's status as a motor
carrier. Great American Logistics, Inc. holds motor carrier operating
authority but does not operate as a for-hire motor carrier and is unrated
by FMCSA.
9. Buyer's Representations and Warranties. As of the date of this Agreement
and as of the Closing, Buyer represents and warrants to Sellers, and
acknowledges and confirms that Seller is relying on these representations
and warranties in entering into this Agreement, as follows:
9.1 Organization and Standing. Buyer is a corporation duly organized and
validly existing and in good standing under the laws of the State of
Michigan, and Buyer has all the requisite power and authority (corporate
and otherwise) to own its properties and to conduct its business as it is
now being conducted. On the Closing Date, Buyer will deliver to Seller a
certificate issued by the state of its incorporation confirming that Buyer
was duly organized and is in good standing under the laws of the state of
its incorporation and a copy of Buyer's Articles of Incorporation and all
amendments thereto.
9.2 Authorization. Buyer has taken all necessary corporate action (a) to duly
approve the execution, delivery, and performance of this Agreement, and
the Related Agreements and (b) to consummate the transactions contemplated
under these Agreements. Buyer has duly executed and delivered this
Agreement. This Agreement is, and the Related Agreements (to which Buyer
is a party) when executed and delivered by the parties to them will be,
legal, valid, and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms, except as such enforcement may
be limited by bankruptcy,
31
insolvency, moratorium, or similar laws relating to the enforcement of
creditor's rights and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in
equity). On the Closing Date, Buyer will deliver to Seller a certified
corporate resolution confirming that the Board of Directors and/or the
Shareholders, as required, have authorized Buyer to execute this Agreement
and any related Agreements and documents and to perform its obligations
thereunder and an incumbency certificate containing the names of the
officers and directors of Buyer as of the Closing Date.
9.3 Governmental Approvals; Existing Agreements.
(a) No approval, authority, or consent of or filing by Buyer (or any
subsidiary thereof) with, or notification to, any federal, state, or
local court, authority, or governmental or regulatory body or
agency, or any other corporation, partnership, individual, or other
entity is necessary to authorize the execution and delivery of this
Agreement or any of the Related Agreements or the consummation of
the transactions contemplated by them.
(b) The execution, delivery and performance of this Agreement and
the Related Agreements and the consummation of the transactions
contemplated by them (i) do not and will not violate any provisions
of law applicable to Buyer or any assignee subsidiary thereof; and
(ii) do not and will not conflict with, result in the breach or
termination of any provision of, or constitute a default under (in
each case whether with or without the giving of notice or the lapse
of time, or both) the Buyer's (or any assignee subsidiary's)
Articles of Incorporation or Bylaws.
9.4 No Brokers. Buyer has not engaged or is responsible for any payment to any
finder, broker or consultant in connection with the transactions
contemplated by this Agreement.
9.5 Litigation. There are no claims, disputes, actions, suits, proceedings, or
investigations pending or, to the Best Knowledge of Buyer, threatened
against or affecting Buyer, any subsidiary or the business or assets of
any of them, including without limitation, proceedings before any court,
administrative agency or other governmental body seeking to prevent
consummation or questioning the validity or legality of this Agreement or
seeking to enjoin the consummation of any transaction contemplated in this
Agreement or any related Agreements.
32
9.6 Financial Ability. Buyer has access to funds sufficient to consummate the
transactions contemplated by this Agreement in a timely manner.
9.7 Solvency. Buyer is, and after giving effect to the transactions
contemplated hereby will be, solvent and is not subject to any voluntary
or involuntary proceedings in bankruptcy, reorganization, dissolution or
liquidation or to any assignment for the benefit of creditors and no
trustee, receiver or liquidator has been appointed for Buyer or any of its
subsidiaries.
9.8 Diversion of Key Parties, Etc. In the event that this transaction is not
consummated for any reason, neither Buyer nor any of its affiliated
parties nor their respective officers, directors, shareholders, owners,
partners, agents, employees or other representatives will, directly or
indirectly, solicit, contact, communicate with or divert business or
attempt to solicit, contact, communicate with or divert business or
provide any transportation and related services for the customers of the
Corporate Group Members or solicit, contact, communicate with, divert,
employ or hire away or attempt to contact, communicate with, divert,
employ or hire away for the benefit of Buyer or any of its affiliated
parties or for the benefit of any other person or entity, the Key Parties,
(as defined herein, but without regard to the Threshold Revenue Amount) or
any employees of the Corporate Group, except to the extent that Buyer or
any of its Affiliated Parties are presently providing services for the
customers of the Corporate Group Members. This Section is subject to the
two (2) year survival of warranties period set forth in Section 13.1.
9.9 Material Misstatements. No statement in this Agreement or in any schedule,
certificate or other document delivered to Seller pursuant to or in
contemplation of this Agreement contains or will contain any untrue
statement of a material fact, or fails or will fail to contain any
material fact necessary to make the statements not misleading.
9.10 Opinion of Counsel for Buyer. On the Closing Date, Buyer will deliver to
Seller a written opinion from legal counsel for Buyer substantially in the
form attached here to as Schedule 9.10.
10. Indemnification.
10.1 Indemnification of Buyer. Seller shall defend, indemnify, and hold
harmless Buyer, Company (and its subsidiaries) and their respective
directors, officers, shareholders, successors, and assigns from and
against any and all costs, losses, claims, liabilities, fines, expenses,
penalties, and damages (including reasonable legal fees) [sometimes
collectively referred to as "Losses"] in excess of the Indemnification
Basket, as defined below, in connection with or resulting from:
33
(a) Any material inaccuracy in any representation or material breach of
any representation, warranty, covenant or agreement of the Seller
contained in this Agreement or any Related Agreement.
(b) The material failure of Seller to perform or observe in full, or to
have performed or observed in full, any covenant, agreement, or
condition to be performed or observed by the Seller under this
Agreement or any Related Agreement.
(c) The matters disclosed on Schedule 8.23 or referred to in Section
10.5 (but only to the extent that Losses disclosed therein are not
paid for by applicable insurance coverage.)
(d) Any costs for which Seller is responsible with respect to
Extraordinary Maintenance Expenses pursuant to the provisions of
Section 8.19 and all uncollected accounts receivable pursuant to the
provisions of Section 8.20.
(e) Any failure of the Simplified Employee Pension Plan heretofore
adopted by any one or more of the Corporate Group Members to comply
with applicable law, including as a tax qualified plan under the
U.S. Internal Revenue Code and the provisions of ERISA, or as the
result of the loss or lack of any documentation with respect thereto
(including any required amendments thereto).
10.2 Indemnification Limitation. Seller's obligation to indemnify Buyer as set
forth in Section 10.1 above is subject to the following limitation:
(a) No indemnification shall be required to be made by Seller until the
aggregate amount of Seller's Losses exceeds Six Hundred Thousand
($600,000) Dollars (the "Indemnification Basket"). In the event
prior to the expiration of the latest survival of warranty period of
Section 13.1, any Corporate Group Member, receives any proceeds from
the WCI Steel, Inc., et al. bankruptcy proceeding (the "WCI
Bankruptcy") relating to the account receivable claim of the
Corporate Group in the WCI Bankruptcy presently pending in the U. S.
Bankruptcy Court for the Northern District of Ohio (Eastern
Division) at Case No. 03-44662, the amount of such proceeds shall be
added to the Indemnification Basket. If the Indemnification Basket
is not exhausted, the proceeds received from the WCI Bankruptcy
shall be retained by the Corporate Group.
34
If Buyer's Losses exceed the Indemnification Basket, Buyer may seek
indemnification from Seller for the amount of Losses in excess of
the Indemnification Basket as provided in this Agreement.
10.3 Indemnification of Seller. Buyer shall defend, indemnify, and hold
harmless Seller, and his heirs, personal representatives and assigns from
and against any and all Losses in connection with or resulting from:
(a) Any material inaccuracy in any representation or material breach of
any representation, warranty, covenant or agreement of Buyer
contained in this Agreement or any Related Agreement.
(b) The material failure of Buyer to perform or observe in full, or to
have performed or observed in full, any covenant, agreement, or
condition to be performed or observed by Buyer under this Agreement
or any Related Agreement.
(c) Any Losses related to the conduct of the Business after the
Representation Date (including those related to any Transportation
Claim which relates to or arises out of any shipment or
transportation activity occurring after the Representation Date (not
caused by any breach of a representation or warranty of Seller).
10.4 Seller's Waiver. Seller irrevocably waives and agrees that Seller will
make no claim against Company or any subsidiary of any kind or character,
whether by way of subrogation, indemnity, contribution, breach of
contract, or any other theory regarding any claim made by Buyer, Company
(or any subsidiary), or any other person under Section 10 or otherwise,
and Seller irrevocably releases and discharges Company and each subsidiary
from any such claim relating to or arising out of any matter occurring on
or prior to the Representation Date.
10.5 Transportation Claims. Notwithstanding any other provision hereof to the
contrary, but subject to Sections 10.1 (c) and 10.2, Seller shall be
responsible for all Transportation Claims, as defined herein, which relate
to or arise out of any shipment or transportation activity occurring on or
before the Representation Date. Seller shall indemnify Buyer and each
Corporate Group Member and hold each of them harmless from any Losses
related to any such Transportation Claim. If Buyer or a Corporate Group
Member receives a request or demand for payment of any such Transportation
Claim for which Seller is responsible hereunder, Buyer will notify Seller
in writing of such request or demand within ten (10) days of receipt of
such request or demand and provide Seller with copies of all claims,
pleadings, correspondence and other documents relating to the
Transportation Claim. If the Transportation Claim is not settled by Seller
or
35
Buyer does not agree to assume the defense of such claim within thirty
(30) days of Seller's receipt of notice of the existence of such
Transportation Claim (whether such notice is provided by the Buyer a
Corporate Group Member or otherwise), Buyer or the Corporate Group Member
involved may thereafter settle or defend such Transportation Claim in any
manner which Buyer deems proper, including settling the Transportation
Claim, and all reasonable costs shall be borne by Seller. Seller shall
reimburse Buyer or the Corporate Group Member incurring such costs within
fifteen (15) days of written request to Seller for payment and upon
delivery of adequate documentation to support such request for
reimbursement.
10.6 Definitions. As used herein, the term "Transportation Claim" means any
claim of or by any shipper or receiver for loss, damage or overcharge or
by any Contractor (including owner-operators, fleet owners and/or
independent contract drivers) for loss, damage or overcharge for any
transportation transaction, as well as all other claims arising out of
transportation activities (including claims for personal injury or death,
or damage to property, arising out of motor vehicle or other accidents.)
As used in this Agreement, the word "material" as it applies to Losses
resulting from any breach of any representation, warranty, covenant or
agreement shall mean any individual Loss in excess of One Thousand
($1,000) Dollars.
10.7 Time Limitation. No claim for indemnification for a breach of a
representation or warranty may be brought against Seller or Buyer unless a
written notice thereof has been sent to Seller or Buyer, as applicable,
within one (1) month after the other party has knowledge of such claim and
in no event later than one (1) month following the expiration date of the
representation or warranty as set forth in Section 13.1, provided that
this Section is intended to relate solely to the timing of the notice of
such claim and shall not extend the survival periods set forth in Section
13.1.
11. Expenses. Except as may be expressly set forth in this Agreement,
including the provisions of Section 7.4, each of the parties shall pay all
of the costs that it incurs incident to the preparation, execution, and
delivery of this Agreement and the performance of any related obligations,
whether or not the transactions contemplated by this Agreement shall be
consummated. Any broker commissions or fees shall be paid by Seller,
except any commissions or fees incurred by Buyer.
12. Confidentiality. Except as necessary to resolve disputes under this
Agreement or as otherwise required by law or governmental regulation, or
as otherwise agreed to by the parties, the terms and conditions of this
transaction and any
36
documents, agreements and matters relating thereto including the existence
of this Agreement, and any other information pertaining to Seller,
Corporate Group Members and/or Buyer, including but not limited to
financial statements, financial information and condition; operating
information; customer lists, contracts and any other customer-related
information; sales volumes; trade secrets and know-how; business plans and
marketing information; and any other information disclosed to, from or
between Seller, Corporate Group Members, or Buyer, whether before or after
the execution of this Agreement, whether tangible or intangible, and in
whatever form or medium provided, as well as all information generated by
such party receiving such information that contains, reflects or is
derived from the disclosed information (hereinafter collectively referred
to as "Confidential Information") is to remain strictly confidential and
is to be used solely for the purposes of implementing the provisions of
this transaction. Except as necessary to resolve disputes under this
Agreement or as otherwise required by law or governmental regulation, none
of the parties will utilize, copy, disseminate, divulge, furnish or make
accessible to any person or entity any of the Confidential Information
delivered or revealed to it by the other party, other than to attorneys,
accountants, financial institutions and other authorized representatives
of the parties necessarily involved in the process of evaluating this
transaction and for the sole purpose of implementing the provisions of
this Agreement. Except as necessary to resolve disputes under this
Agreement or as otherwise required by law or governmental regulations,
each party shall instruct any person or entity to whom such Confidential
Information may be revealed as authorized hereunder to hold the same in
strict confidence and a list of all such persons or entities shall be
furnished to the other party promptly upon request.
Buyer further understands and agrees that in the event the parties fail to
consummate the transaction contemplated hereunder, Buyer will immediately
return all Confidential Information furnished to it by Seller and will
retain no copies thereof in any form or medium.
This Section shall survive the Representation Date for a period of five
(5) years thereafter, except that Buyer shall not be prohibited from
disclosing Confidential Information regarding the Corporate Group Members
following the Closing except as set forth in Section 2.3(b). Further,
Seller and Buyer may use the Confidential Information as may be required
for each of them, their respective accountants and other representatives,
to prepare, file and support any tax returns and other necessary documents
applicable to periods on and prior to the Effective Date, as to Seller,
and for all relevant periods, as to Buyer.
13. Miscellaneous Provisions.
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13.1 Survival of Representations and Warranties. All representations,
warranties, and agreements contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement for the
following time periods: (a) as to title and ownership of the Purchased
Shares and Seller's Personal Goodwill, no limitation as to time; (b) as to
matters regarding Taxes, filed against any Corporate Group Member relating
to events occurring prior to the Representation Date, for the applicable
statute of limitation; (c) as to tort claims relating to events occurring
prior to the Representation Date, for three (3) years following the
Representation Date; and (d) as to all other matters relating to events
occurring prior to the Representation Date, for a period of two (2) years
following the Representation Date.
13.2 Notices. All notices, demands, and requests required or permitted to be
given under the provisions of this Agreement shall be in writing and shall
be deemed given (a) when personally delivered or sent by facsimile
transmission or email to the party to be given the notice or other
communication or (b) on the business day following the day such notice or
other communication is sent by overnight courier to the following:
if to Seller: Xxxxxx X. Xxxxx
000 Xxxxxxxxxx Xxxxx
Xxxx, XX 00000
Fax No: 000.000.0000
Email: xxxxxxxx@xxx.xxx
With a copy to: Xxxx X. Xxxxx
Xxxxx & Xxxx, LLC
0000 Xxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Fax No. 000.000.0000
Email: xxxxxx@xxxxxxxxx.xxx
if to Buyer: Universal Truckload Services, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Fax No.: 000-000-0000
Email: xxxxxxx@xxxx.xxx
With a copy to: Xxxxx X. Xxxxxxxx, Xx.
Xxxx, Klein, Umphrey, Xxxxxxxx & May, P.C.
000 X. Xxx Xxxxxx Xxxx, Xxxxx 000
Xxxx, Xxxxxxxx 00000
38
Fax No. 000.000.0000
Email: xxxxx.xxxxxxxx@xxxx.xxx
or to such other address, facsimile number or email address that the
parties may designate in writing.
13.3 Assignment. Neither Seller nor Buyer shall assign this Agreement, or
any interest in it, without the prior written consent of the other, except
that Buyer may assign any or all of its rights to any subsidiary of Buyer
without Seller's consent, provided that Buyer shall remain jointly and
severally responsible with Assignee to Seller for the obligations and
liabilities of Buyer under this Agreement and all Related Agreements,
including the amounts due from Buyer to Seller. In the event of an
assignment by Buyer to a subsidiary thereof, all of the representations,
warranties, covenants and agreements made by Seller herein shall also be
deemed to have been made directly to such subsidiary of Buyer. Within five
(5) days after any assignment contemplated by this Section, Buyer will
deliver to Seller signed originals of all documents executed in order to
implement the assignment.
13.4 Parties in Interest. This Agreement shall inure to the benefit of, and be
binding on, the named parties and their respective successors and
permitted assigns, but not any other person.
13.5 Choice of Law; Forum Selection. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of
Michigan. without regard to principles of conflicts of laws. No action
concerning this Agreement, or any document, agreement or instrument
executed in connection herewith, including the Consulting Agreement,
Covenant Not to Compete and Escrow Agreement, may be brought or maintained
in any court other than a court of the State of Michigan located in Macomb
County, Michigan, or of the Commonwealth of Pennsylvania located in
Allegheny County, PA or a court of the United States of America sitting in
Detroit, Michigan or Pittsburgh, PA (the "Designated Courts"). The parties
irrevocably consent to the jurisdiction and venue of the Designated
Courts.
13.6 Counterparts. This Agreement may be signed in any number of counterparts
with the same effect as if the signature on each counterpart were on the
same instrument.
13.7 Entire Agreement. This Agreement and all related documents, schedules,
exhibits, or certificates, including any documents of even date herewith,
represent the entire understanding and agreement between the parties with
respect to the subject matter and supersede all prior agreements or
negotiations
39
between the parties, including any and all prior letters of intent,
correspondence, etc. This Agreement may be amended, supplemented, or
changed only by an agreement in writing that makes specific reference to
this Agreement or the agreement delivered pursuant to it, and must be
signed by the party against whom enforcement of any such amendment,
supplement, or modification is sought. Any document referenced as being
attached to a schedule of this Agreement, a complete copy of which has
heretofore been provided to Buyer, need not be physically attached to the
schedule involved so long as it is referenced on the schedule with such
specificity as to definitively identify the document and recites that the
document has previously been delivered to Buyer.
13.8 Business Days. The term "business days" means Monday through Friday of
each week, except for days banks are not generally open for business in
Detroit, Michigan.
14. Certain Tax Matters.
14.1 Seller shall prepare or cause to be prepared and file or cause to be
filed on a timely basis all Tax returns for the Company and its
subsidiaries ("Tax Returns") for all taxable periods ending on or
prior to the Effective Date, including Tax Returns for such periods
which are due after the Effective Date. This shall include the Tax
Returns for the period ending due to Buyer's purchased of the
Purchased Shares. Buyer will have a reasonable opportunity to review
and comment on each such Tax Return which is due after the Effective
Date prior to filing.
14.2 Buyer will prepare or cause to be prepared and file or cause to be
filed on a timely basis any Tax Returns for taxable periods which
end after the Effective Date. In the case of any such Tax Return (i)
which is for a period beginning before the Effective Date, or (ii)
which could affect the Seller's Tax liability, Seller shall have a
reasonable opportunity to review and comment on such Tax Return
prior to filing.
14.3 The Seller shall be liable for and shall pay all income Taxes of or
with respect to the Company and its subsidiaries and for which
Seller is personally liable as an S corporation shareholder
applicable to periods on and prior to the Effective Date, excluding
Taxes historically paid by Corporate Group Members to the extent
accrued on the Closing Balance Sheet. For this purpose, the parties
shall allocate Tax liabilities of the Company and its subsidiaries
for the fiscal year in which the Effective Date occurs utilizing the
closing the books method as of the Effective Date.
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14.4 The parties shall cooperate in all reasonable respects with each
other in a timely manner in the preparation and filing of any Tax
Returns of the Company and its subsidiaries covering pre-Effective
Date periods, payment of any Taxes of or with respect to the Company
and its subsidiaries attributable to pre-Effective Date periods in
accordance with this Agreement, and the conduct of any Tax audit or
other Tax proceeding involving the Company or any subsidiary and
relating to any pre-Effective Date period. Each party shall execute
and deliver such powers of attorney and make available such other
documents as are reasonably necessary to carry out the intent of
this Section. Each party agrees to notify the other party of any
audit adjustments that do not result in Tax liability but can
reasonably be expected to affect Tax Returns of the other party.
14.5 Buyer, on the one hand, and the Seller, on the other hand, will (i)
use reasonable efforts to keep the other advised as to the status of
Tax audits and litigation involving any Taxes that could give rise
to a liability of or otherwise affect the other (a "Tax Liability
Issue"), (ii) promptly furnish to the other copies of any inquiries
or requests for information from any tax authority concerning any
Tax Liability Issue, (iii) timely notify the other regarding any
proposed written communication to any such tax authority with
respect to such Tax Liability Issue, (iv) promptly furnish to the
other upon receipt copies of any information or document requests,
notices of proposed adjustment, revenue agent's reports or similar
reports or notices of deficiencies together with all relevant
documents, Tax Returns and memos related to the foregoing documents,
notices or reports, relating to any Tax Liability Issue, (v) give
the other and its or their accountants and counsel the reasonable
opportunity to review and comment in advance on all written
submissions, filings and any other information relevant to any Tax
Liability Issue, and (vi) consider in good faith any suggestions
made by the other and its or their accountants and counsel to submit
documentation or attend those portions of any meetings with Tax
authorities and proceedings that relate to such Tax Liability Issue;
provided, however, that the failure of one party to so notify the
other party of any such audit or Tax controversy shall not affect
the other party's obligations under this Agreement; unless, and only
to the extent that, such failure caused the liability of the party
entitled to be notified to be greater than the liability would have
been had prompt notice been given. Notwithstanding the foregoing,
the parties may make appropriate redactions in the submissions,
filings and any other information provided to the other to preserve
the confidentiality of such information as to issues that are not
Tax Liability Issues. To the extent that any tax audit or tax
litigation involving Seller, any Corporate Group Member or Buyer
could
41
give rise to a liability of the other party, Buyer or Seller, as
applicable, may not settle any such audit or litigation without the
consent of the other party, which consent shall not be unreasonably
withheld.
14.6 Buyer, Company (and its subsidiaries) and Seller shall file all Tax
Returns (including amended returns and claims for refunds) in a
manner consistent with the Purchase Price allocations and
adjustments as agreed to by the parties in this Agreement, or as
adjusted as provided for in this Agreement, and shall use their
reasonable best efforts to sustain such allocations in any
subsequent Tax audit or dispute.
[SIGNATURE PAGE FOLLOWS]
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The parties have executed this Agreement on the date set forth on the
first page of this Agreement.
"SELLER"
/s/ Xxxxxx X. Xxxxx
------------------------------------
Xxxxxx X. Xxxxx
"BUYER"
Universal Truckload Services, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Its: President
-------------------------------
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
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