STOCK TRANSFER AGREEMENT
THIS STOCK TRANSFER AGREEMENT (the "Agreement") is entered into effective
the 24th day of January, 1997, by and among THE SAFE SEAL COMPANY, INC.
("PURCHASER"), a Texas corporation with its chief executive office at 00000
Xxxxxxx Xxxxx, Xxxxx X000, Xxxxxxx, Xxxxx 00000, XXXX XXXXXX ("SELLER"), an
individual whose address is 0000 X. 00xx Xxxxxx, Xxxxx, Xxxxxxxx, HARLEY
INDUSTRIES, INC. (THE "COMPANY"), a California corporation with its chief
executive office and principal place of business at 0000 Xxxx 00xx Xxxxxx, Xxxxx
000, Xxxxx Xxxxxxxx 00000, and HARLEY EQUIPMENT CORPORATION (THE "EQUIPMENT
SUBSIDIARY"), an Oklahoma corporation and a wholly-owned subsidiary of the
Company with its chief executive office and principal place of business at 0000
Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxxxx 00000. Purchaser, Seller, the
Company and the Equipment Subsidiary are sometimes hereinafter referred to
collectively as the "Parties" or individually as a "Party." In addition, XXXXXX
XXXXX has joined in the execution hereof solely with respect to the Termination
of the Option Agreement and Release hereinafter described.
W I T N E S S E T H :
WHEREAS, Seller is the legal and beneficial owner and holder of
twenty-four thousand (24,000) shares (the "HII Shares") of the Company, the HII
Shares constituting approximately three and one-tenth percent (3.1%) of the
issued and outstanding capital stock of the Company;
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser, all of the HII Shares, on the terms and conditions and for
the consideration set forth in this Agreement;
WHEREAS, as a condition to Purchaser's obligation to consummate the
transactions contemplated in this Agreement, Purchaser must contemporaneously
acquire approximately ninety-six and nine-tenths percent (96.9%) of the issued
and outstanding capital stock of the Company; and
WHEREAS, in consideration of the transfer of the HII Shares, the Purchaser
has agreed to cause the Company to transfer (i) certain Assets to the Equipment
Subsidiary, and (ii) all of the issued and outstanding capital stock of the
Equipment Subsidiary (the "HEC Shares") to Seller;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confessed, the Parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 ADVERSE CONSEQUENCES. The term "Adverse Consequences" shall mean all
actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in defense, investigation or
settlement, liabilities, obligations, taxes, liens, losses, expenses and fees,
including court costs and attorneys fees.
1.2 AFFILIATE. The term "Affiliate" of a person shall mean, with respect
to that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of, that
person. Specifically, and without limiting the definition of the term
"Affiliate," Gene Xxxxx, Xxxxxxx Grounds, Xxxxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx
are all agreed to be Affiliates of the Company and of the Seller. As used in the
definition of Affiliate, the term "control" (including the terms "controlling,"
"controlled by," or "under common control with") means the possession, direct or
indirect, of the power to direct, cause the direction of, or influence the
management and policies of a person, whether through the ownership of voting
securities, by contract, through the holding of a position as a partner,
director or officer of such person, as a trustee, or otherwise. As used in this
Section, the term "person" means an individual, a corporation, a partnership, a
limited liability company, an association, a joint stock company, a trust, an
incorporated organization, or a government or political subdivision thereof, or
any other form of entity.
1.3 ASSETS. The term "Assets" shall mean all of the assets, other than the
Leased Assets, owned or used by the Company in the Business, including without
limitation those assets set forth on that certain Schedule of Assets previously
delivered to the Purchaser, subject to non-material diminution thereof in the
Ordinary Course of Business.
1.4 BALANCE SHEET. The term "Balance Sheet" shall mean the August 31, 1996
balance sheet of the Company, including the notes thereto, prepared internally
from the books and records of the Company, without audit, and included in the
Financial Statements attached hereto as SCHEDULE 1.22.
1.5 BALANCE SHEET DATE. The term "Balance Sheet Date" shall mean August
31, 1996.
1.6 BANK OF OKLAHOMA DEBT. The term "Bank of Oklahoma Debt" shall mean the
indebtedness of the Company to Bank of Oklahoma under the Revolving Credit and
Term Loan Agreement dated March 18, 1991, as amended through the Ninth Amendment
to Revolving Credit and Term Loan Agreement dated November 1, 1996.
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1.7 XXXX OF SALE. The term "Xxxx of Sale" shall have the meaning ascribed
thereto in Section 6.3 (b) hereof.
1.8 BUSINESS. The term "Business" shall mean the current business of the
Company of selling, repairing and servicing valves and equipment.
1.9 CLASS A REPRESENTATIONS. The term "Class A Representations" shall mean
those representations and warranties of Seller set forth in (i) SECTIONS 3.1,
3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.18, 3.23, 3.25 AND 3.28, (ii) SECTIONS 3.12,
3.13 AND 3.14 to the extent, but only to the extent, such sections deal with
title issues, and (iii) SECTION 3.17, except to the extent that such section
deals with Environmental, Health & Safety Laws.
1.10 CLASS B REPRESENTATIONS. The term "Class B Representations" shall
mean all of the representations and warranties of Seller set forth in ARTICLE
III of this Agreement, OTHER THAN those which are Class A Representations,
Environmental Representations, or Financial Representations.
1.11 CLOSING. The term "Closing" shall mean the consummation of the
transfer of the HII Shares to Purchaser and the HEC Shares to Seller on the
Closing Date.
1.12 CLOSING DATE. The term "Closing Date" shall mean the date that the
condition set forth in ARTICLE VI has been met or waived by both Parties, or
such other date as may be established by agreement of the Parties.
1.13 CLOSING FINANCIAL STATEMENTS. The term "Closing Financial Statements"
shall mean a balance sheet and income statement of the Company prepared
internally from the books and records of the Company, without audit, as of the
Measurement Date, and attached hereto as SCHEDULE 1.13.
1.14 CODE. The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.15 EMPLOYEE. The term "Employee" shall mean any employee of the Company
who as of the Closing Date is employed or otherwise performs work or provides
services in connection with the operation of the Business, including those, if
any, on disability, sick leave, layoff or leave of absence, who, in accordance
with the Company's applicable policies, would be eligible to return to active
status, as set forth on SCHEDULE 3.22 attached hereto.
1.16 EMPLOYEE BENEFIT PLAN. The term "Employee Benefit Plan" means any (a)
nonqualified deferred compensation or retirement plan or arrangement which is an
Employee Pension Benefit Plan, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement
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which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or
(d) Employee Welfare Benefit Plan or material fringe benefit plan or program.
1.17 EMPLOYEE PENSION BENEFIT PLAN. The term "Employee Pension Benefit
Plan" has the meaning set forth in ERISA Sec. 3(2).
1.18 EMPLOYEE WELFARE BENEFIT PLAN. The term "Employee Welfare Benefit
Plan" has the meaning set forth in ERISA Sec. 3(1).
1.19 ENVIRONMENTAL, HEALTH & SAFETY LAWS. The term "Environmental, Health
& Safety Laws" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976,
the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, the
Hazardous Materials Transportation Act, the Federal Insecticide, Fungicide and
Rodenticide Act and the Occupational Safety and Health Act of 1970, each as
amended, together with all other laws (including rules and regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments and all agencies thereof
concerning pollution or protection of the environment, public health and safety,
or employee health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of any solid, hazardous, industrial, or toxic
pollutants, contaminants, substances or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
solid, hazardous, industrial or toxic pollutants, contaminant, substances or
wastes.
1.20 ENVIRONMENTAL REPRESENTATIONS. The term "Environmental
Representations" shall mean all of the representations and warranties of Seller
set forth in (i) Section 3.30 and (ii) Section 3.17, to the extent that such
section deals with Environmental, Health & Safety Laws.
1.21 ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.22 FINANCIAL REPRESENTATIONS. The term "Financial Representations" shall
mean all of the representations and warranties of Seller set forth in SECTION
3.31.
1.23 FINANCIAL STATEMENTS. The term "Financial Statements" shall mean the
August 31, 1996 Financial Statements of the Company attached hereto as SCHEDULE
1.23.
1.24 HARLEY SUBSIDIARIES. The term "Harley Subsidiaries" shall mean (i)
the Equipment Subsidiary, (ii) Harley Industries Inc. S.A. de CV, a corporation
organized and existing under the laws of the Republic of Mexico (the "Mexican
Subsidiary"),and (iii) Valve Repair of South Carolina, Inc.
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1.25 INTELLECTUAL PROPERTY. The term "Intellectual Property" shall mean
the following (a) all inventions (whether patentable or unpatentable and whether
or not reduced to practice), all improvements thereto and all patents, patent
applications, and patent disclosures together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
and (h) all copies and tangible embodiments hereof (in whatever form or medium).
1.26 MEASUREMENT DATE. The term "Measurement Date" shall mean October 31,
1996.
1.27 ORDINARY COURSE OF BUSINESS. The term "Ordinary Course of Business"
shall mean the ordinary course of business consistent with past custom and
practice (including with respect to quantity and frequency).
1.28 PBGC. The term "PBGC" shall mean the Pension Benefits Guaranty
Corporation.
1.29 PERMITTED BONUS. The term "Permitted Bonus" shall mean the
distribution by the Company to its shareholders of bonuses in an aggregate
amount not to exceed Six Hundred Twenty-Five Thousand and No/100 Dollars
($625,000.00), the proceeds of which will be used to acquire, on or before the
Closing Date, the following nonproducing assets: (A) (i) the stock of the
Mexican Subsidiary whose sole asset is the real property located in San Xxxxxx
xx Xxxxxxx, Mexico; (ii) a note receivable owed to the Company by Xx. Xxxxx in
the outstanding principal amount of $150,000; (iii) the investment securities in
Industrial Equipment Rentals, Inc.; and (iv) two automobiles and a country club
membership utilized by Xxxx Xxxxx, all of which as of the Measurement Date had
an aggregate net book value which did not exceed Six Hundred TwentyFive Thousand
Dollars ($625,000), and (B) the Assets described in the Xxxx of Sale.
ARTICLE II
TRANSFER OF SHARES
2.1 TRANSFER OF SHARES. Subject to the terms and conditions set forth in
this Agreement, Seller hereby agrees to sell, convey, transfer, assign and
deliver to Purchaser, and Purchaser hereby agrees to purchase from Seller, on
the Closing Date, the HII Shares, free and clear of any restrictions or
conditions to transfer or assignment, rights of first refusal, mortgages, liens,
pledges, charges, encumbrances, equities, claims, covenants, conditions,
restrictions, options or agreements. For and in consideration of the transfer of
the HII Shares to Purchaser,
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and other good and valuable consideration more particularly described herein,
Purchaser hereby agrees to cause the Company, and the Company hereby agrees, to
sell, convey, transfer, assign and deliver to Seller the HEC Shares.
2.2 TAXES OF SELLER. Seller shall pay all income or other taxes of Seller
or of the Equipment Subsidiary arising out of (i) the transfer of the HII Shares
to Purchaser, (ii) the transfer of the HEC Shares to Seller, (iii) the transfer
of the Assets described in the Xxxx of Sale to the Equipment Subsidiary, (iv)
the payment or receipt of payment for any of the foregoing, (v) any
consideration delivered in connection with the transfer of any of the foregoing,
or (vi) as independent consideration for the Agreement Not to Compete
hereinafter described. Neither Purchaser nor the Company shall be responsible
for any business, occupation, income, withholding or similar tax, or any taxes
of any kind, of the Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce Purchaser to acquire the HII Shares, and to
acquire contemporaneously herewith the other ninety-six and nine-tenths percent
(96.9%) of the outstanding capital stock of the Company, Seller hereby
represents and warrants to Purchaser that:
3.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, has all
necessary corporate powers to own its properties and to operate the Business as
now owned and operated by it, and is qualified to do business in all of the
states in which the Assets or any Leased Assets are located or the nature and
operation of the Business require such qualification.
3.2 AUTHORITY. Seller has the full right, power, legal capacity and
authority to execute, deliver and perform his obligations under this Agreement.
3.3 CONSENTS AND APPROVALS; NO BREACH OR DEFAULT. Except for the consents
required from the Bank of Oklahoma with respect to the Bank of Oklahoma Debt,
and as set forth on SCHEDULE 3.3(A), no consent, approval or authorization of,
or filing or registration with, any governmental or regulatory authority, or any
other person or entity, is required to be made or obtained by Seller or by the
Company or any Harley Subsidiary in connection with the execution, delivery or
performance of this Agreement, or the consummation by Seller of the transactions
contemplated hereby (except that no representation or warranty is made with
respect to the Mexican Subsidiary). Except as set forth on SCHEDULE 3.3(B),
neither the execution and delivery of this Agreement by Seller, nor the
consummation of the transactions contemplated herein by Seller, will (A) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency or court to which Seller, the Company or any Harley Subsidiary is subject
(except that no representation or warranty is made with respect to the Mexican
Subsidiary), or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
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accelerate, terminate, modify or cancel, or require any notice under any
agreement, contract, lease, license, instrument, promissory note, conditional
sales contract, partnership agreement or other arrangement to which Seller or
the Company or any Harley Subsidiary is a party or by which he or it is bound or
to which any of his or its assets are subject, or (C) conflict with or violate
the Articles of Incorporation, Bylaws or other charter document of the Company
or of any Harley Subsidiary.
3.4 VALID AND BINDING OBLIGATION. Upon execution and delivery, this
Agreement and each document, instrument or agreement to be executed by Seller or
the Equipment Subsidiary in connection herewith, will constitute the legal,
valid, and binding obligation of Seller or the Equipment Subsidiary, as
applicable, enforceable against Seller or the Equipment Subsidiary, as
applicable, in accordance with its terms, except as same may be limited by
applicable bankruptcy laws, insolvency laws, and other similar laws affecting
the rights of creditors generally.
3.5 CAPITAL. The authorized capital stock of the Company consists of (i)
three million (3,000,000) shares of common stock, $0.01 par value per share, of
which seven hundred eighty thousand, four hundred twenty-eight (780,428) shares
are issued and outstanding, and (ii) One Million Nine Hundred Fifty Thousand
(1,950,000) shares of preferred stock, none of which is issued or outstanding.
Seller owns all of the HII Shares. The HII Shares constitute all of the issued
and outstanding capital stock of the Company which are not being acquired
contemporaneously herewith by Purchaser. All of the Company's outstanding
capital stock, including the HII Shares, is duly and validly authorized and
issued, fully paid and nonassessable, and none of such capital stock has been
issued in violation of the rights of any stockholder of the Company. The only
outstanding subscriptions, options, rights, warrants, convertible securities,
conversion rights, exchange rights or other agreements or commitments which
obligate the Company to issue or transfer from treasury additional shares of the
Company's common stock are set forth in SCHEDULE 3.5, and Seller shall cause all
of same to be fully and finally canceled and released, without any further
liability or obligation of the Company with respect thereto, at Closing. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company or its capital
stock. There are no voting rights, voting agreements, proxies or other
agreements or understandings with respect to the voting of any capital stock of
the Company. The HII Shares represent three and one-tenth percent (3.1%) of the
issued and outstanding capital stock of the Company, and represent all of the
outstanding capital stock of the Company other than the Seven Hundred Fifty-six
Thousand, Four Hundred Twenty-eight (756,428) shares to be acquired by Purchaser
from Gene Xxxxx, Xxxxxxx Grounds and Hub Associates.
3.6 TITLE TO HII SHARES. The Seller has, and shall deliver to Purchaser on
the Closing Date, good, indefeasible and marketable title to the HII Shares,
free and clear of restrictions or conditions to transfer or assignment, rights
of first refusal, mortgages, liens, pledges, charges, encumbrances, equities,
claims, covenants, conditions, restrictions, options or agreements.
3.7 TITLE TO ASSETS. Except for the security interests securing payment of
the Bank of Oklahoma Debt and as set forth on SCHEDULE 3.7, the Company has good
and defensible title to
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the Assets, free and clear of restrictions or conditions to transfer or
assignment, or mortgages, liens, pledges, charges, encumbrances, equities,
claims, easements, rights-of-way, covenants, conditions or restrictions, except
for items which do not materially interfere with or restrict the use of the
Assets as presently utilized.
3.8 POSSESSION OF ASSETS; LEASED ASSETS. The Company is in possession of
all of the Assets and all of the assets leased to it from others. All assets
leased to the Company from others, whether real, personal or mixed, are
described on SCHEDULE 3.8 and SCHEDULE 3.17(B) attached hereto (the "Leased
Assets"). The Assets listed in the Schedule of Assets referenced in SECTION 1.3,
and the Leased Assets constitute all of the material assets, whether real or
personal property or mixed, tangible, or intangible, that are owned or used in
the Business by the Company. The Company does not own legal or equitable title
to any material assets or interests in assets except the Assets and the Leased
Assets. Seller shall deliver to Purchaser on the Closing Date, possession of
and/or control or dominion over all of the Assets and Leased Assets, including
without limitation all of the Company's cash, accounts receivable, property,
plant and equipment, other personal property, contract rights and general
intangibles, customer and supplier lists, and assumed and trade names. Solely
for purposes of this SECTION 3.8, the term "material assets" shall refer to
assets having a net book value individually greater than $10,000, or
collectively greater than $150,000.
3.9 CONDITION. Except as expressly set forth on SCHEDULE 3.9, all of the
Assets and Leased Assets are in adequate condition and repair for their intended
use, except for Assets which are out of service in the Ordinary Course of
Business, the aggregate value of which does not exceed Twenty Thousand Dollars
($20,000).
3.10 CONTRACTS AND LEASES. All material contracts, leases and agreements,
written or oral, to which the Company is a party or by which the Company or its
assets may be bound (collectively, the "Contracts") are set forth in SCHEDULE
3.10. Except as set forth on SCHEDULE 3.10, all of the Contracts are in full
force and effect, and to the knowledge of Seller after due inquiry are valid,
and there has not been any default by the Company, or to the knowledge of Seller
after due inquiry by any third party to any of said Contracts, or any event,
fact or circumstance which with notice or lapse of time or both, would
constitute a default by the Company, or to the knowledge of Seller after due
inquiry by any other party to any of the Contracts. Neither the Company nor the
Seller has received notice or has actual knowledge that any party to any of the
Contracts intends to cancel or terminate any of the Contracts or exercise or not
exercise any options that such party might have under any of the Contracts.
Solely for purposes of this SECTION 3.10, the term "material contracts" shall
refer to contracts under which the Company is obligated to perform in any
calendar year, obligations greater than $10,000 individually or $150,000 in the
aggregate.
3.11 OTHER CONTRACTS. Except as set forth in SCHEDULE 3.11, attached
hereto, the Company is not a party to, nor is any of its property bound by, any
distributor's or manufacturer's representative or agency agreement, any output
or requirements agreement, any agreement not entered into in the Ordinary Course
of Business, or any agreement requiring the performance of
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any obligation for a period of time extending beyond one (l) year from the date
hereof or calling for consideration of more than $5,000 per agreement or $50,000
in the aggregate. Except as set forth on SCHEDULE 3.11, the Company is not a
party to, nor is any of its property bound by, any agreement which is materially
adverse to the businesses, properties or financial condition of the Company.
Except as set forth in SCHEDULE 3.11, neither the Company nor any Harley
Subsidiary is a party to any agreement which: (i) prohibits it from engaging in
the business that it currently conducts, or upon consummation of the
transactions contemplated herein, will prohibit it from engaging in any type of
business, or (ii) will, upon consummation of the transactions contemplated
herein, prohibit Purchaser from engaging in any type of business.
3.12 EQUIPMENT. Except for the security interests securing payment of the
Bank of Oklahoma Debt, all of the equipment owned by the Company (collectively,
the "Equipment") is owned free and clear of any lien, security, claim or
encumbrance, and none of the Equipment is held under any security agreement,
conditional sales contract, or other title retention or security arrangement or
is located other than in the possession of the Company. The Equipment is in
adequate operating condition for its intended use.
3.13 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company as
set forth in the books and records of the Company (collectively, the
"Accounts"), and all papers and documents relating thereto, are genuine and in
all respects what they purport to be, and each such Account is valid and
subsisting and arises out of a bona fide sale or lease of goods sold or leased
and delivered to, or out of and for services theretofore actually rendered by
the Company to, the account debtor named in such Account. The amount of each
Account represented as owing as of the date indicated is the correct amount
actually and unconditionally owing as of the date indicated, except for normal
cash discounts, and is not subject to any set-offs, credits, disputes, defenses,
deductions or countercharges, except those arising in the Ordinary Course of
Business which do not exceed $10,000 individually nor $150,000 in the aggregate.
Except for the security interests securing payment of the Bank of Oklahoma Debt,
the Company is the owner of each such Account free and clear of any charges,
liens, security interests, adverse claims, and encumbrances of any and every
nature whatsoever.
3.14 INVENTORIES. The inventories of raw materials, work in process and
finished goods (collectively called "Inventories") shown on the Closing
Financial Statements as of the Measurement Date, consist of items of a quality
and quantity useable and saleable in the Ordinary Course of Business by the
Company, except for obsolete and slow moving items and items below standard
quality, all of which have been written down on the books of the Company to
estimated net realizable value or have been provided for by adequate reserves
based upon the advice of the Company's independent accountants. All items
included in the Inventories are the property of the Company and in its
possession, except for sales made in the Ordinary Course of Business since the
Measurement Date; for each of these sales either the purchaser has made full
payment (subject to customary discounts, allowances and carrying charges) or the
purchaser's liability to make payment is reflected in the books of the Company.
Except for the security interests securing payment of the Bank of Oklahoma Debt,
no items included in the Inventories have been pledged as collateral or are held
on consignment from others. The Inventories shown on the Financial
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Statements and on the Closing Financial Statements are based on quantities
determined by physical count or measurement, taken within the preceding twelve
(12) months, and are valued at the lower of cost (determined on a first-in,
first-out basis) or market value and on a basis consistent with that of prior
years.
3.15 LICENSES. All licenses owned by the Company or in which the Company
has any rights, licenses or sublicenses (collectively, the "Licenses"), together
with a brief description of each, are set forth on SCHEDULE 3.15. The Company
has not infringed, and is not now infringing, on any license belonging to any
other person or other entity. The Company owns and holds adequate licenses
necessary for the Business as now conducted by it, and neither the Company nor
Seller has received any claim nor has actual knowledge that such use conflicts
with, infringes on or otherwise violates any rights of others. The sale of the
HII Shares contemplated herein will not result in the termination of any
License.
3.16 INTELLECTUAL PROPERTY. Except for the rights of the Company to use
the names of various manufacturers under its distributorship agreements, the
Company does not own any Intellectual Property, nor require any Intellectual
Property to permit the Company to conduct the Business in the manner in which it
is currently conducted without any infringement or conflict with the rights of
others. No adverse claims have been asserted against the Seller, the Company or
the Business with respect to infringement upon or conflict with the Intellectual
Property rights of others.
3.17 REAL PROPERTY; LEASED REAL PROPERTY. Except as set forth in SCHEDULE
3.17(A) with respect to real property owned by the Company, and SCHEDULE 3.17(B)
with respect to real property leased by the Company (collectively, the "Real
Property"), the Company neither owns nor leases any real property or
improvements or interests therein. Neither the Company nor Seller has received
any notice, nor do either of them have actual knowledge, of any change
contemplated in any applicable laws, ordinances or restrictions, or any judicial
or administrative action, or any action by adjacent landowners, or natural or
artificial conditions upon the Real Property, which would have a material
adverse effect upon the Business, the Assets, or the Leased Assets. There is no
zoning, deed restriction, land use provision or restriction, or other material
adverse fact or condition of any kind or character whatsoever, which adversely
affects the continued use of the Real Property in the manner in which it is
currently used. Except for the facility in Beaumont, Texas, a portion of which
is subleased to the Federal Bureau of Prisons for use as a storage facility,
there are no parties in possession of any portion of the Real Property as
lessees, tenants at will or at sufferance, trespassers or otherwise, other than
the Company. The improvements included within the Real Property (the
"Improvements") and any renovations thereof have been, or by Closing will be,
substantially completed and installed in compliance with all applicable laws and
in a good and workmanlike manner, and the Company has not received any notice,
and Seller has no actual knowledge of any structural defects. The heating,
electrical, plumbing and other building equipment, as of the Closing, will be
adequate in quantity and quality for normal operations of the Business, as
presently conducted. To the knowledge of Seller, all utilities required for the
operation of the Improvements enter the Real Property through adjoining public
streets or, if they pass through an adjoining private tract, do so in accordance
with valid public
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easements or private easements which inure to the benefit of and are enforceable
by the Company. To the knowledge of the Seller, the Real Property has full and
free access to and from public streets and roads and Seller has no knowledge of
any fact or condition which would result in the termination of such access. To
the knowledge of the Seller, the Improvements do not encroach upon any adjacent
real property nor any easements or building set-back lines to which the Real
Property is subject, and no improvements upon adjacent real property encroach
upon the Real Property. There is no pending condemnation or similar proceeding
affecting the Real Property or any portion thereof, and neither the Company nor
the Seller has received any notice, and neither of them has actual knowledge,
that any such action is presently contemplated.
3.18 SUBSIDIARIES. Each of the Harley Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. No Harley Subsidiary has conducted any
business or operations. No Harley Subsidiary has violated any federal, state or
local ordinance, statute, law, rule or regulation applicable to it. All of the
issued and outstanding capital stock of any Harley Subsidiary is duly and
validly authorized and issued, fully paid and nonassessable, and the Company
owns good, indefeasible and marketable title to all of such capital stock, free
and clear of restrictions or conditions to transfer or assignment, rights of
first refusal, mortgages, liens, pledges, charges, encumbrances, equities,
claims, covenants, conditions, restrictions, options or agreements. There are no
outstanding subscriptions, options, rights, warrants, convertible securities,
conversion rights, exchange rights or other agreements or commitments which
obligate any Harley Subsidiary to issue or transfer from treasury additional
shares of such Harley Subsidiary's capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to any Harley Subsidiary or the capital stock of any of the
Harley Subsidiaries. There are no voting trusts, voting agreements, proxies or
other agreements or understandings with respect to any capital stock of any
Harley Subsidiary. As of the Balance Sheet Date and through the Closing Date,
none of the Harley Subsidiaries will have any assets or liabilities or conduct
any business, nor be or become a party to any contract, lease, instrument or
agreement. Neither the Company nor Purchaser will maintain or incur any debt,
liability, obligation or commitment of any nature, whether accrued, absolute,
contingent or otherwise, by, through or under any of the Harley Subsidiaries,
arising out of any event, fact, or circumstance, or any action taken or not
taken, prior to Closing. Except for the Harley Subsidiaries, the Company does
not own, directly or indirectly, any interest or investment (whether equity or
debt) in any corporation, partnership, business, trust, or other entity.
3.19 INSURANCE. Attached hereto as SCHEDULE 3.19 is a true, complete and
accurate list of all insurance policies maintained by the Company, and the
Company has maintained uninterrupted insurance coverage of such types and in
such amounts for a period of at least four (4) years prior to Closing.
3.20 BANKING. The names and addresses of all banks or other financial
institutions in which the Company has an account, deposit or safe deposit box,
with the account numbers and other descriptions and names of all persons
authorized to draw on these accounts or deposits or access to these boxes, are
set forth on SCHEDULE 3.20 attached hereto.
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3.21 POWERS OF ATTORNEY. No person or other entity holds a general or
special power of attorney from the Company or any of the Harley Subsidiaries.
3.22 PERSONNEL. Attached hereto as SCHEDULE 3.22 is a list of the names,
addresses, hire dates, dates of birth and annual salaries of all Employees of
the Company as of November 4, 1996. Also set forth on SCHEDULE 3.22 is a list of
those Employees who are not actively working in the Business and the reasons
therefor. The Harley Subsidiaries do not have any employees.
3.23 EMPLOYEE BENEFITS.
(A) SCHEDULE 3.23 is a true, correct and complete list of each Employee
Benefit Plan that the Company, or any Harley Subsidiary, maintains, or to which
any of them contribute.
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
(ii) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B
of Title I of ERISA and of Code Sec. 4980B have been met with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(iii) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan
and all contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each such Employee or accrued in
accordance with the past custom and practice of the Company and the Harley
Subsidiaries. All premiums or other payments for all periods ending on or
before the Closing Date have been and will be paid with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code Sec.
401(a) and has received, within the last two years, a favorable
determination letter from the Internal Revenue Service.
(v) The market value of assets under each such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multiemployer
Plan) equals or exceeds the present value of all vested and nonvested
liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
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(vi) The Seller has delivered to Purchaser correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each
such Employee Benefit Plan.
(B) With respect to each Employee Benefit Plan that the Company or any
Harley Subsidiary maintains or ever has maintained or to which any of them
contributes, ever has contributed, or ever has been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multi-Employer Plan) has been completely or partially
terminated or been the subject of a reportable event as to which notices
would be required to be filed with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan (other than any
Multi-employer Plan) has been instituted or threatened.
(ii) There have been no prohibited transactions with respect to any such
Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending, or, to the best of Seller's knowledge, threatened.
Seller has no knowledge of any basis for any such action, suit,
proceeding, hearing, or investigation.
(iii) Neither the Company nor any of the Harley Subsidiaries has incurred,
and Seller does not expect that the Company or any Harley Subsidiary will
incur, any Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV or ERISA (including any withdrawal liability) or
under the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(C) Except as set forth on SCHEDULE 3.23, neither the Company nor any
Harley Subsidiary contributes to, ever has contributed to, or ever has been
required to contribute to, any Multiemployer Plan or has any liability
(including withdrawal liability) under any Multiemployer Plan.
(D) Neither the Company nor any Harley Subsidiary maintains or has ever
maintained or contributes, has ever contributed, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Sec. 4980B).
3.24 EMPLOYMENT AGREEMENTS. Except as set forth on SCHEDULE 3.24, the
Company is not a party to any employment agreements, consulting agreements,
agreements providing for director or officer indemnification or other agreements
or arrangements providing for employee or other remuneration or benefits (other
than the Plans). Each Employee is terminable in
13
accordance with the terms and provisions of the Company's Employee Handbook,
revised as of March 1989. Except as set forth on SCHEDULE 3.24, no Employees are
represented by any labor organization, and, as of the date hereof, no labor
organization or group of Employees has made a written demand to the Company for
recognition, or filed a petition with the National Labor Relations Board, or
announced its intention to hold an election of a collective bargaining
representative. There is no pending, or to the best knowledge and reasonable
belief of Seller threatened, labor dispute, strike or work stoppage affecting or
potentially affecting the Business.
3.25 NO SEVERANCE PAYMENTS. Except for the potential bonus payment to Xxx
Xxxxxxxx described in the schedules hereto, the Company will not owe a severance
payment or similar obligation to any of its employees, officers, or directors,
as a result of the transactions contemplated by this Agreement, nor will any of
such persons be entitled to an increase in severance payments or other benefits
as a result of the transactions contemplated hereby, nor in the event of the
subsequent termination of their employment.
3.26 LIABILITIES. The Company does not have, and as of the Closing Date
will not have, any liabilities, obligations or commitments of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due (herein "Liabilities"), except (i) Liabilities which are adequately
disclosed or accrued against in the Financial Statements, (ii) Liabilities which
have been incurred in the Ordinary Course of Business and in accordance with
standard, customary and historical practices and experiences of the Company, and
(iii) Liabilities expressly set forth, as to the nature and amount thereof, on
SCHEDULE 3.26. Except for Liabilities arising under the Xxxx of Sale, none of
the Harley Subsidiaries has any Liabilities. In no event shall the Company or
the Purchaser be liable for (or have paid any) legal, accounting or other costs
or expenses incurred by the Company or Seller in connection with the transfer of
the HII Shares or the HEC Shares, or any of the transactions contemplated in
this Agreement, except for (i) the reasonable invoices of the Company's
independent accountants in connection with the preparation of the audit in
contemplation of the transaction described in this Agreement or (ii) as
expressly set forth in a written instrument executed by Seller and Purchaser.
3.27 LITIGATION. Except as set forth on SCHEDULE 3.27, there is no suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation pending, and neither the Company nor Seller has received any
written or oral notice that any is threatened, against or affecting the Company,
its Affiliates, the Assets, the Leased Assets or the Business.
3.28 TAX MATTERS.
(A) The Company and the Harley Subsidiaries have filed all tax returns
that they were required to file, and all such tax returns were correct and
complete in all respects. All taxes owed by the Company or any of the Harley
Subsidiaries (whether or not shown on any tax return) have been paid. Except for
the automatic six-month extension which Harley has received with respect to its
1996 tax return, neither the Company nor any Harley Subsidiary is the
beneficiary of any extension of time within which to file any tax return. No
claim has ever been made by an authority in a jurisdiction where any of the
Company or any Harley Subsidiary does not file tax
14
returns, that the Company or any Harley Subsidiary is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of the Company or any Harley Subsidiary that arose in connection with any
failure (or alleged failure) to pay any tax.
(B) Each of the Company and the Harley Subsidiaries has withheld and paid
all taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder, or
other third party.
(C) Neither Seller, nor any director or officer (or employee responsible
for tax matters) of the Company, nor any Harley Subsidiary expects any authority
to assess any additional taxes for any period for which tax returns have been
filed. Except as set forth on SCHEDULE 3.28, there is no dispute or claim
concerning any tax liability of the Company or any Harley Subsidiary either (i)
claimed or raised by any authority in writing or (ii) as to which any of Seller
or the former directors and former officers (and employees responsible for tax
matters) of the Company or the Harley Subsidiaries has knowledge based upon
personal contact with any agent of such authority. SCHEDULE 3.28 lists all
federal, state, local, and foreign income tax returns filed with respect to the
Company or the Harley Subsidiaries for taxable periods ended on or after October
31, 1989, indicates those tax returns that have been audited, and indicates
those tax returns that currently are the subject of audit. The Seller has
delivered to Purchaser correct and complete copies of all federal income tax
returns, examination reports, and statements of deficiencies assessed against or
agreed to by the Company or any Harley Subsidiary since October 31, 1989.
(D) Neither the Company nor any Harley Subsidiary has waived any statute
of limitations in respect of taxes or agreed to any extension of time with
respect to a tax assessment or deficiency.
3.29 COMPLIANCE WITH LAWS. The Company has complied with, and is not in
violation of, applicable federal, state or local ordinances, statutes, laws,
rules, restrictions and regulations (excluding Environmental, Health & Safety
Laws) that will result, or are likely to result, directly or indirectly, in
Adverse Consequences to the Business, the Assets, the Leased Assets, or the
customers, suppliers or financial prospects of the Company. There are not any
uncured violations of federal, state or local laws, ordinances, statutes,
orders, rules, restrictions, regulations or requirements (excluding
Environmental, Health & Safety Laws) affecting any portion of the Business, the
Real Property, the Assets or the Leased Assets, and neither any of the Assets,
the Leased Assets or the Real Property, nor the operation thereof nor the
conduct of the Business, violates any applicable federal, state or municipal
laws, ordinances, orders, regulations or requirements (excluding Environmental,
Health & Safety Laws).
3.30 ENVIRONMENTAL, HEALTH & SAFETY LAWS. Except as described on SCHEDULE
3.30 (i) neither the ownership nor the operation of the Business or any Assets
or Leased Assets has violated or violates any Environmental, Health & Safety
Laws, (ii) neither the Real Property, nor any real property previously owned or
occupied by the Company or any of the Harley Subsidiaries, nor to the knowledge
of the Seller any property adjacent to any of the foregoing, has
15
been used for the use, manufacture, storage, treatment, generation,
transportation, processing, handling or disposal of any solid, hazardous,
industrial or toxic pollutant, contaminant, substance or waste in violation of
any Environmental, Health & Safety Laws, (iii) neither the Company, nor any of
the Harley Subsidiaries, nor the Seller has received nor has knowledge of any
notice of or any threat of any claim, suit, proceeding, inquiry, investigation,
citation, notice, violation, consent order or judicial or administrative action
arising out of or based upon any Environmental, Health & Safety Laws, (iv) no
solid, hazardous, industrial or toxic pollutant, contaminant, substance or waste
has been disposed of, spilled onto, discharged or released as those terms are
defined in the Environmental, Health & Safety Laws occurred on or within the
Real Property or, to the best of Seller's knowledge, any property adjacent
thereto, nor any real property previously owned or occupied by the Company or
any of the Harley Subsidiaries, (v) no underground storage tanks, above ground
storage tanks, solid or hazardous waste management units, xxxxx, underground
injection systems, landfills, lagoons, settling ponds or any other impoundment
used to treat, store or dispose of any solid, hazardous or toxic substances,
pollutants, contaminants or wastes regulated by the Environmental Health &
Safety Laws have ever been placed on the Real Property, and if any underground
storage tanks are disclosed in SCHEDULE 3.30, none of such tanks are leaking,
(vi) neither the Company, nor any of the Harley Subsidiaries, nor the Seller has
received notice of any past, present or future event, condition, circumstance,
activity, practice, incident or action or plan which may interfere with or
prevent compliance or continued compliance with the Environmental, Health and
Safety Laws or which may give rise to any common laws or legal liability, or
otherwise form the basis of any claim action, demand, lawsuit, proceeding,
hearing, study or investigation, based on, related to, or alleging any violation
of the Environmental Health & Safety Laws and (vii) all wastes generated by the
Company have been treated and/or disposed of at appropriately licensed
recycling, reclamation, reuse, or treatment, storage and disposal facilities.
There is no environmental condition relating to any of the Assets, the Leased
Assets or the Business that may reasonably be expected to have a materially
adverse effect on any of the Assets, the Leased Assets or the Business or the
value thereof. The Company has all permits, licenses, franchises, operating
authorities and other authorizations or documented exemptions or variances
thereto necessary to the conduct of the Business in the manner and in the areas
in which the Business is presently conducted, the Company is in full compliance
with all the terms and conditions thereof and all such permits, licenses,
franchises, and authorizations are valid and in full force and effect. The
Company has not engaged in any activity which could cause the revocation or
suspension of any such permits, licenses, franchises, or other authorizations,
and no actions or proceedings looking to or contemplating revocation or
suspension of any thereof are pending or, to the best knowledge and reasonable
belief of Seller, threatened.
3.31 FINANCIAL STATEMENTS. The Financial Statements (i) are true,
complete, and correct in all material respects, (ii) fairly and accurately
present the financial position of the Company as of the periods described
therein, and the results of the operations of the Company for the periods
indicated, and (iii) have been prepared in accordance with generally accepted
accounting principles, consistently applied (except for certain footnote
disclosures normally required by GAAP, the omission of which, in the good faith
opinion of Seller, will not cause the Financial Statements to be misleading).
The Closing Financial Statements (i) are true, complete,
16
and correct in all material respects, (ii) fairly and accurately present the
financial position of the Company as of the periods described therein, and the
results of the operations of the Company for the periods indicated, (iii) have
been prepared in accordance with generally accepted accounting principles,
consistently applied (except for certain footnote disclosures normally required
by GAAP, the omission of which, in the good faith opinion of Seller, will not
cause the Closing Financial Statements to be materially misleading), and (iv)
reflect all necessary eliminating entries and normal adjustments (including
without limitation year-end adjustments). After due inquiry of the Company's
management, Seller knows of no adjustments that will be required by the
Company's independent public accountants in order for such accountants to render
an unqualified report on the Company's financial statements.
3.32 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in SCHEDULE
3.32, since the Balance Sheet Date, there has been no:
(A) material adverse change in the financial condition, liabilities,
assets, business or prospects of the Company;
(B) loss, destruction or damage to any property of the Company,
whether or not insured, exceeding $150,000 in net book value in the
aggregate;
(C) material contract, commitment or obligation entered into or
incurred by the Company outside the Ordinary Course of Business;
(D) labor trouble, pending or threatened, involving the Company, or
change in the personnel of the Company or the terms or conditions of their
employment, other than changes in personnel of the Company below the level
of manager and occurring in the Ordinary Course of Business; or
(E) other event or condition of any character that has or might
reasonably be expected to have an adverse effect on the financial
condition, business, assets, liabilities or prospects of the Company.
3.33 CUSTOMERS. SCHEDULE 3.33 to this Agreement is a correct and current
list of all customers of the Company and/or the Harley Subsidiaries, together
with summaries of the sales made to each customer during the most recent fiscal
year and the immediately preceding fiscal year by each such entity. Except as
indicated in SCHEDULE 3.33, Seller does not have any information, nor is he
aware of any facts, indicating that any of these customers intend to cease doing
business with the Company, or to materially alter the volume or terms of such
business.
3.34 INTERESTS IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Neither the
Seller, nor any shareholder, officer, director or manager (nor any former
shareholder, officer, director or manager) of the Company, nor to the best
knowledge and reasonable belief of Seller any relative of any of them, has any
direct or indirect interest in any supplier or customer of the Company, or
17
any person or other entity who has done business with the Company in the
twenty-four (24) months preceding the Closing.
3.35 CORPORATE DOCUMENTS. Seller has furnished to Purchaser for its
examination (i) true and correct copies of the certificates or articles of
incorporation and bylaws of the Company and of any Harley Subsidiary, as amended
to date; (ii) true and correct copies of the contents of the minute books of the
Company and of any Harley Subsidiary (including proceedings of audit and other
committees), each of which contains all records for all proceedings, consents,
actions and meetings of the shareholders, board of directors and committees, of
each of them since their respective dates of incorporation.
3.36 ADVERSE INFORMATION. After due inquiry of Company management, Seller
does not have any information or knowledge of any change contemplated in any
applicable laws, ordinances or restrictions, or any judicial or administrative
action, or any event, fact or circumstance which will, or could be reasonably
expected to, have a material adverse effect on the Company or its condition,
financial or otherwise, the Assets, the Leased Assets or the condition, value or
operation thereof.
3.37 DISCLOSURE. Seller has provided to Purchaser actual copies of all
Contracts, documents concerning all litigation and administrative proceedings,
employee benefit plans, Licenses, insurance policies, lists of suppliers,
customers, and Employees, and corporate and partnership records relating to the
Company and/or the Harley Subsidiaries or their assets and liabilities or the
Business, and such information covers all material commitments and liabilities
of the Company. In addition, (i) Purchaser has been fully informed with respect
to all material developments in the business of the Company since the Balance
Sheet Date, (ii) management of the Company has not made any material commitments
nor taken any material actions of which Purchaser has not been advised, and
(iii) Purchaser and its agents have been granted unlimited access to the books
and records of the Company (whether retained electronically, on discs or on
paper).
3.38 FULL DISCLOSURE. This Agreement, the schedules and exhibits hereto,
and all other documents and written information furnished by the Seller, the
Company, or their Affiliates on behalf of Seller, the Company or their
respective Affiliates, to Purchaser or its representatives pursuant hereto or in
connection herewith, are true, complete and correct in all material respects,
and do not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made herein and therein not
misleading. After due inquiry of management of the Company, Seller is not aware
of any presently existing facts or circumstances relating to the Business or the
assets, liabilities, prospects, operations or financial condition of the Company
which materially and adversely affects, or in the reasonable judgment of Seller
is likely to materially and adversely affect, the Business, the Company, or the
assets, liabilities, prospects, operations or financial condition thereof, or
the ability of the Seller to perform this Agreement or the obligations of Seller
hereunder.
18
ALL OF THE REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS
AGREEMENT SHALL BE TRUE, COMPLETE AND CORRECT AS OF THE DATE OF THIS AGREEMENT
AND SHALL BE DEEMED TO HAVE BEEN MADE AGAIN AT AND AS OF THE CLOSING DATE, AND
THEN SHALL BE TRUE, COMPLETE AND CORRECT IN ALL RESPECTS, AND SHALL SURVIVE THE
CLOSING AND THE EXECUTION AND DELIVERY OF ALL DOCUMENTS, INSTRUMENTS AND
AGREEMENTS EXECUTED IN CONNECTION THEREWITH.
TO THE EXTENT THAT A FACTUAL SITUATION IS SET FORTH AS A DISCLOSURE ITEM
ON A SCHEDULE AND SUCH FACTUAL SITUATION MAY UNDER THE EXPRESS TERMS OF THIS
AGREEMENT REQUIRE DISCLOSURE ON ANOTHER SCHEDULE UNDER THIS AGREEMENT, SUCH
FACTUAL SITUATION SHALL BE DEEMED TO HAVE BEEN DISCLOSED ON SUCH OTHER SCHEDULE
TO THE EXTENT THAT THE FACTUAL DESCRIPTION WOULD BE SUFFICIENT TO APPRIZE THE
READER OF THE RELEVANT FACTS WHICH WOULD OTHERWISE BE REQUIRED TO BE SET FORTH
ON SUCH OTHER SCHEDULE.
ARTICLE IV
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants that:
4.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Texas, and has all
necessary corporate powers to own its properties and to carry on its business as
now owned and operated by it.
4.2 AUTHORITY. Purchaser has the right, power, legal capacity, and
authority to execute, deliver and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement by Purchaser has been
duly authorized by Purchaser's Board of Directors, which constitutes all of the
necessary corporate action for Purchaser to consummate the transactions
contemplated by this Agreement and to perform its obligations hereunder.
4.3 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
filing or registration with, any governmental or regulatory authority, or any
other person or entity, is required to be made or obtained by Purchaser in
connection with the execution, delivery or performance of this Agreement or the
consummation by Purchaser of the transactions contemplated hereby.
4.4 VALID AND BINDING OBLIGATIONS. Upon execution and delivery, this
Agreement and each document, instrument or agreement to be executed by Purchaser
in connection herewith will constitute the legal, valid, and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms, except
as same may be limited by bankruptcy laws, insolvency laws, and other similar
laws affecting the rights of creditors generally.
ALL OF THE REPRESENTATIONS AND WARRANTIES OF PURCHASER CONTAINED IN THIS
AGREEMENT SHALL BE TRUE, COMPLETE AND CORRECT AS OF THE DATE OF THIS AGREEMENT
AND SHALL BE DEEMED TO HAVE BEEN MADE AGAIN AT AND AS OF THE CLOSING DATE, AND
THEN SHALL BE TRUE, COMPLETE AND
19
CORRECT IN ALL RESPECTS, AND SHALL SURVIVE THE CLOSING AND THE EXECUTION AND
DELIVERY OF ALL DOCUMENTS, INSTRUMENTS AND AGREEMENTS EXECUTED IN CONNECTION
THEREWITH.
ARTICLE V
ADDITIONAL WARRANTIES AND
CERTAIN COVENANTS AND AGREEMENTS
5.1 SELLER'S COVENANTS. Seller represents, warrants, covenants and agrees
that from the Balance Sheet Date through the Closing Date, except for the
Permitted Bonus:
(A) the Company, the Harley Subsidiaries and the Seller have used
and will use their best efforts to preserve the business organization of
the Company and the Harley Subsidiaries intact, to keep available to the
Business the Employees, and to preserve the present relationships of the
Company and the Harley Subsidiaries with their suppliers, customers and
others having business relationships with them;
(B) the Company has maintained and will maintain its existing
insurance as to the Business and the Assets (and as applicable, the Leased
Assets);
(C) the Company has maintained and operated and will maintain and
operate the Business in a good and businesslike manner in accordance with
good and prudent business practices and the Company's historical policies;
(D) the Company has maintained and operated, and will continue to
maintain and operate, the Assets and the Leased Assets, including the Real
Property, in a good and businesslike manner in accordance with good and
prudent business practices and the Company's historical policies, in as
good working order and condition as existed as of September 24, 1996,
ordinary wear and tear excepted;
(E) the Company has not issued or sold, nor directly or indirectly
redeemed or acquired, and will not issue or sell, or directly or
indirectly redeem or acquire, any shares of its capital stock, or any
other of its securities, and has not granted nor agreed to grant any
options or rights with respect thereto, and has not changed nor agreed to
change and will not change its capital structure;
(F) except with respect to the Permitted Bonus, the Company has not
declared, set aside nor paid and will not declare, set aside or pay a
dividend or other distribution in respect to its capital stock;
(G) except with respect to the Permitted Bonus, the Company has not
made and will not make any payment of any type to the holders of any
capital stock
20
of the Company or any of their Affiliates, other than ordinary salary or
expenses which have been fully disclosed to Purchaser; or
(H) the Company has neither waived nor released and will not waive
nor release any material right of or material claim held by it, and has
not discounted and will not discount any of its receivables;
(I) the Company has not acquired nor disposed of and will not
acquire or dispose of, any material assets, individually or in the
aggregate, and has not entered into and will not enter into any contract
or arrangement therefor, and has not entered into and will not enter into
any other transaction other than for value in the Ordinary Course of
Business and in accordance with prudent business practices and the
Company's historical policies;
(J) the Company has not revalued and will not revalue any of its
assets or liabilities;
(K) the Company has not, other than in the Ordinary Course of
Business, changed and will not change the salary or other compensation
payable or to become payable by the Company to any of its officers,
directors, employees or agents, and has not declared, made or committed,
and will not declare, make or commit to any kind of payment of a bonus or
other additional salary or compensation to any such person;
(L) the Company has not made and will not make a loan to any person
or entity, and has not guarantied and will not guaranty any loan;
(M) the Company has not amended nor terminated, and will not amend
nor terminate, any material contract, agreement, permit or license to
which the Company or either of the Harley Subsidiaries is a party, or by
which the Company, any Harley Subsidiary, or any of the Assets or Leased
Assets are bound;
(N) the Company has maintained and will maintain all debt and lease
instruments, and has not entered into and will not enter into any new or
amended debt or lease instruments, without the prior written approval of
Purchaser;
(O) the Company has not entered into and will not enter into any
agreement or instrument which would constitute an encumbrance, mortgage or
pledge of the Assets, or which would bind Purchaser, the Company or the
Assets after Closing, which have been entered into outside the normal
scope of maintaining and operating the Business and the Assets in the
Ordinary Course of Business;
21
(P) the Company has not removed, nor permitted the removal of, and
will not remove nor permit the removal of, any personal property or
fixtures from the Real Property, unless such personal property or fixtures
are replaced with an item of at least equal value that is properly suited
for its intended purpose, other than inventory sold in the Ordinary Course
of Business, or other personal property in an amount which is not
material, either individually or in the aggregate;
(Q) subject to the approval of Xxxx Xxxxx, the Company and the
Seller will afford Purchaser the continuing right to review and inspect
the Assets and the Leased Assets, including the Real Property, at
reasonable hours, and any and all books, records, contracts, and other
documents or data pertaining to the ownership, use, insurance, operation,
renovation and maintenance of the Assets and Leased Assets, including the
Real Property, and the Business;
(R) subject to the prior approval of Xxxx Xxxxx, the Company and the
Seller will afford Purchaser free and open access to the Employees during
regular business hours, to assist Purchaser in the contemplated due
diligence review, and to allow Purchaser to gather information to make
employment decisions to be effective after Closing;
(S) the Company has performed and will perform all of the Company's
obligations under all contracts and commitments applicable to the Company
or the Assets, and has maintained and will maintain the Company's books of
account and records in the usual, regular and customary manner;
(T) except as otherwise expressly set forth in this Agreement, the
Company has complied and will comply with all statutes, laws, ordinances
and regulations applicable to the Company, the Assets, the Leased Assets
and the conduct of the Business, and will provide Purchaser with immediate
notice of any violation of any Environmental, Health & Safety Laws;
(U) the Company has paid and will pay in the Ordinary Course of
Business all bills and other payments due with respect to the ownership,
use, insurance, operation and maintenance of the Business, the Assets, and
the Leased Assets, including the Real Property, except for items being
contested in good faith and for which proper and adequate security has
been given, where required (which contested matters, if adversely
resolved, do not aggregate in excess of $15,000) within thirty (30) days
after such bills or other payments were due, and has taken and will take
all action necessary or prudent to prevent liens or other claims for the
same from being filed or asserted against any part of the Assets or the
Leased Assets, including the Real Property, provided however, that the
Company shall not make any expenditures outside the Ordinary Course of
Business, nor any capital
22
expenditures, individually or in the aggregate in excess of $3,000,
without the prior written approval of Purchaser;
(V) the Company has not made and will not make any material changes
in its management, operations, accounting or business practices or methods
(including without limitation, any change in depreciation or amortization
policies or rates), nor negotiate or pursue the acquisition or the
start-up of any new business or line of business;
(W) all revenues or cash or other receipts from all sources in all
media received by the Company have been deposited and will be deposited in
the Company's account;
(X) the Seller will cause all of the representations and warranties
set forth in SECTION 3.32 hereof to be and remain true, complete and
correct as of the Closing;
(Y) to the extent Seller receives notice, Seller will immediately
advise Purchaser in writing of any material adverse change in the
financial condition, results of operations, business or prospects of the
Company or any of the Harley Subsidiaries, and any event which could
reasonably be expected to result in such a change; and
(Z) there has been no agreement by the Company to do any of the
things described above in this SECTION 5.1 which, if such were to occur
between the Balance Sheet Date and the Closing Date, would constitute a
breach of a covenant contained in this SECTION 5.1.
5.2 THIRD PARTY CONSENTS. Except as set forth in SECTION 6.1(E), Seller
shall use its best efforts to obtain the respective consents or approvals of
each third party whose consent or approval is required for the consummation of
the transactions contemplated hereby.
5.3 COMPETING PROPOSALS. Seller will not initiate, and will not permit the
Company to initiate, directly or indirectly, contact with any person or entity
in an effort to solicit any takeover proposal, nor will any of them authorize
any officer, director or employee of the Company, or any investment banker,
attorney, accountant or any representative, to directly or indirectly initiate
any such contact. As used in this SECTION 5.3, "takeover proposal" shall mean
any proposal for an acquisition, merger or other business combination involving
the Company or any of the Harley Subsidiaries or for the acquisition of a
substantial equity interest therein or a substantial portion of any of their
assets, other than the transaction contemplated by this Agreement. Further, the
Seller will not, and will not permit the Company to, directly or indirectly,
cooperate or negotiate with, or furnish or cause to be furnished any non-public
information concerning the Business, properties or assets to, any person or
entity in connection
23
with any takeover proposal. Seller shall immediately notify Purchaser orally of,
and confirm in writing, all relevant details relating to any takeover proposal
which Seller or the Company may receive. Seller will use its best efforts to
consummate the transactions contemplated in this Agreement on the Closing Date,
and will, at or prior to Closing, take all necessary action to perform its
obligations under this Agreement.
5.4 COOPERATION; SATISFACTION OF CONDITIONS. Seller shall (a) give
assistance, to the extent within his control (and upon prior notice to Purchaser
of any expense, at Purchaser's expense), to Purchaser in preparing any required
filings and seeking any required consents or approvals in any manner reasonably
requested, and (b) use Seller's best efforts to pursue, to the extent within
Seller's control, the satisfaction of all other conditions to the consummation
of the transactions contemplated herein. Upon the fulfillment of the condition
precedent to the obligations of the Parties contained herein, Seller will
forthwith proceed to Closing.
5.5 REPAYMENT OF LOANS. As of the Balance Sheet Date, the Company did not
owe, and from the Balance Sheet Date through the Closing Date the Company will
not incur, any indebtedness, liability or obligation to Seller, except for
salary accrued in the Ordinary Course of Business. As of the Balance Sheet Date
Seller did not owe, and from the Balance Sheet Date through the Closing Date
Seller will not incur, an indebtedness, liability or obligation to the Company.
ARTICLE VI
CONDITION TO CLOSING
6.1 MUTUAL CONDITION TO PARTIES' OBLIGATIONS. The obligations of the
Parties to consummate the transactions contemplated herein are subject only to
(i) the acquisition by Purchaser of the outstanding shares of the Company owned
by Gene Xxxxx, Xxxxxxx Grounds, and Hub Associates, and (ii) satisfactory review
by Purchaser between the date hereof and the Closing Date of the books, records
and financial information of the Equipment Subsidiary for the first quarter of
the 1997 fiscal year of the Equipment Subsidiary, to determine that the
Equipment Subsidiary has not lost in excess of $150,000 during such quarter, in
Purchaser's reasonable discretion. The Parties may agree to waive this condition
in whole or in part by written instrument signed by all of the Parties;
provided, however, that no such waiver of the condition shall constitute a
waiver by any Party of its other rights or remedies, at law or in equity, if the
other Party shall be in default of any of such Party's representations,
warranties, covenants or agreements under this Agreement. Each Party hereby
agrees to proceed immediately to Closing upon satisfaction of the foregoing
condition.
ARTICLE VII
THE CLOSING
7.1 TIME AND PLACE. On the Closing Date, the transfer of the HII Shares by
Seller to Purchaser, the transfer of the HEC Shares from the Company to the
Seller, and the other
24
transactions contemplated hereby (the "Closing") shall take place at the offices
of Texas Commerce Bank--Richmond/Sage, 0000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx
00000, immediately following the satisfaction of the condition outlined in
ARTICLE VI hereof.
7.2 SELLER'S DELIVERIES. At or before the Closing, Seller shall deliver or
cause to be delivered to Purchaser the following, all of which shall be in form
and content acceptable to Purchaser:
(a) Audited Combining Balance Sheet of the Equipment Subsidiary,
dated as of the Measurement Date, and setting forth the assets and
liabilities of the Equipment Subsidiary after giving effect to completion
of the transaction contemplated herein, as if it had occurred as of the
Measurement Date;
(b) Certificate duly executed by Seller, pursuant to which Seller
certifies that the Combining Balance Sheet described above (i) is true,
complete, and correct in all material respects, (ii) fairly and accurately
presents the financial position of the Company as of the date hereof, and
(iii) has been prepared in accordance with generally accepted accounting
principles, consistently applied;
(c) All of the stock certificates evidencing the HII Shares,
together with irrevocable stock powers executed by Seller, as the record
holder of each such stock certificate;
(d) Termination of Option Agreement and Release, duly executed by
Xxxxxx Xxxxx in substantially the form attached hereto as EXHIBIT A;
(e) Agreement Not to Compete duly executed by Seller and the
Company in substantially the form attached hereto as EXHIBIT B;
(f) Xxxx of Sale, Assignment, Assumption and Indemnity Agreement
pursuant to which the Company has transferred certain assets to the
Equipment Subsidiary, and the Equipment Subsidiary has agreed to assume
certain liabilities of the Company and to indemnify the Company for same,
in substantially the form attached hereto as EXHIBIT C (the "Xxxx of
Sale");
(g) cash or other immediately available funds payable to the Company
by the Seller in the amount of (i) sixty percent (60%) of the net book
value of the assets and liabilities of the Equipment Subsidiary, as set
forth in the Audited Combining Balance Sheet referenced above, minus (ii)
Five Hundred Thousand Dollars ($500,000.00);
(h) 8.0% Subordinated Promissory Note, duly executed by Seller in
substantially the form attached hereto as EXHIBIT D, in an original
principal amount
25
equal to forty percent (40%) of the net book value of the assets and
liabilities of the Equipment Subsidiary, as set forth in the Audited
Combining Balance Sheet referenced above;
(i) Guaranty of Specific Indebtedness duly executed by the Equipment
Subsidiary with respect to the 8.0% Subordinated Promissory Note described
above in substantially the form attached hereto as EXHIBIT E;
(j) Commercial Security Agreement duly executed by the Equipment
Subsidiary in order to secure payment of the 8.0% Subordinated Promissory
Note described above in substantially the form attached hereto as EXHIBIT
F;
(k) Second Lien Mortgage (With Security Agreement and Assignment of
Rents) duly executed by the Equipment Subsidiary with respect to the real
property acquired by the Equipment Subsidiary from the Company at the
Closing, in order to secure payment of the 8.0% Subordinated Promissory
Note described above in form and content acceptable to Purchaser (together
with any required consent of the holder of the Company's first mortgage);
(l) UCC-1 Financing Statements duly executed by the Equipment
Subsidiary with respect to the property and assets described in the
Commercial Security Agreement and the Second Lien Mortgage described
above, for filing in all appropriate locations;
(m) Landlord Lien Waivers duly executed by the landlords of the
Equipment Subsidiary with respect to its leased locations in Houston,
Dallas and Tulsa, in form and content reasonably acceptable to Purchaser.
(n) Release duly executed by the Bank of Oklahoma, releasing the
Company and all guarantors and all others primarily or secondarily liable
with respect to the indebtedness secured by the existing mortgage of the
Real Property, located in Wichita, Kansas, together with the original
promissory note(s) evidencing such indebtedness marked "Paid;"
(o) Certified resolutions of the Board of Directors of the Equipment
Subsidiary authorizing the execution, delivery and performance of this
Agreement, and each of the documents, instruments and agreements set forth
above, and the performance of such additional actions and the execution,
delivery and performance of such additional documents as may be advisable
or requested by Purchaser;
(p) An opinion of counsel issued by Xxxxxxxxxx, Fist & Xxxxxxx,
counsel for Seller, in form and content reasonably acceptable to
Purchaser;
26
(q) Certificate in form and substance satisfactory to Purchaser,
dated the Closing Date and executed by the Seller, stating that after due
inquiry, it has determined that (1) all of the Seller's representations
and warranties set forth in ARTICLE III of this Agreement are true,
complete and correct as of the Closing Date, (2) Seller has performed all
of the covenants and agreements to be performed by Seller pursuant to
ARTICLE V of this Agreement, and (3) all conditions to Closing set forth
in SECTION 6.1 of this Agreement have been satisfied;
(r) Such consents, waivers, estoppel letters or similar
documentation as Purchaser shall request, in Purchaser's sole discretion,
in connection with the transfer of the HII Shares; and
(s) All other items required to be delivered hereunder or as may be
reasonably requested which are necessary or would reasonably facilitate
consummation of the transactions contemplated hereby.
In addition, Seller will put Purchaser into full possession and enjoyment of the
Company, the Business, the Assets and the Leased Assets, including without
limitation the Real Property and all documents, books, records, agreements, and
financial data of any sort relating to the Business, immediately upon the
occurrence of the Closing.
7.3 PURCHASER'S OBLIGATIONS. At the Closing, provided that Seller delivers
each and every item outlined above and required to be delivered by Purchaser
shall deliver, or cause to be delivered to Seller, the following, all of which
shall be in form and content acceptable to Seller:
A. Provided that Seller delivers at Closing each and every item
outlined above in Section 7.2, then Purchaser shall deliver, or
cause to be delivered, the following:
(i) All of the stock certificates evidencing the HEC Shares,
together with irrevocable stock powers duly authorized and executed by the
Company, as the record holder of each such stock certificate;
(ii) Special Warranty Deed pursuant to which the Company has
transferred to the Equipment Subsidiary the Real Property owned by the
Company, and located in Wichita, Kansas;
(iii) The Xxxx of Sale;
(iv) Certified resolutions of the Board of Directors of the
Purchaser authorizing the transactions contemplated herein;
(v) Certified resolutions of the Board of Directors of the Company
authorizing the transactions contemplated herein; and
27
(vi) All other items required to be delivered hereunder or as may be
requested or which are necessary or would reasonably facilitate
consummation of the transactions contemplated hereby.
B. If Seller fails for any reason (including without limitation Seller's
inability to obtain financing) to provide each and every item outlined in
SECTION 7.2, then Seller nevertheless be obligated and required to deliver the
items described in Subsections 7(c), 7(d), 7(e), 7(p), 7(q) and 7(r), and in
exchange therefor, Purchaser shall deliver to Seller the following:
(i) At Closing, Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) payable to Seller in cash or other immediately available
funds;
(ii) At Closing, a Subordinated Promissory Note executed by
Allwaste, Inc., a Delaware corporation, and payable to the order of
Purchaser in the original principal amount of One Hundred Ninety-Five
Thousand and No/100 Dollars ($195,000.00), in the form of Subordinated
Promissory Note received by Gene Xxxxx, Xxxxxxx Grounds and Hub
Associates, to be endorsed and assigned without recourse, to Seller; and
(iii) The right to receive Fifty-Five Thousand and No/100 Dollars in
the event that withing four (4) years of closing the Purchaser becomes a
"Public Entity." For purposes of this Agreement the Purchaser shall be
deemed to have become a Public Entity if (i) it or any successor shall
have closed the offering to the public of any class of equity securities
of the Purchaser or such successor pursuant to a registration statement
ordered effective under the Securities Act of 1933, as amended, (ii) the
Purchaser or any successor shall merge or consolidate with, or sell all or
substantially all of its assets to, (x) any entity which has a class of
equity securities registered under the Securities Act of 1934, as amended
(the "Exchange Act"), (y) an Affiliate of any such entity with such a
class equity securities registered under the Exchange Act, or (z) Allwaste
or any Affiliate thereof, or (iii) 80% or more of the issued and
outstanding voting securities of the Purchaser or any successor to the
Purchaser otherwise becomes owned, directly or indirectly, by an entity
which has a class of equity securities registered under the Exchange Act.
7.4 FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. Seller, at any time at or after the Closing, will execute,
acknowledge and deliver any further stock powers, bills of sale, assignments and
other assurances, documents and instruments of transfer, reasonably requested by
Purchaser, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Purchaser, for the purpose of
assigning and confirming to Purchaser, all of the HII Shares, or if necessary,
any of the Assets.
28
ARTICLE VIII
TERMINATION OF OBLIGATION
AND PAYMENT OF EXPENSES
8.1 TERMINATION OF AGREEMENT. This Agreement and the transactions
contemplated herein shall terminate prior to Closing, only upon the termination
or expiration of that certain Stock Purchase Agreement entered into effective
December 28, 1996, by Purchaser, Gene Xxxxx, Xxxxxxx Grounds, Hub Associates and
the Company. This Agreement shall not expire and may not be terminated in any
other manner.
8.2 PAYMENT OF EXPENSES. In the event that this Agreement shall be
terminated pursuant to SECTION 8.1, all obligations of the Parties to this
Agreement shall terminate and there shall be no liability of any Party to
another. Each Party will pay all costs and expenses incurred incident to his or
its negotiation and preparation of this Agreement and all documents, instruments
and agreements relating to the transactions contemplated herein, and such
Parties' performance of and compliance with all agreements and conditions
contained herein or therein on his or its part to be performed or complied with,
including the fees, expenses and disbursements of his or its counsel, auditors
and investment bankers.
ARTICLE IX
INDEMNIFICATION, ADJUSTMENT TO
PURCHASE PRICE AND OTHER REMEDIES
9.1 INDEMNIFICATION.
A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements of the Seller and the
Purchaser shall survive the Closing hereunder (notwithstanding any investigation
by or on behalf of Seller or Purchaser) and continue in full force and effect
thereafter subject only to the applicable statute of limitations; PROVIDED,
HOWEVER, that the Class B Representations shall survive the Closing hereunder
and continue in full force and effect for a period of three (3) years
thereafter, and the Environmental Representations shall survive the Closing
hereunder and continue in full force and effect for a period of five (5) years
thereafter, and provided further that (i) Purchaser shall not be indemnified for
breach of any representation, warranty, covenant or agreement to the extent that
Purchaser had actual knowledge of such breach at or prior to the Closing, (ii)
Purchaser shall for purposes of this ARTICLE IX be deemed to have actual
knowledge of all information of which Allwaste, Inc. had actual knowledge by
reason of any due diligence investigation conducted by Allwaste, Inc. in
contemplation of this Agreement, and (iii) the foregoing shall not be deemed to
extend an indemnity claim with respect to a factual situation with respect to
which the applicable statute of limitations has run without any damage to, or
claim against, the Purchaser, beyond such applicable statute of limitations.
29
B. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PURCHASER.
(i) In the event Seller breaches any of Seller's representations,
warranties and covenants contained herein, and, if there is an applicable
survival period pursuant to SECTION 9.1(A) above, provided that Purchaser makes
a written claim for indemnification against the Seller within such survival
period, then Seller agrees to indemnify Purchaser from and against the entirety
of any Adverse Consequences Purchaser may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences Purchaser may
suffer after the end of any applicable period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach; SUBJECT, HOWEVER, to the
following limitations:
(a) the Seller shall not have any obligation to indemnify Purchaser from
and against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any Class A
Representations until Purchaser has suffered Adverse Consequences by
reason of all such breaches in excess of a Twenty-Five Thousand Dollar
($25,000) aggregate deductible (after which point the Seller will be
obligated only to indemnify Purchaser from and against five and one-half
percent (5.5%) of the Adverse Consequences over and above the amount of
such deductible);
(b) the Seller shall not have any obligation to indemnify Purchaser from
and against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any Class B
Representations until Purchaser has suffered Adverse Consequences by
reason of all such breaches in excess of a Three Hundred Eighty Thousand
Dollar ($380,000) aggregate deductible (after which point the Seller will
be obligated only to indemnify Purchaser from and against five and
one-half percent (5.5%) of such Adverse Consequences over and above the
amount of such deductible) and there will be an aggregate ceiling on the
obligation of the Seller to indemnify Purchaser from and against Adverse
Consequences resulting from, arising out of, relating to, in the nature
of, or caused by breaches of the Class B Representations, which ceiling
shall equal Two Hundred Fifty Thousand Dollars ($250,000.00).
(c) (1) the Seller shall not have any obligation to indemnify Purchaser
from and against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any
Environmental Representations until Purchaser has suffered Adverse
Consequences by reason of all such breaches in excess of a Five Hundred
Thousand Dollar ($500,000) aggregate deductible, (2) after Purchaser has
suffered Adverse Consequences in the amount of such deductible, the Seller
will be obligated to indemnify Purchaser from and against five and
one-half percent (5.5%) of such Adverse Consequences up to an aggregate
amount of Five Hundred Thousand Dollars ($500,000), and (3) thereafter,
the Seller will be obligated to indemnify Purchaser from and against two
and three-fourths percent (2.75%) of all further such Adverse
Consequences, up to an aggregate ceiling on the obligation of the Seller
to indemnify Purchaser from and against Adverse Consequences resulting
from, arising out of, relating to, in the nature of,
30
or caused by breaches of the Environmental Representations, which ceiling
shall equal Two Hundred Fifty Thousand Dollars ($250,000).
(d) Notwithstanding any other limitation in this SUBSECTION 9.1(B)(I), the
Seller shall be fully obligated to indemnify Purchaser for five and
one-half percent (5.5%) of any (1) federal income tax liability, together
with any penalties and interest thereon, to the extent of (a) any
assessments occurring at or prior to Closing, (b) to the extent occurring
after Closing, such liability results from any disallowance of any
deductions or amortization with respect to goodwill of the Company or any
Harley Subsidiaries for any tax year of the Company or such Harley
Subsidiaries ended on or prior to December 31, 1996, but only to the
extent that such liability and related interest and penalties have not
been accrued in the audited financial statements of the Company at October
31, 1996, and (c) any corporate tax liability of the Company for any tax
year resulting from the failure of the IRS to allow any deductions for the
Permitted Bonus, and (2) any liability with respect to Environmental,
Health & Safety Laws with respect to the specific matters set forth in
SUBSECTIONS 6.1(G)(I) and (II) of that certain Stock Purchase Agreement
dated December 29, 1996, executed by Purchaser, Gene Xxxxx, Xxxxxxx
Grounds, Hub Associates and the Company, irrespective of any waiver of
such conditions at Closing.
(ii) In the event Seller commits any fraud in connection with the
transactions contemplated herein, or conceals or permits the concealment of any
matters from Purchaser or its representatives during the due diligence process,
and Purchaser makes a written claim for indemnification under this SUBSECTION
9.1(B)(II), then Seller agrees to indemnify Purchaser from and against the
entirety of any Adverse Consequences Purchaser may suffer through and after the
date of the claim for indemnification resulting from, arising out of, relating
to, in the nature of, or caused by such fraud or concealment; PROVIDED, HOWEVER,
that the Seller shall not have any obligation to indemnify Purchaser from and
against any Adverse Consequences resulting from, arising out of, relating to, in
the nature of, or caused by such fraud or concealment until Purchaser has
suffered Adverse Consequences by reason of all such fraud or concealment in
excess of a Twenty-Five Thousand Dollar ($25,000) aggregate deductible (after
which point the Seller will be obligated only to indemnify the Purchaser from
and against further such Adverse Consequences).
C. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. In the
event Purchaser breaches any of its representations, warranties and covenants
contained herein, provided that Seller makes a written claim for indemnification
against Purchaser prior to the expiration of the applicable statute of
limitations, then Purchaser agrees to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer through after the
date of the claim for indemnification resulting from, arising out of, relating
to, in the nature of, or caused by the breach.
31
D. MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party ( the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this SECTION 9.1, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; PROVIDED, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to assume the
defense of the Third Party Claim with counsel of his or its choice reasonably
satisfactory to the Indemnified Party at any time within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim; PROVIDED,
HOWEVER, that the Indemnifying Party must conduct the defense of the Third Party
Claim actively and diligently thereafter in order to preserve its rights in this
regard; and PROVIDED FURTHER that the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with SECTION
9.1(D)(II) above, (a) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves only the
payment of money damages by one or more of the Indemnifying Parties and does not
impose an injunction or other equitable relief upon the Indemnified Party, and
(b) the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld unreasonably).
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with SECTION
9.1(D)(II) above, or the Third Party Claim involves an injunction or other
equitable relief, however, (a) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner he or it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith) and (b) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the fullest extent provided in this SECTION 9.1.
E. DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make
appropriate adjustments for tax consequences and insurance coverage and take
into account the time value of money (using the per annum rate of Eight Percent
(8.0%) as the discount rate) in determining the Adverse Consequences for
purposes of this SECTION 9.1.
32
F. OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant; PROVIDED, HOWEVER, that Purchaser acknowledges and agrees
that except for the purchase price adjustment contemplated in SECTION 9.2 with
respect to breaches of Financial Representations, the foregoing indemnification
provisions in this SECTION 9.1 shall be the exclusive remedy of the Purchaser
for any breach of the representations and warranties in ARTICLE III above.
Seller hereby agrees that he will not make any claim for indemnification against
the Company or any of the Harley Subsidiaries by reason of the fact that he was
a director, officer, employee or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Purchaser against Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
9.2
A. ADJUSTMENT TO VALUATION AT CLOSING. Deloitte & Touche are preparing
audited financial statements of the Company, dated as of the Measurement Date.
Such audited financial statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied, and in a manner consistent
with the Company's historical accounting policies with respect to audited
financial statements (including the materiality threshold previously used by the
Company's independent public accountants in calculating the Company's net
worth). The determination of such accounting firm with respect to any accounting
issue shall be final and binding on the Parties. At Closing, the value
attributable to the HII Shares shall be reduced by an aggregate amount (the "HII
Deficiency Amount") equal to five and one-half percent (5.5%) of (A) the sum of
(i) the amount, if any, by which four million two hundred fifty thousand dollars
($4,250,000) exceeds the Company's Stockholders' Equity as of the Measurement
Date, as set forth in such audited financial statements, after giving effect to
the Permitted Bonus, plus (ii) the amount of any Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or caused by any breach of
the Financial Representations, minus (B) eighty thousand dollars ($80,000). In
addition, if the net book value of the assets and liabilities of the Equipment
Subsidiary as set forth in such audited financial statements is greater than or
less than Three Million Fifty-Seven Thousand Five Hundred Fifty Four Dollars
($3,057,554), and such excess or deficiency is at least Fifty Thousand Dollars
($50,000.00), then the value attributable to the HEC Shares shall be increased
or decreased by the amount of such excess or deficiency, respectively (the "HEC
Adjustment Amount"). The original principal amount of the Subordinated Note and
the amount of cash payable at Closing shall be increased or decreased, as
applicable, pro rata, based on the net amount of the HII Deficiency Amount and
the HEC Adjustment Amount.
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B. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE FOR EQUIPMENT SUBSIDIARY.
Within thirty (30) days after the Closing Date, the Purchaser shall deliver to
the Seller an unaudited balance sheet and income statement of the Equipment
Subsidiary, prepared as of the Closing Date, after giving effect to the
transactions contemplated herein (the "Post-Closing Financial Statements").
These Post-Closing Financial Statements shall become final and binding on the
Parties on the 15th day following receipt thereof by the Seller unless the
Seller furnishes written notice of Seller's disagreement ("Notice of
Disagreement") to Purchaser prior to such date. Any Notice of Disagreement shall
specify in detail the nature of any disagreement so asserted. If a Notice of
Disagreement is sent by Seller to Purchaser in accordance with this SECTION
9.2(B), then the Post-Closing Financial Statements shall become final and
binding upon the Parties on the earlier to occur of: (i) the date the Parties
resolve in writing any differences they have with respect to any matter
specified in the Notice of Disagreement, or (ii) the date any disputed matters
are finally resolved in writing by the Accounting Firm (as defined below).
During the 10-day period following the delivery of a Notice of Disagreement, the
Parties shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in the Notice of
Disagreement. If, at the end of such 10-day period (or such longer period of
time as the Parties may agree upon in writing), the Parties have not reached
agreement on such matters, the matters which remain in dispute, together with
copies of this Agreement, the Post-Closing Financial Statements, and the Notice
of Disagreement, shall be submitted, within five (5) days following the
expiration of such 10-day period (or any agreed upon extension thereof), to
Deloitte & Touche for review and resolution, or, if such firm is unable or
unwilling to act, such other nationally recognized independent public accounting
firm as shall be agreed upon by the Parties in writing (in either such event,
the "Accounting Firm"), and all proceedings conducted by the Accounting Firm
shall be conducted at the offices of the Accounting Firm in Tulsa, Oklahoma. The
Accounting Firm shall render a decision resolving the matters in dispute as soon
as practicable following the date of the submission to the Accounting Firm. The
cost of any engaging the Accounting Firm (including the fees and expenses of the
Accounting Firm but excluding the fees and disbursements of each party's
independent auditors and counsel) pursuant to this SECTION 9.2(B) shall be borne
one-half by Purchaser and one-half by Seller. The fees and disbursements of
Seller's independent auditors and counsel incurred in connection with this
SECTION 9.2(B) shall be borne by Seller, and the fees and disbursements of
Purchaser's independent auditors and counsel incurred in connection with this
SECTION 9.2 shall be borne by Purchaser. The PostClosing Financial Statements,
upon becoming final due to lack of objection, written agreement, or decision of
the Accounting Firm, or in any other manner, are referred to herein as the
"Final Post-Closing Financial Statements". To the extent that the net book value
of the Equipment Subsidiary set forth in the Final Post-Closing Financial
Statements is less than or greater than the amount thereof set forth in the
audited combining balance sheet described in SECTION 7.2(A), then the original
principal amount of the 8.0% Subordinated Promissory Note delivered at Closing
(the "Note") shall be reduced or increased, respectively, by the amount of such
difference (the "PostClosing Adjustment Amount"), and the Parties hereby agree
that within five (5) business days after the date on which the Post-Closing
Financial Statements become final (time being of the essence), (i) Seller,
Purchaser and the Equipment Subsidiary will execute a Modification Agreement,
pursuant to which the original principal amount of the 8.0% Subordinated
Promissory Note
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delivered at Closing is increased or reduced, as applicable, by the amount of
the Post-Closing Adjustment Amount, and (ii) the Equipment Subsidiary will
execute such additional agreements as Purchaser may request in order to modify,
renew, extend, ratify and confirm the liens and instruments securing or
guaranteeing payment of such note.
9.3 SPECIFIC PERFORMANCE. Each of the Parties hereby agrees that the
transactions contemplated by this Agreement are unique. Each Party hereby
acknowledges and agrees that it would be impossible to measure the damages which
would result if any Party should default in his or its obligations under this
Agreement; accordingly the Parties hereby agree that each Party shall have, in
addition to any other legal or equitable remedy available to him or it, the
right to enforce this Agreement by decree of specific performance or other
equitable remedy, and each Party hereby irrevocably waives any defense, claim or
assertion that a remedy in damages will be adequate.
9.4 OFFSET; ATTORNEYS' FEES. Subject to the limitations on liability set
forth in SECTION 9.1 hereof, to the extent permitted by applicable law, all
amounts due and owing to Seller under this Agreement or any document,
instrument, or agreement executed in connection herewith or therewith shall be
subject to offset by the Purchaser to the extent of any damages incurred as a
result of Seller's breach of this Agreement or any document, instrument, or
agreement executed by Seller in connection herewith. Seller hereby acknowledges
and agrees that but for the right of offset contained in this SECTION 9.4, the
Purchaser would not have entered into this Agreement or any of the transactions
contemplated herein. If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing Party or Parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it or they may be entitled at law or
equity. The rights and remedies granted herein are cumulative and not exclusive
of any other right or remedy granted herein or provided by law.
9.5 RIGHTS AND LIABILITIES OF PARTIES. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the Parties and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
Party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over against any Party to this Agreement.
ARTICLE X
ASSETS TRANSFERRED TO EQUIPMENT SUBSIDIARY
SELLER AND EQUIPMENT SUBSIDIARY HEREBY ACKNOWLEDGE THAT PURCHASER HAS
CAUSED THE COMPANY TO TRANSFER CERTAIN OF THE ASSETS TO THE EQUIPMENT SUBSIDIARY
CONTEMPORANEOUSLY WITH THE ACQUISITION BY PURCHASER OF THE OUTSTANDING CAPITAL
STOCK OF THE
35
COMPANY, AND THAT SELLER WAS, THROUGH THE DATE HEREOF, AN OFFICER, DIRECTOR AND
SHAREHOLDER OF THE COMPANY. AS A RESULT, SELLER IS MUCH MORE FAMILIAR WITH THE
ASSETS (INCLUDING THE REAL PROPERTY) BEING TRANSFERRED TO THE EQUIPMENT
SUBSIDIARY, AND THE CONDITION OF THOSE ASSETS, THAN IS THE PURCHASER. SELLER AND
THE EQUIPMENT SUBSIDIARY HEREBY ACKNOWLEDGE AND AGREE THAT IT WOULD BE
UNCONSCIONABLE TO HOLD THE COMPANY OR THE PURCHASER RESPONSIBLE TO THE EQUIPMENT
SUBSIDIARY OR THE SELLER AS A RESULT OF THE CONDITION OF ANY OF THE ASSETS
(INCLUDING THE REAL PROPERTY) OR ANY DEFECT THEREIN.
SELLER AND THE EQUIPMENT SUBSIDIARY HEREBY ACKNOWLEDGE AND AGREE THAT
NEITHER THE PURCHASER NOR THE COMPANY NOR ANY OF THEIR EMPLOYEES OR AGENTS HAVE
MADE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH
RESPECT TO ANY OF THE ASSETS (INCLUDING THE REAL PROPERTY), OR THE CONDITION,
FITNESS, MARKETABILITY, SUITABILITY OR HABITABILITY THEREOF. IN NO EVENT SHALL
THE PURCHASER OR THE COMPANY BE LIABLE FOR ANY DEFECTS IN ANY OF THE ASSETS
(INCLUDING THE REAL PROPERTY) OR FOR ANY LIMITATION ON THE USE OF THE ASSETS
(INCLUDING THE REAL PROPERTY) OR ANY PORTION THEREOF. NEITHER THE PURCHASER NOR
THE COMPANY SHALL BE RESPONSIBLE TO THE SELLER OR THE EQUIPMENT SUBSIDIARY FOR
ANY LATENT DEFECT IN ANY OF THE ASSETS (INCLUDING THE REAL PROPERTY), NOR THE
EXISTENCE WITH RESPECT THERETO OF ANY VIOLATIONS OF LAW OR REGULATIONS OF ANY
GOVERNMENTAL AUTHORITY. THE EXECUTION OF THIS AGREEMENT BY SELLER AND THE
EQUIPMENT SUBSIDIARY SHALL BE CONCLUSIVE EVIDENCE THAT SELLER AND THE EQUIPMENT
SUBSIDIARY ACCEPT THE ASSETS CONVEYED TO THE EQUIPMENT SUBSIDIARY AS IS, WHERE
IS, WITH ALL FAULTS, AND WITHOUT REPRESENTATION OR WARRANTY AS TO THE CONDITION,
FITNESS, MARKETABILITY, SUITABILITY OR HABITABILITY THEREOF.
ARTICLE XI
MISCELLANEOUS
11.1 CONFIDENTIALITY. Unless and until Closing has occurred, or such
information is or becomes public through no fault of the disclosing Party, each
Party hereby agrees that he or it will not disclose any information of a
confidential or proprietary nature concerning the other Parties or their
respective businesses or operations to any third parties, except for the
following, each of whom shall be informed of the confidential nature of such
information and the necessity to retain it in confidence: (A) Purchaser's
officers, directors, partners, or employees, (B) a limited number of outside
legal, accounting and other professional consultants or key agents, and (a) such
other parties to whom such Party is required to disclose such information under
applicable law, pursuant
36
to the advice of legal counsel for such Party, in which event the disclosing
Party shall (i) give prior written notice to the other Parties of the disclosing
Party's legal obligation to disclose such information, including the person(s)
to whom such information is legally required to be disclosed, and (ii) disclose
only the portion of such information which the disclosing Party reasonably
believes, on the advice of legal counsel, is legally required to be disclosed.
Each Party agrees that prior to Closing, he or it and all of his or its
Affiliates will use information obtained in connection with the transactions
contemplated in this Agreement solely for the purpose of evaluating such
transactions, and in no event shall any Party use any of such confidential or
proprietary information for his or its own benefit or to the detriment of the
other Parties. In the event that Closing does not occur each Party shall,
promptly upon request, return all of such confidential or proprietary
information to the appropriate Party, including any and all copies thereof.
11.2 ANNOUNCEMENTS. No public or private announcement or disclosure shall
be made of the transactions contemplated herein, whether by press release or
filing of a report or disclosure with any securities exchange or governmental
authority, except as expressly contemplated herein, unless and until the Party
proposing such announcement or disclosure shall have supplied the proposed text
of such announcement or disclosure to the other Parties for review and comment
at least twenty-four (24) hours prior to release; provided however, that if in
the good faith opinion of legal counsel to the announcing or disclosing Party,
such announcement or disclosure is required under applicable federal or state
law to be made sooner, a copy of such announcement or disclosure shall be made
available to all other Parties as soon as possible, but in any event prior to
release.
11.3 BROKERAGE COMMISSIONS AND OTHER FEES. Seller hereby represents and
warrants that neither the Seller nor the Company has incurred any liability for,
nor knows of any person or entity entitled to, any commission or finder's fee in
connection with this Agreement or the transactions contemplated herein.
Purchaser hereby represents and warrants that Purchaser has not incurred any
liability for, and does not know of any person or entity entitled to, any
commission or finder's fee in connection with this Agreement or the transactions
contemplated herein. Each Party shall be responsible for all costs, fees and
expenses (including attorney and accountant fees and expenses) paid or incurred
by such Party, and Seller shall be responsible for all costs, fees and expenses
paid or incurred by the Seller or the Company, in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement,
or otherwise in connection with the transactions contemplated hereby, except
that the Company shall pay all the reasonable accounting and auditing costs of
its outside accountants necessary to consummate the transactions contemplated
herein, including the costs of the preparation of any financial statements
required to be delivered under the terms of this Agreement.
11.4 MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only in writing signed by all of the Parties.
11.5 NOTICES. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when
37
delivered personally or telefaxed during regular business hours during a
business day to the appropriate location described in the preamble to this
Agreement, or three (3) business days after posting thereof by United States
first-class, registered or certified mail, return receipt requested, with
postage and fees prepaid and addressed at his or its address set forth in the
preamble to this Agreement, with a copy to legal counsel for such Party, at the
address set forth on the letterhead on which such counsel's legal opinion was
delivered. Any Party may designate a different address for subsequent notices or
communications by furnishing notice to the other Parties in the manner described
above.
11.6 ATTORNEYS' FEES. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing Party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it may be entitled at law or equity.
11.7 FEES AND OTHER EXPENSES. Except as expressly set forth herein to the
contrary, all costs, fees and expenses (including attorney and accountant fees
and expenses) shall be paid by the Party incurring same in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement,
or otherwise in connection with the transactions contemplated hereby.
11.8 ADDITIONAL REMEDIES. All rights and remedies of each Party hereunder
are cumulative of every other right or remedy that such Party may otherwise have
at law or in equity or under this Agreement or any other document, instrument or
agreement. The exercise of one or more rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of other rights or remedies.
11.9 NON-WAIVER. Failure on the part of a Party in any one or more
instances to enforce any of such Party's rights which arise in connection with
this Agreement, or to insist upon the strict performance of any of the terms,
conditions or covenants of this Agreement, shall not be construed as a waiver or
relinquishment for the future of any such rights, terms, conditions or
covenants. No waiver of any condition of this Agreement shall be valid unless it
is in writing, and executed by the Party against whom such waiver is sought to
be enforced. Any valid waiver shall be effective only for the purposes expressly
set forth therein.
11.10 GOVERNING LAW; JURISDICTION; VENUE. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Texas, without regard to conflicts of law principles, and the laws of the
United States applicable in Texas. Venue for any litigation between or among the
Parties with respect to the subject matter of this Agreement shall be Xxxxxx
County, Texas. Each Party hereby irrevocably submits to personal jurisdiction in
Texas. Each Party hereby waives all objections to personal jurisdiction in Texas
and venue in Xxxxxx County for purposes of such litigation.
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11.11 CONSTRUCTION. The Parties and their respective legal counsel have
participated extensively in the preparation, negotiation and drafting of this
Agreement. Accordingly, no presumption will apply in favor of either Seller or
Purchaser in the interpretation of this Agreement or in the resolution of the
ambiguity of any provision hereof. All words used herein shall be construed to
be of such gender or number as the circumstances require. As used herein the
term "this Agreement" shall mean this Agreement as a whole and as the same may,
from time to time hereafter, be amended, supplemented or modified. The words
"herein," "hereof," "hereto," "hereunder," "hereinafter," "hereinabove," and
"hereinbelow," and other words of similar import, refer to this Agreement as a
whole and not to any particular article, section, paragraph, clause or other
subdivision hereof, unless otherwise specifically noted. As used herein, the
words "include" or "including" shall mean "including without limitation."
11.12 HEADINGS. The headings and subheadings of the Articles and Sections
contained herein or on any Schedule or Exhibit attached hereto are for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement or any provisions hereof. Any reference herein to an Article
or Section shall be deemed to be a reference to the corresponding Article or
Section of this Agreement unless otherwise stated herein.
11.13 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective, valid and enforceable
under applicable law, but if any provision of this Agreement shall be prohibited
by, or invalid or unenforceable under, applicable law, then (i) the Parties
agree that they will amend such provisions by the minimal amount necessary to
bring such provisions within the ambit of enforceability, and (ii) any court of
competent jurisdiction may, at the request of either Party, revise, reform or
reconstruct such provisions in a manner sufficient to cause them to be
enforceable. In no event shall any prohibition against, or the invalidity or
unenforceability of, any provision hereof affect the validity or enforceability
of any other provision hereof.
11.14 SCHEDULES AND EXHIBITS. All schedules and exhibits attached to this
Agreement are hereby incorporated into and made a part of this Agreement.
11.15 FURTHER ASSURANCES. Each of the Parties shall perform such actions
and deliver or cause to be delivered any and all such documents, instruments and
agreements as the other Party may reasonably request for the purpose of fully
and effectively carrying out this Agreement and the transactions contemplated
hereby.
11.16 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the Parties and their respective successors and assigns.
11.17 ENTIRE AGREEMENT. This Agreement and all of the documents and
agreements executed in connection herewith set forth the entire agreement
between the Parties with respect to the subject matter hereof, and supersede all
prior or contemporaneous oral agreements or understandings, and all prior or
contemporaneous written agreements, with respect thereto.
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11.18 MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which together shall constitute but one and the same agreement.
EXECUTED AND DELIVERED EFFECTIVE as of the date first written above.
PURCHASER:
THE SAFE SEAL COMPANY, INC.
a Texas corporation
By:
XXXXXXX X. XXXXXX
President & CEO
SELLER:
XXXX XXXXXX, Individually
THE COMPANY:
HARLEY INDUSTRIES, INC.
a California corporation
By:
Name:___________________________
Title:____________________________
THE EQUIPMENT SUBSIDIARY:
HARLEY EQUIPMENT CORPORATION
an Oklahoma corporation
By:
Name:___________________________
Title:____________________________
40
The undersigned spouse of Seller is fully aware of, understands, and fully
consents and agrees to the provisions of this Stock Transfer Agreement, and its
binding effect upon any community or other property interests that she may own,
and her awareness, understanding, consent and agreement are evidenced by her
execution hereof. The undersigned spouse of Seller additionally joins in the
execution hereof in order to sell, assign and transfer unto Purchaser all of her
respective rights, titles and interests, legal or beneficial, if any, in the HII
Shares.
---------------------------------------
NAME:________________________________,
SPOUSE OF XXXX XXXXXX
The undersigned hereby joins in the execution of this Stock Transfer
Agreement in order (i) to induce the Purchaser to execute this Agreement, and
(ii) to acknowledge his agreement to execute and deliver at Closing the
Termination of Option Agreement and Release in substantially the form of EXHIBIT
A attached hereto and incorporated herein by reference.
--------------------------------------
XXXXXX XXXXX
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Schedule 1.12 - Closing Financial Statements (Unaudited October 31)
Schedule 1.14 - Employees
Schedule 1.22 - Financial Statements (Unaudited August 31)
Schedule 3.3 - (A) Seller's Consents and Approvals
Schedule 3.3 - (B) Seller's Breaches and Defaults
Schedule 3.5 - Options, etc.
Schedule 3.7 - Exceptions to Title to Assets
Schedule 3.8 - Leased Assets (Personal Property)
Schedule 3.9 - Condition of Assets and Leased Assets
Schedule 3.10 - Contracts
Schedule 3.11 - Other Contracts
Schedule 3.15 - Licenses
Schedule 3.17 - (A) Real Property Owned
(B) Real Property Leased
Schedule 3.18 - Subsidiaries
Schedule 3.19 - Insurance
Schedule 3.20 - Banking
Schedule 3.22 - Personnel
Schedule 3.23 - Employee Benefits
Schedule 3.24 - Employment Agreements
Schedule 3.26 - Additional Liabilities
Schedule 3.27 - Litigation
Schedule 3.28 - Tax Matters
Schedule 3.30 - Environmental, Health and Safety
Schedule 3.32 - Certain Changes or Events
Schedule 3.33 - Customers
EXHIBITS
Exhibit A - Termination of Option Agreement and Release
Exhibit B - Agreement Not to Compete
Exhibit C - Xxxx of Sale
Exhibit D - 8.0% Subordinated Promissory Note
Exhibit E - Guaranty of Equipment Subsidiary
Exhibit F - Security Agreement of Equipment Subsidiary
42
