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EXHIBIT 10.12
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 25th day of September, 1996, by and among Xxxxxx Xxxxx & Associates,
Inc. (the "Company"), the shareholders of the Company whose names appear on the
signature pages hereto (each, individually, a "Shareholder," and collectively,
the "Shareholders"), J. Xxxxxxxxxxx Xxxxx, Trustee of the RB Trust Dated June
28, 1993 (the "Trustee"), J. Xxxxxxxxxxx Xxxxx and Xxxxxxx X. Xxxxx. Messrs.
Xxxxx, Xxxxx and the Trustee are referred to individually herein as "Investor"
and collectively as "Investors."
BACKGROUND
A. Each of the Shareholders is the registered and beneficial holder of
shares of the Company's Series A Common Stock ("Series A Common Stock") and/or
the Company's Series B Common Stock ("Series B Common Stock").
B. The Shareholders desire to sell to Investors, and Investors desire
to purchase from the Shareholders, an aggregate of 26,793 shares of Series A
Common Stock and 107,175 shares of Series B Common Stock, which shares represent
approximately 11.43% of the outstanding shares of Series A Common Stock and
Series B Common Stock treated as a single class, with each Shareholder selling
to each Investor the number of shares shown on Schedule 1 attached hereto, on
the terms and conditions set forth herein.
AGREEMENT
In consideration of the foregoing and of the mutual covenants set forth
below, the parties hereby agree as follows:
1. PURCHASE OF THE SECURITIES.
1.1 Purchase of Common Stock. Subject to the terms and conditions of
this Agreement, Investors shall purchase from the Shareholders at the Closing
(as such term is defined below), and the Shareholders shall sell to Investors at
the Closing, an aggregate of 26,793 shares of Series A Common Stock and 107,175
shares of Series B Common Stock for an aggregate purchase price of $5,000,000
(the "Purchase Price"). The shares of Series A Common Stock and Series B Common
Stock to be sold pursuant hereto are sometimes referred to herein as the
"Shares." The number and type of Shares to be sold by each Shareholder and to
be purchased by each Investor, and the purchase price to be paid to each
Shareholder by each Investor therefor, are shown on Schedule 1 attached hereto.
1.2 Closing. The purchase and sale of the Shares (the "Closing") shall
take place at the offices of Xxxxxxx & XxXxxxxx, 000 Xxxx Xxxxxx Xxxxx, Xxxxx
0000, Xxxxx Xxxx, Xxxxxxxxxx, as soon as practicable following the satisfaction
of the conditions set forth in Sections 5 and 6 hereof, or at such other time
and place as the Company, the Shareholders and Investors
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may mutually agree. Prior to the Closing, each Shareholder shall deliver to the
Company one or more certificates evidencing the Common Stock held by such
Shareholder with requisite stock powers attached permitting the transfer of the
shares by the Company in accordance with Schedule 1. Upon receipt thereof, the
Company shall cancel such certificates and reissue new certificates (i) to each
Investor, registered in such Investor's name evidencing the Shares purchased by
such Investor as shown on Schedule 1, and (ii) to each of the Shareholders,
evidencing the remaining shares of Common Stock to be held by such Shareholder
following the sale of the Shares to Investors. The Company shall hold all of the
certificates representing the Shares in trust until payment of the Purchase
Price by Investors. At the Closing, the Trustee (acting on behalf of Investors)
shall effect payment of the Purchase Price by wire transfer to an account
designated by the Company against delivery by the Company of the certificates
representing the Shares.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS. Except
as set forth herein or on the Disclosure Schedule attached hereto (the
"Disclosure Schedule"), the Company and the Shareholders hereby jointly and
severally represent and warrant to Investors as follows:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and proposed to be conducted. The
Company is qualified to transact business in all other states where required by
reason of its current operations, except to the extent that the failure to so
qualify would not have a Material Adverse Effect (as defined below). The Company
has no subsidiaries or affiliated companies and does not otherwise own or
control, directly or indirectly, any equity interest in any corporation,
association or business entity.
2.2 Capitalization. The authorized capital of the Company consists of
10,000,000 shares of Common Stock, of which 1,000,000 shares are designated as
Series A Common Stock and 2,000,000 shares are designated as Series B Common
Stock. An aggregate of 234,444 shares of Series A Common Stock and 937,776
shares of Series B Common Stock are issued and outstanding, respectively, all of
which are owned of record and beneficially by the Shareholders. All of the
issued and outstanding shares of Common Stock are duly and validly issued,
fully-paid and nonassessable. The Disclosure Schedule sets forth a complete list
of all outstanding options, warrants, rights (including conversion or preemptive
rights), agreements for the voting or purchase or acquisition from the Company
of any shares of its capital stock, or restrictions on the sale of shares of
capital stock of the Company, including without limitation all buy/sell
agreements and shareholders agreements of any kind. True and complete copies of
all such options, warrants, rights and agreements have been delivered to
Investors.
2.3 Authorization. The Company has full power and authority to enter
into this Agreement and the Investors' Rights Agreement to be entered into as
provided in Section 5.8 hereof (the "Investors' Rights Agreement"). All action
on the part of the Company and its officers, directors and shareholders which is
necessary for the authorization, execution, delivery
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and performance of this Agreement and the Investors' Rights Agreement has been
taken or will be taken prior to the Closing. This Agreement constitutes, and the
Investors' Rights Agreement will constitute when executed, valid and legally
binding obligations of the Company and the Shareholders, enforceable against
them in accordance with their respective terms.
2.4 Title to the Shares. Each of the Shareholders represents, as to such
Shareholder only, that such Shareholder has good and marketable title to the
Shares being sold by such Shareholder, free of any mortgage, pledge, lien,
encumbrance or charge. Upon the consummation of the transactions contemplated
hereby, Investors will acquire good and marketable title to the Shares, free of
any mortgage, pledge, lien encumbrance or charge.
2.5 Financial Statements. The Company has furnished to Investors copies
of the Company's (i) unaudited balance sheets as of December 31, 1994 and 1995
and the related statements of operations, stockholders' equity, and cash flows
for each of the years in the two-year period ended December 31, 1995, and (ii)
an unaudited balance sheet as of July 31, 1996 (the "Balance Sheet Date") and
the related statements of operations, stockholders' equity, and cash flows for
the seven months then ended (collectively, the "Financial Statements"). The
Financial Statements (a) were prepared in accordance with the Company's books
and records, (b) present fairly the Company's financial position as of the dates
indicated and its results of operations for the periods indicated, and (c) have
been prepared in conformity with generally accepted accounting principles
("GAAP") consistently applied throughout the periods indicated.
2.6 Projections. The Company has provided Investors with projected
statements of operations for fiscal year 1996 through fiscal year 2000. Such
projections have been prepared in good faith and the Company and the
Shareholders believe that the assumptions upon which such projections are based
are fair and reasonable, although no assurance can be or is being given that the
projected results of operations will be achieved as provided therein.
2.7 Material Liabilities. The Company has no liabilities or obligations,
absolute or contingent (individually or in the aggregate), except (a)
liabilities and obligations set forth in the Financial Statements and (b)
liabilities and obligations which have been incurred subsequent to the Balance
Sheet Date in the ordinary course of business which either individually or in
the aggregate, have not had, and would not have, a material adverse effect on
the Company's financial condition, assets, liabilities, earnings, business or
prospects of the Company (a "Material Adverse Effect").
2.8 Title to Properties and Assets. The Company has good and marketable
title to its properties and assets, and has good title to and enjoys peaceful
and undisturbed possession of all its leasehold interests, in each case not
subject to any mortgage, pledge, lien, encumbrance or charge, other than liens
and encumbrances arising in the ordinary course of business which would not have
a Material Adverse Effect.
2.9 Compliance with Other Instruments. The Company is not in violation
of any term of its Articles of Incorporation or Bylaws. The Company is not in
violation of any term or
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provision of any mortgage, indebtedness, indenture, contract, agreement,
instrument, order, writ, injunction, judgment or decree to which the Company is
a party or by which it is bound, the result of which would have a Material
Adverse Effect. The Company is not in violation of any order, statute, rule or
regulation applicable to the Company, the result of which would have a Material
Adverse Effect. The execution, delivery and performance of and compliance with
the terms of this Agreement and the Investors' Rights Agreement will not result
in a violation of the Company's Articles of Incorporation or Bylaws. The
execution, delivery and performance of and compliance with the terms of this
Agreement and the Investors' Rights Agreement will not result in a violation of,
or conflict with, or constitute a default under any mortgage, indebtedness,
indenture, contract, agreement, instrument, order, writ, injunction, judgment or
decree to which the Company is a party or by which it is bound nor result in the
creation of, any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company, the result of which would have a Material
Adverse Effect.
2.10 Litigation. There are no actions, suits, proceedings or
investigations pending before any court or governmental agency against (i) the
Company or any of its properties or assets, (ii) any Shareholder relating to his
or her status as a shareholder of the Company, or (iii) any employee of the
Company relating to his or her status as an employee of the Company, nor have
any such actions, suits, or proceedings or investigations been threatened. The
foregoing includes, without limitation, actions pending or, to the Company's or
any Shareholder's knowledge, threatened, which involve the prior employment of
any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers. There is no action, suit, proceeding or investigation by the Company
against any third party currently pending or which the Company intends to
initiate.
2.11 Protection of Proprietary Information. The Company has provided
Investors with a copy of the form of agreement used by the Company to protect
its proprietary information and trade secrets and otherwise to protect the
Company, including without limitation, any nonsolicitation agreements. All
current and former employees of the Company have executed an agreement
substantially in the form provided to Investors.
2.12 Governmental Consents. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority is required
in connection with the execution, delivery and performance of this Agreement or
the Investors' Rights Agreement.
2.13 Patents and Trademarks. The Company has sufficient title and
ownership of all trademarks, service marks, trade names, copyrights, trade
secrets, proprietary information, proprietary rights and processes (collectively
"Proprietary Rights") necessary for its business as now conducted without any
conflict with or infringement of the Proprietary Rights of others. There are no
outstanding options, licenses, or agreements of any kind relating to the
Proprietary Rights of the Company, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the Proprietary
Rights of any other person or entity. The Company is not aware of any violation
or infringement on the Proprietary Rights of the
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Company, and the Company has not received any communications alleging that the
Company has violated or, by conducting its business as now conducted or proposed
to be conducted, would violate any of the Proprietary Rights of any other person
or entity.
2.14 Material Agreements. The Disclosure Schedule contains a complete and
accurate list of all agreements, understandings, instruments, contracts, and
proposed transactions to which the Company is a party or by which it is bound
which may involve obligations (contingent or otherwise) of payments by the
Company in excess of $200,000, or in the case of payments to the Company, in
excess of $1,000,000, or which require performance for a period longer than one
year. Except for agreements explicitly contemplated hereby or referred to
herein, there are no agreements, understandings or proposed transactions between
the Company and any of its officers, directors, or affiliates, and none of such
individuals or entities has any interest in or is a party to any such agreement,
understanding, or proposed transaction. The Company is not a party to nor is it
bound by any contract, agreement, or instrument which could have a Material
Adverse Effect on its business as now conducted or as proposed to be conducted.
2.15 Changes. Except as otherwise contemplated hereby, since July 31,
1996 there has not been:
(a) any material adverse change in the financial condition,
assets, liabilities, earnings, business or prospects (including any decrease in
backlog) of the Company ("Material Adverse Change"), or any damage, destruction
or loss to any asset of the Company, whether or not covered by insurance, which
could have a Material Adverse Effect;
(b) any waiver by the Company of a valuable right or of a material
debt owed to it;
(c) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business;
(d) any change or amendment to a material contract or arrangement
by which the Company or any of its properties or assets is bound or subject;
(e) any change in any compensation arrangement or agreement with
any Key Employee (as defined below) of the Company;
(f) any change in the assets, liabilities, financial condition or
operations of the Company, except changes in the ordinary course of business
which could not have a Material Adverse Effect;
(g) any change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
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(h) any declaration or payment of any dividend or other
distribution of earnings or assets of the Company or the adoption or
consideration of any plan or arrangement with respect thereto;
(i) any resignation or termination of employment of any Key
Employee of the Company or, to the best of the Company's knowledge, any plans
with respect thereto; or
(j) any other event or condition of any character which could have
a Material Adverse Effect.
2.16 Employee and Related Matters. The Disclosure Schedule contains a
complete list of all contracts, commitments and arrangements, whether written or
oral, express or implied, with any employee and a list of all of the Company's
Employee Benefit Plans, as such term is defined in the Employee Retirement
Income Security Act of 1974, as amended. The Company is not a party to any
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the best of the Company's knowledge has sought, to represent
any of the employees, representatives or agents of the Company. There is no
strike or other labor dispute involving the Company pending, or to the best of
the Company's knowledge threatened, nor is the Company aware of any labor
organization activity involving the Company's employees. The Company is not
aware of any officer or key employee, or any group of officers or key employees,
that intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Except as otherwise provided in any employment agreement listed in
the Disclosure Schedule, the employment of each employee by the Company is
terminable at the will of the Company. Any person who renders services for or to
the Company and is treated for tax purposes as independent contractor has been
properly classified as such for tax purposes. The Company has complied with all
applicable federal and state laws and regulations concerning payroll
withholding. No employee of the Company is in violation of any term of any
employment contract, confidentiality agreement or any other contract or
agreement relating to the relationship of such employee with the Company or, to
the best of the Company's knowledge, any other party, because of the nature of
the business now conducted or proposed to be conducted by the Company.
2.17 Taxes. The Company has validly elected to be treated as a subchapter
S corporation for federal and state tax purposes and has taken all action
necessary to ensure such treatment since January 1, 1991. Each Shareholder has
and continues to meet the definition of a permitted shareholder of a subchapter
S corporation as provided in Section 1361 of the Internal Revenue Code (the
"IRC"). The Company has timely filed all federal, state and other tax returns
required to have been filed and has paid all taxes which have become due and
payable. The Company has not been advised that any of its returns, federal,
state or other, have been or are being audited. There are no agreements, waivers
or other arrangements providing for an extension of time with respect to the
assessment of any tax or deficiency against the Company, nor are there any
actions, suits, proceedings or claims now pending against the Company in respect
of any tax or assessment. There is no pending or, to the best of the Company's
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knowledge, threatened investigation of the Company by any federal, state,
foreign or local authority relating to any taxes or assessments, or any claims
for additional taxes or assessment's asserted by any such authority.
2.18 Insurance. The Disclosure Schedule includes a list of all insurance
policies held by the Company and in effect as of the date hereof.
2.19 Conflict of Interest. Neither the Company nor, to the best of the
Company's knowledge, its officers and directors, has an interest, either
directly or indirectly, in any entity, including, without limitation, any
corporation, partnership, joint venture, proprietorship, firm, licensee,
business or association (whether as an employee, officer, director, shareholder,
agent, independent contractor, security holder, creditor, consultant or
otherwise) that currently (i) provides any services or designs, produces and/or
sells any products or product lines, or engages in any activity which is the
same, similar to or competitive with any activity or business of the Company as
now conducted or as proposed to be conducted, (ii) is a supplier, customer or
creditor of the Company, or has an existing contractual relationship with any of
the Company's employees, or (iii) has any direct or indirect interest in any
property or asset, real or personal, tangible or intangible, of the Company.
2.20 Minutes. The copies of the minute books of the Company provided to
Investors contain a complete summary of all meetings of directors and
shareholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.21 Disclosure. Neither this Agreement nor any of the Schedules and
Exhibits attached hereto nor any certificate furnished to Investors by or on
behalf of the Company or the Shareholders in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading.
3. REPRESENTATIONS AND WARRANTIES OF INVESTORS. Investors hereby jointly and
severally represent and warrant to the Company and the Shareholders as follows:
3.1 Authorization. Each Investor has full power and authority to enter
into this Agreement and the Investors' Rights Agreement. All action on the part
of such Investor which is necessary for the authorization, execution, delivery
and performance of this Agreement and the Investors' Rights Agreement has been
taken or will be taken prior to the Closing. This Agreement constitutes, and the
Investors' Rights Agreement will constitute, when executed, the valid and
legally binding obligation of Investors, enforceable in accordance with its
terms.
3.2 Purchase for Investor's Own Account. Each Investor is acquiring the
Shares for investment and for such Investor's own account, and not with a view
to the resale or distribution of any part thereof.
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3.3 Investment Experience. Each Investor is experienced in investing in
securities of companies such as the Company and can evaluate and bear the
economic risk of such Investor's investment.
3.4 Accredited Investor. Each Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission Rule 501 of Regulation
D, as presently in effect.
3.5 Restricted Securities. Each Investor understands that the Shares
will be characterized as "restricted securities" under the federal securities
laws. Such Investor acknowledges that the certificates and instruments
evidencing the Shares will bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE RESTRICTED SECURITIES AND
MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT OF 1933, AS AMENDED.
3.6 Qualified Subchapter S Corporation Shareholder. Each Investor meets
the definition of a permitted shareholder of a subchapter S corporation as
provided in Section 1361 of the IRC.
3.7 Disclosure of Information. Each Investor believes such Investor has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Common Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the purchase of the Common Stock
contemplated hereunder. The foregoing, however, does not limit or modify the
representations and warranties of the Company and the Shareholders in Section 2
of this Agreement or the right of Investors to rely thereon.
4. COVENANTS.
4.1 Conduct of the Company Prior to the Closing. From and after the date
of this Agreement until the Closing, except as contemplated by this Agreement,
the Company shall conduct its business in the ordinary course and shall not:
(a) waive any valuable right or any material debt owed to it;
(b) satisfy or discharge any lien, claim or encumbrance or pay any
obligation, except in the ordinary course of business;
(c) change or amend any material contract or arrangement by which
the Company or any of its properties or assets is bound or subject.
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(d) change any compensation arrangement or agreement with any Key
Employee of the Company;
(e) effect any change in the assets, liabilities, financial
condition or operations of the Company, except changes in the ordinary course of
business which would not have a Material Adverse Effect.
(f) create any contingent obligation by way of guaranty,
endorsement, indemnity, warranty or otherwise, except in the ordinary course of
business;
(g) declare or pay any dividend or other distribution of assets or
earnings or adopt or consider any plan or arrangement with respect thereto; or
(h) issue any shares of capital stock or any options, warrants,
convertible securities or other rights to acquire capital stock without
Investors' consent.
4.2 Access to Information and Documents. From and after the date of this
Agreement, the Company shall give Investors and Investors' attorneys,
accountants and other representatives full access to its properties, documents,
books and records and shall furnish Investors with such information concerning
the Company as Investors may reasonably request. Investors hereby covenant and
agree to hold any and all such information obtained from the Company in strict
confidence and not to disclose such information to any third party without the
Company's consent, which consent shall not be unreasonably withheld; provided,
however, that Investors may disclose such information to its partners,
affiliates, attorneys and accountants.
4.3 Best Efforts to Satisfy Closing Conditions. The Company and the
Shareholders shall use their respective best efforts to cause the conditions set
forth in Section 5 hereof to be satisfied as soon as practicable following the
execution hereof.
4.4 Compensation for 1996. Subject to compliance with Section 4.5,
compensation for employees of the Company for 1996 shall be determined in a
manner consistent with the manner in which such compensation was determined in
1994 and 1995.
4.5 Distributions to Shareholders and Investors for 1996. On or prior to
December 31, 1996, the Company shall distribute to its shareholders, including
Investors, an aggregate amount equal to 26.5% of the amount computed by the
Company as the Net For Dividend amount for 1996, such computation to be made in
a manner consistent with the computation of such amount in 1994 and 1995.
4.6 Sale of Company Aircraft. Within 30 days after the Closing, the
Company shall sell its Hawker and Commander Aircraft (collectively, the "Company
Aircraft") to a company to be formed by Xxxxxx X. Xxxxx and his wife for a
purchase price equal to the fair market value of the Company Aircraft. The
purchase price shall be paid by assuming all indebtedness related
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to the Company Aircraft plus a two year promissory note in a principal amount
equal to the difference between such indebtedness and such fair market value
(the "Purchase Price").
4.7 Key Man Life Insurance. Within 30 days following the Closing, the
Company shall purchase guaranteed renewable, key man term life insurance
policies, each in a policy amount of $2,000,000, insuring the life of Xxxxxx
Xxxxx and the life of Xxx Xxxxxxxx and naming the Company as the beneficiary.
5. CONDITIONS OF INVESTORS' OBLIGATIONS. The obligation of Investors to
purchase the Shares is subject to the fulfillment or waiver on or before the
Closing of each of the following conditions:
5.1 Representations and Warranties. The representations and warranties
of the Company and the Shareholders contained in Section 2 hereof shall be true
on and as of the Closing with the same effect as though such representations and
warranties had been made on and as of such date.
5.2 Performance. The Company and the Shareholders shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with on or before the
Closing.
5.3 No Material Adverse Change. There shall have occurred no Material
Adverse Change.
5.4 No Indebtedness for Borrowed Money. The Company shall have no
indebtedness for borrowed money, except for indebtedness related to the Company
Aircraft and indebtedness in an amount not to exceed $100,000.
5.5 Closing Certificate. The Company and Xxxxxx X. Xxxxx shall have
executed and delivered to Investors a certificate confirming the satisfaction of
the conditions set forth in Sections 5.1, 5.2, 5.3 and 5.4 hereof.
5.6 Completion of Due Diligence Investigation. Investors shall have
completed their due diligence investigation to their reasonable satisfaction.
5.7 Completion of Audit and Review by KPMG. The Company shall have
retained KPMG Peat Marwick LLP ("KPMG") to perform, and KPMG shall have
completed, (i) an audit of the Company's financial statements for the year ended
December 31, 1994 and for the year ended December 31, 1995 and (ii) a review of
the Company's financial statements for the seven-month period ended July 31,
1996, and such audit and review shall not differ materially from the Financial
Statements. In connection with its audit and review of the Company's financial
statements, KPMG shall have also delivered a separate detailed analysis of all
expenses related to the use or ownership of the Company Aircraft for all periods
covered by the financial statements described above. KPMG shall have also
delivered a separate letter rendering its
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professional opinion that the Collart Family Living Trust, the Xxxxxx and Xxxxx
Xxxx Trust dated February 26, 1990 and the Heinsheimer Living Trust dated July
17, 1968, each satisfy and have continually satisfied the requirements of a
permitted shareholder of a subchapter S corporation under Section 1361 of the
IRC during all times that such trusts have been shareholders of the Company.
5.8 The Investors' Rights Agreement. The Company and the Shareholders
shall have executed and delivered the Investors' Rights Agreement, a copy of
which is attached hereto as Exhibit A.
5.9 Bylaws. The Bylaws of the Company shall have been amended to be
consistent with the requirements of the Investors' Rights Agreement, including
such amendments as may be necessary to provide for a Board of Directors of the
Company consisting of five (5) persons.
5.10 Waiver of Rights Under Shareholder Buy-Out Agreements. The Company
and the Shareholders shall have waived in writing all of their respective rights
under the Shareholders' Buy-Out Agreements dated January 1, 1993 and January 1,
1995, as amended (the "Buy-Out Agreements"), with respect to the sale of the
Shares as provided herein.
5.11 Opinion of Company Counsel. Investors shall have received a legal
opinion from Xxxxx & Xxxxxx, LLP in form and substance reasonably satisfactory
to Investors and its legal counsel, which specifically includes an opinion that
the Xxxxxx X. Xxxxx Trust dated March 27, 1986, the Xxxxx Xxxxxxx Xxxxxx Trust
dated August 28, 1986, the Xxxxxx X. Xxxxx and Xxxxx X. Xxxxxx Revocable Trust,
dated June 24, 1992 and the K. and X. Xxxxxxxx Revocable Trust dated September
1, 1994, each satisfy the requirements of a permitted shareholder of a
subchapter S corporation under Section 1361 of the IRC.
6. CONDITIONS OF THE COMPANY'S AND THE SHAREHOLDERS' OBLIGATIONS. The
obligation of the Shareholders to sell the Shares is subject to the fulfillment
on or before the Closing of each of the following conditions by Investors:
6.1 Representations and Warranties. The representations and warranties
of Investors contained in Section 3 hereof shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of such date.
6.2 Performance. Investors shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with on or before the Closing.
6.3 Closing Certificate. Investors shall have executed and delivered to
the Company and the Shareholders a certificate confirming the satisfaction of
the conditions set forth in Sections 6.1 and 6.2 hereof.
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6.4 Waiver of Rights Under the Buy-Out Agreements. The Company and the
Shareholders shall have waived in writing all of their respective rights under
the Buy-Out Agreements with respect to the sale of the Shares as provided
herein.
6.5 Opinion of Investors' Counsel. The Company shall receive a legal
opinion from Xxxxxxx & XxXxxxxx in the form and substance reasonably
satisfactory to the Company and its legal counsel, which is limited to an
opinion that the RB Trust dated June 28, 1993 satisfies the requirements of a
permitted shareholder of a subchapter S corporation under Section 1361 of the
IRC.
7. INDEMNIFICATION.
7.1 Indemnification of the Company and the Shareholders. Whether or not
the transactions contemplated by this Agreement are consummated, Investors
jointly and severally agree to indemnify and hold the Company and the
Shareholders harmless from any and all losses, claims, damages, liabilities,
costs, attorneys' fees and other expenses of every nature incurred or suffered
by them as a result of, arising out of, or related to any (i) breach by
Investors of any representation, warranty or covenant contained in this
Agreement, or (ii) claim by any person or entity for any commission or
compensation in the nature of a finders' fee for which Investors are
responsible.
7.2 Indemnification of Investors. Whether or not the transactions
contemplated by this Agreement are consummated, the Company and the Shareholders
jointly and severally agree to indemnify and hold Investors harmless from any
and all losses, claims, damages, liabilities, costs, attorneys' fees and other
expenses of every nature incurred or suffered by Investors as a result of,
arising out of, or related to (i) any breach by the Company or the Shareholders
of any representation, warranty or covenant contained in this Agreement,
provided, however, that Investors shall have no remedy for any breach by the
Company of Section 4.6, except as set forth in Section 8.3 below, (ii) the
operation of the Company prior to the Closing, (iii) a determination that the
Company is taxable under subchapter C of the Internal Revenue Code for any
period prior to the Closing, (iv) the distribution of any accumulated earnings
and profits or the recognition of any built-in gains or other tax liabilities
resulting from the Company's transition from a subchapter C corporation to a
subchapter S corporation in 1991, (v) any adjustments to the Company's liability
for taxes as set forth on the Company's tax returns as filed for periods prior
to the Closing and/or any adjustments to the Company's liability for taxes as
set forth on its books and records (based on past practices) for the current
period, including the day of the Closing, which adjustments result in additional
taxes, interest, penalties and/or any related costs or expenses or (vi) any
claim by any person or entity for any commission or compensation in the nature
of a finders' fee for which the Company or the Shareholders are responsible.
12.
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7.3 Amount Limitation. No party shall be entitled to compensation for
any claim against another party, whether by indemnification or otherwise, unless
the aggregate of such party's claims pursuant to this Agreement exceed $100,000,
and then only to the extent of such excess.
8. CERTAIN POST-CLOSING TRANSACTIONS.
8.1 Debt Financed Recapitalization. Within 120 days after the Closing,
the Company shall use its best efforts to enter into one or more credit
facilities (collectively, the "New Credit Facility"), on terms acceptable to
both the Company and Investors. Investors shall assist the Company in
identifying appropriate lenders and in negotiating the terms of the New Credit
Facility. The terms and conditions of the New Credit Facility shall permit the
Company to use up to $10.0 million in borrowings thereunder to purchase
outstanding shares of Common Stock pursuant to a purchase offer made in
accordance with this Section 8.1; provided, however, that in the event the
Company Aircraft have not been sold as contemplated by Section 4.6 prior to the
date on which the first such purchase offer is announced, the aggregate amount
of borrowings which may be used to purchase shares of Common Stock pursuant to
this Section 8.1 shall be limited to an amount equal to $10.0 million minus the
indebtedness related to the Company Aircraft outstanding on the Closing Date.
(The amount available to fund such purchase offer as provided in the preceding
sentence is referred to below as the "Maximum Purchase Consideration.") Promptly
after obtaining the New Credit Facility, the Company shall offer, in writing, to
purchase from its shareholders, including each Investor, for a purchase price
equal to Investors Effective Price (as such term is defined below), an aggregate
number of shares of Common Stock (the "Maximum Number of Purchased Shares") such
that, if all such shares were to be purchased at such price, the Maximum
Purchase Consideration would be required to fund such purchase. (For example, if
the Maximum Purchase Consideration is $10.0 million and Investors Effective
Price is $37.3223, then the Company shall offer to purchase up to 267,936 shares
of Common Stock.) To the extent more shares are tendered to the Company in
response to such purchase offer than the Maximum Number of Purchased Shares, the
Company shall purchase shares from each tendering shareholder in accordance with
such tendering shareholder's ownership of Common Stock as compared to the
ownership of Common Stock by all tendering shareholders. In the event the
Company is, for any reason, unable to make a purchase offer in an amount equal
to the Maximum Purchase Consideration, then the Company shall make successive
purchase offers as described above as and when it is able to do so until the
total consideration paid by the Company in connection with such purchase offers
equals the Maximum Purchase Consideration. As used in this Section 8, the term
Investors Effective Price shall initially mean $37.3223 per share, which amount
(i) shall be adjusted appropriately in the event of any stock split, stock
dividend or stock combination and (ii) shall be reduced in the event of the
transfer of any additional shares pursuant to Section 8.2 or Section 8.3 prior
to any purchase offer pursuant to this Section 8.1 to an amount computed by
dividing $5.0 million by the total number of shares held by Investors as a group
after such transfer or transfers.
8.2 Transfer of Additional Shares Upon Sale of Company Aircraft. Within
thirty (30) calendar days following the sale or transfer of the Company Aircraft
and termination of all
13.
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obligations with respect thereto, the Shareholders shall transfer additional
shares of Common Stock to Investors pro rated in accordance with the shares sold
pursuant hereto so as to achieve the result that all of the economic
consequences associated with the Company Aircraft, including, any taxation
imposed on such sale, will be economically borne by the Shareholders as if the
Company had not owned the Company Aircraft and had not been subject to the
obligations with respect thereto on and after the Closing.
8.3 Transfer of Additional Shares if Company Aircraft Not Sold. In the
event the indebtedness related to the Company Aircraft is not assumed by a
purchaser of the Company Aircraft, as contemplated by Section 4.6 above, prior
to December 31, 1996, then Investors shall be entitled to receive from the
Shareholders an additional number of shares of Common Stock such that, had such
transfer been effected as of the Closing Date, Investors' aggregate holdings of
Common Stock as of the Closing Date would have represented a percentage of the
outstanding shares of Common Stock equal to $5.0 million divided by ($43.75
million minus the amount of all indebtedness related to the Company Aircraft
outstanding as of the Closing Date). Such transfers shall be made by each
Shareholder pro rata in accordance with such Shareholder's ownership interest in
the Company and to each Investor pro rata in accordance with such Investor's
ownership interest in the Company and shall be effected no later than January
10, 1997.
9. MISCELLANEOUS.
9.1 Termination. This Agreement may be terminated by the Company (acting
on its own behalf and on behalf of the Shareholders) or by the Trustee (acting
on its own behalf and on behalf of the other Investors) on written notice to the
other party in the event the Closing hereunder has not occurred prior to
September 30, 1996; provided, however, that no party hereto shall have the right
to terminate this Agreement pursuant to this Section 9.1 if the Closing has not
occurred due to the failure of such party to satisfy a condition to any other
party's obligations hereunder.
9.2 Survival of Warranties. The representations, warranties and
covenants contained in or made pursuant to this Agreement shall survive beyond
the Closing and shall continue in effect until the expiration of two years
following the execution and delivery of this Agreement and shall in no way be
affected by any investigation made by or on behalf of any party, except that
claims based on the representations and warranties in Section 2.17 may be made
at any time before the expiration of the statute of limitations (including any
extension, waiver, or tolling thereof) applicable to the tax liabilities
referred to in Section 2.17.
9.3 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties.
9.4 Governing Law. This Agreement shall be interpreted and enforced in
accordance with, and its validity and performance shall be governed by, the laws
of the State of California without regard to its principles of choice of law.
14.
15
9.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
9.7 Notices. Unless otherwise expressly provided herein, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given (i) by telecopier at the number indicated for such
party on the signature page hereof upon receipt of confirmation thereof, (ii)
upon personal delivery to the party to be notified or (iii) four (4) days after
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof. Any party may change such
party's notice address and telecopy number by written notice given to the other
parties in accordance with this Section 9.7.
9.8 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of the party against which such amendment or waiver is to be
enforced.
9.9 Expenses. In the event the transactions contemplated by this
Agreement are consummated, the Company will bear all of the costs and expenses
incurred by the Company, the Shareholders and Investors with respect to the
negotiation, execution, delivery and performance of this Agreement and the
documents contemplated hereby, except that the Company shall not bear costs and
expenses related to the fees of Xxxxxxx & XxXxxxxx and Deloitte & Touche in
excess of $35,000. In the event the transactions contemplated by this Agreement
are not consummated for any reason, the parties shall bear their own costs and
expenses; provided, however, that Investors shall reimburse the Company for
amounts paid to KPMG for the work performed in the audit and review of the
Company's financial statements contemplated by Section 5.7 hereof, unless
Investors elect not to consummate the transactions contemplated hereby due to
material differences between the financial statements provided to Investors
under Section 5.7 and those provided under Section 2.5.
9.10 Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
9.11 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties with regard to the
subject matter hereof and thereof.
15.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"INVESTORS" THE "COMPANY"
XXXXXX XXXXX & ASSOCIATES, INC.
/s/ J. XXXXXXXXXXX XXXXX
-------------------------------------
J. Xxxxxxxxxxx Xxxxx, Trustee of By:
the RB Trust Dated June 28, 1993 ---------------------------------
Xxxxxx X. Xxxxx, President and
Chief Executive Officer
Address:
/s/ J. XXXXXXXXXXX XXXXX 1301 Dove Street, 7th Floor
------------------------------------- Xxxxxxx Xxxxx, XX 00000
J. XXXXXXXXXXX XXXXX Telecopier No.: (000) 000-0000
THE "SHAREHOLDERS"
/s/ XXXXXXX X. XXXXX
------------------------------------
XXXXXXX X. XXXXX
Address:
000 X. Xxxxx Xxx., 00xx Floor -----------------------------------------
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Xxxxxx X. Xxxxx, Co-trustee of the Xxxxxx
Telecopier No.: (000) 000-0000 Xxxxx and Xxxxx Xxxxxx Revocable Trust,
Dated June 24, 1992
-----------------------------------------
Xxxxx X. Xxxxx, Co-trustee of the Xxxxxx
Xxxxx and Xxxxx Xxxxxx Revocable Trust,
Dated June 24, 1992
Address:
0 Xxxxxx
Xxxxxx, XX 00000
Telecopier No.:
Telecopier No.:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
16.
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"INVEST0RS" THE "COMPANY"
XXXXXX XXXXX & ASSOCIATES, INC.
-----------------------------------
J. Xxxxxxxxxxx Xxxxx, Trustee of By: /s/ XXXXXX X. XXXXX
the RB Trust Dated June 28, 1993 ---------------------------------------
Xxxxxx X. Xxxxx, President
Chief Executive Officer
Address:
0000 Xxxx Xxxxxx, 7th Floor
--------------------------------- Xxxxxxx Xxxxx, XX 00000
J. XXXXXXXXXXX XXXXX Telecopier No.: (000) 000-0000
THE "SHAREHOLDERS"
---------------------------------
XXXXXXX X. XXXXX
Address: /s/ XXXXXX X. XXXXX
000 X. Xxxxx Xxx., 00xx Floor ---------------------------------------
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Xxxxxx X. Xxxxx, Co-trustee of the
Telecopier No.: (000) 000-0000 Xxxxxx Xxxxx and Xxxxx Xxxxxx Revocable
Trust, Dated June 24, 1992
/s/ XXXXX X. XXXXX
----------------------------------------
Xxxxx X. Xxxxx, Co-trustee of the Xxxxxx
Xxxxx and Xxxxx Xxxxxx Revocable Trust,
Dated June 24, 1992
Address:
0 Xxxxxx
Xxxxxx, XX 00000
Telecopier No.: 854-4563
Telecopier No.:
(SIGNATURES CONTINUE ON FOLLOWING PAGE]
16.
18
/s/ XXXXXXX X. XXXXXXXX
----------------------------------------
Xxxxxxx X. Xxxxxxxx, Co-trustee of the
K. and X. Xxxxxxxx Revocable Trust
Dated September 1, 1994
/s/ XXXXX X. XXXXXXXX
----------------------------------------
Xxxxx X. Xxxxxxxx, Co-trustee of the
K. and X. Xxxxxxxx Revocable Trust
Dated September 1, 1994
Address:
Telecopier No.:
----------------------------------------
Xxxxxx Xxxx, Co-trustee of the Xxxxxx
and Xxxxx Xxxx Trust Dated February 26,
1990
----------------------------------------
Xxxxx Xxxx, CO-Trustee of the Xxxxxx
and Xxxxx Xxxx Trust Dated February 26,
1990
Address:
Telecopier No.:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
17.
19
----------------------------------------
Xxxxxxx X. Xxxxxxxx, Co-trustee of the
K. and X. Xxxxxxxx Revocable Trust
Dated September 1, 1994
----------------------------------------
Xxxxx X. Xxxxxxxx, Co-trustee of the
K. and X. Xxxxxxxx Revocable Trust
Dated September 1, 1994
Address:
Telecopier No.:
/s/ XXXXXX XXXX
----------------------------------------
Xxxxxx Xxxx, Co-trustee of the Xxxxxx
and Xxxxx Xxxx Trust Dated February 26,
1990
/s/ XXXXX XXXX
----------------------------------------
Xxxxx Xxxx, Co-trustee of the Xxxxxx
and Xxxxx Xxxx Trust Dated February 26,
1990
Address:
Telecopier No.:
(SIGNATURES CONTINUE ON FOLLOWING PAGE]
17.
20
/s/ XXXXXX X. XXXXXXXXXXX
----------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Trustee of the
Heinsheimer Living Trust Dated July 17,
1968
Address:
Telecopier No.:
----------------------------------------
XXXX X. XXXXXXXXXX
----------------------------------------
XXXX X. XXXXXXXXXX
Address:
Telecopier No.:
----------------------------------------
XXXXXXX X. XXXXXXX
Address:
Telecopier No.:
(SIGNATURES CONTINUE ON FOLLOWING PAGE]
18.
21
----------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Trustee of the
Heinsheimer Living Trust Dated July 17,
1968
Address:
Telecopier
/s/ XXXX X. XXXXXXXXXX
----------------------------------------
XXXX X. XXXXXXXXXX
/s/ XXXX X. XXXXXXXXXX
----------------------------------------
XXXX X. XXXXXXXXXX
Address
Telecopier No.:
----------------------------------------
XXXXXXX X. XXXXXXX
Address:
Telecopier No.:
(SIGNATURES CONTINUE ON FOLLOWING PAGE]
18.
22
----------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Trustee of the
Heinsheimer Living Trust Dated July 17,
1968
Address:
Telecopier No.:
----------------------------------------
XXXX X. XXXXXXXXXX
----------------------------------------
XXXX X. XXXXXXXXXX
Address:
Telecopier No.:
/s/ XXXXXXX X. XXXXXXX
----------------------------------------
XXXXXXX X. XXXXXXX
Address:
Telecopier No.:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
18.
23
/s/ XXXXXXX X. XXXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
/s/ XXXXXXXX X. XXXXXXX
---------------------------------------
Xxxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
Address:
Telecopier No.:
---------------------------------------
XXXXXXX X. XXXXXXXX
---------------------------------------
XXXXX XXX XXXXXXXX
Address:
Telecopier No.:
---------------------------------------
XXXXXXXXX X. XXXXX
---------------------------------------
XXXXXXXXX XXX XXXXXXXX
Address:
Telecopier No.:
19.
24
---------------------------------------
Xxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
---------------------------------------
Xxxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
Address:
Telecopier No.:
/s/ XXXXXXX X. XXXXXXXX
---------------------------------------
XXXXXXX X. XXXXXXXX
/s/ XXXXX XXX XXXXXXXX
---------------------------------------
XXXXX XXX XXXXXXXX
Address:
Telecopier No.:
/s/ XXXXXXXXX X. XXXXX
---------------------------------------
XXXXXXXXX X. XXXXX
/S/ XXXXXXXXX XXX XXXXXXXX
---------------------------------------
XXXXXXXXX XXX XXXXXXXX
Address:
Telecopier No,.:
19.