EXHIBIT 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
SMART CHOICE AUTOMOTIVE GROUP, INC.,
XXXXXX INDUSTRIES, INC.,
XXXXXX'X RACING BODIES, INC.,
XXXXXX INDUSTRIES, LLC
and
SUN AUTOMOTIVE PARTNERS L.P.
August 26, 1999
================================================================================
TABLE OF CONTENTS
PAGE
----
1. Definitions............................................................1
2. The Merger.............................................................5
(a) The Merger.......................................................5
(b) Merger Effective Date............................................5
(c) The Merger Consideration.........................................6
(d) Certificate of Formation of Surviving Company....................6
(e) Delivery of Shares...............................................6
(f) Effectiveness of Merger..........................................6
(g) Working Capital Adjustments......................................6
(h) The Closing......................................................7
(i) Deliveries at the Closing........................................8
3. Representations and Warranties Concerning the Transaction..............8
(a) Representations and Warranties of Seller.........................8
(b) Representations and Warranties of Buyer and Parent..............10
4. Representations and Warranties Concerning the Companies...............11
(a) Organization, Qualification and Corporate Power.................12
(b) Capitalization..................................................12
(c) Noncontravention................................................12
(d) Brokers' Fees...................................................12
(e) Property........................................................13
(f) Subsidiaries....................................................13
(g) Financial Statements............................................13
(h) No Undisclosed or Contingent Liabilities........................13
(i) Absence of Certain Changes......................................14
(j) Compliance with Law; Licenses...................................15
(k) Tax Matters.....................................................16
(l) Real Property...................................................18
(m) Intellectual Property...........................................18
(n) Contracts.......................................................19
(o) Powers of Attorney..............................................20
(p) Litigation, Orders..............................................20
(q) Employee Benefits...............................................20
(r) Environmental Matters...........................................22
(s) Severance Arrangements..........................................23
(t) Insurance.......................................................23
(u) Suppliers.......................................................23
(v) Accounts Receivable.............................................24
ii
(w) Certain Interests...............................................24
(x) Labor Matters...................................................24
(y) Bank Accounts...................................................25
(z) Transactions with Affiliates....................................25
(aa) Product Warranties, Defects and Liabilities.....................26
(bb) Inventories.....................................................26
(cc) Prices; Financial Condition.....................................26
(dd) Disclosure......................................................26
5. Pre-Closing Covenants.................................................26
(a) General.........................................................27
(b) Notices and Consents............................................27
(c) Conduct of Business.............................................27
(d) Full Access.....................................................29
(e) Notice of Developments..........................................29
(f) Exclusivity.....................................................29
(g) Environmental Matters...........................................30
6. Post-Closing Covenants................................................30
(a) General.........................................................30
(b) Litigation Support..............................................30
(c) Transition......................................................31
7. Conditions to Obligation to Close.....................................32
(a) Conditions to Obligation of Buyer and Parent....................32
(b) Conditions to Obligation of Seller and the Companies............34
8. Remedies for Breaches of this Agreement...............................35
(a) Survival of Representations and Warranties......................35
(b) Indemnification Provisions for Benefit of Buyer.................36
(c) Indemnification Provisions for Benefit of Seller................37
(d) Matters Involving Third Parties.................................37
(e) Determination of Adverse Consequences...........................37
(f) Other Indemnification Provisions................................38
9. Termination...........................................................38
(a) Termination of Agreement........................................38
(b) Effect of Termination...........................................38
10. Tax Indemnification...................................................39
11. Miscellaneous.........................................................41
(a) Press Releases and Public Announcements.........................41
(b) No Third-Party Beneficiaries....................................42
(c) Entire Agreement................................................42
iii
(d) Succession and Assignment.......................................42
(e) Counterparts....................................................42
(f) Headings........................................................42
(g) Notices.........................................................42
(h) Governing Law...................................................43
(i) Waiver of Jury Trial............................................43
(j) Amendments and Waivers..........................................44
(k) Severability....................................................44
(l) Expenses........................................................44
(m) Construction....................................................44
(n) Incorporation of Exhibits and Schedules.........................44
iv
Exhibit A Actual Working Capital Accounts
Exhibit B Articles of Merger
Exhibit C Certificate of Merger
Exhibit D Historical Financial Statements
Exhibit E Assignment of Trademarks
Exhibit F Form of Lease
Exhibit G Transition Services Agreement
Exhibit H Opinion of Seller
Exhibit I Opinion of Buyer
Disclosure Schedule Exceptions to Representations and Warranties Concerning the
Companies
v
AGREEMENT AND PLAN OF MERGER
This Agreement is entered into as of August 26, 1999, by and among SMART
CHOICE AUTOMOTIVE GROUP, INC., a Florida corporation ("Seller"), XXXXXX
INDUSTRIES, LLC, a Delaware limited liability company ("Buyer"), SUN AUTOMOTIVE
PARTNERS, L.P., a Delaware limited partnership ("Parent"), XXXXXX INDUSTRIES,
INC., a Florida corporation ("Sub 1"), and XXXXXX'X RACING BODIES, INC., a
Florida corporation ("Sub 2"). Seller, Parent, Buyer, Sub 1 and Sub 2 are
referred to collectively herein as the "Parties."
Seller owns all of the outstanding capital stock of Sub 1 and Sub 2 (Sub 1
and Sub 2 are hereinafter collectively referred to as the "Companies"). This
Agreement contemplates a transaction in which the Companies would be acquired by
Buyer by means of a merger of the Companies into Buyer (the "Merger") for the
consideration and upon the terms set forth herein and in accordance with the
Delaware General Corporation Law ("DGCL") and the Florida Business Corporation
Act ("FBCA").
The Board of Managers of Buyer and the respective Boards of Directors of
Seller and the Companies believe that the Merger, upon the terms set forth
herein, is in the best interests of their respective companies and in the best
interests of the members and stockholders of their respective companies and such
Boards have unanimously approved the Merger.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACTUAL WORKING CAPITAL" is the sum of $557,000, book cash (whether
positive or negative, with negative book cash being generated by, among other
things, checks drawn on the bank accounts and not yet paid to or cashed by
recipient), accounts receivable, inventory and prepaids minus accounts payable,
accrued wages and vacation and other accrued expenses, as reflected on the
Closing Balance Sheet calculated using the accounts set forth on EXHIBIT A and
adjusted for any amounts distributed by Buyer to the Parent on the Closing Date;
provided, however, such calculation will exclude all intercompany accounts.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
1
"BUYER" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents (including marketable securities
and short-term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 2(h) below.
"CLOSING DATE" has the meaning set forth in Section 2(h) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" has the meaning set forth in the preface above.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Companies that is not already generally available to the
public.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4 below.
"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 which is an Employee Pension Benefit Plan (including any
Multiemployer Plan) or (d) Employee Welfare Benefit Plan or other employee
benefit plan, stock option, bonus or incentive plan, severance pay policy or
agreement, deferred compensation agreement or similar plan, arrangement or
agreement, in each case referred to in the foregoing clauses (a) through (d),
maintained, sponsored by or contributed to by Sub 1 or Sub 2, or by Seller with
respect to employees of Sub 1 or Sub 2.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
(ss)3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
(ss)3(1).
"ENVIRONMENTAL LAWS" means all federal, state and local, provincial and
foreign, civil and criminal laws, regulations, rules, ordinances, codes,
decrees, judgments, directives or judicial or administrative orders relating to
pollution or protection of the environment, natural resources or human health
and safety, including, without limitation, laws relating to releases or
threatened releases of Hazardous Substances (including, without limitation,
releases to ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, release, transport, disposal or handling
of Hazardous Substances. "Environmental Laws" include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
(ss)601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. (ss)1801
et seq. ), the Resource Conservation and Recovery Act (42 U.S.C. (ss) 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. (ss) 251 et seq.),
the Clean Air Act (42 U.S. C. (ss)7401 et seq.) , the
2
Toxic Substances Control Act (15 U.S.C. (ss)2601 et seq.), the Oil Pollution Act
(33 U.S.C. (ss)2701 et seq.), the Emergency Planning and Community Right-to-Know
Act (42 U.S.C. (ss)11001 et seq.), the Occupational Safety and Health Act
(29 U.S.C. (ss)651 et seq.) and all other state laws analogous to any of the
above.
"ENVIRONMENTAL LIABILITIES" means all liabilities of the Companies which
(i) arise under or relate to violations of Environmental Laws or arise in
connection with or related to any matter disclosed or required to be disclosed
in Section 4(q) of the Disclosure Schedule and (ii) are attributable to actions
occurring or conditions existing on or prior to the Closing Date.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FBCA" means the Florida Business Corporation Act.
"FINANCIAL STATEMENT" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect as of the Closing Date or as of such date as otherwise stated herein.
"XXXX-XXXXX-XXXXXX ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"HAZARDOUS SUBSTANCES" means any toxic or otherwise hazardous substance,
which is regulated under Environmental Laws.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d)(i) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d)(i) below.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 4(m) below.
"KNOWLEDGE" means actual knowledge of an executive officer of the Party
without independent investigation.
"LICENSES" has the meaning set forth in Section 4(j) below.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Companies, taken as a whole, PROVIDED that in determining whether there has been
a Material Adverse Effect, the following matters will not be considered: (i) any
changes in the pricing of products purchased by the Companies and (ii) any
changes in the financial condition of a customer or supplier of the Companies.
3
"MERGER CONSIDERATION" has the meaning set forth in Section 2(c) below.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4(g) below.
"MOST RECENT FISCAL QUARTER END" has the meaning set forth in Section 4(g)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA (ss)3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARENT" has the meaning set forth in the preface above.
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
"REPORTABLE EVENT" has the meaning set forth in ERISA /section/4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SUB 1 SHARE" means any share of the common stock, par value $.01 per
share, of Sub 1.
"SUB 2 SHARE" means any share of the common stock, par value $.01 per
share, of Sub 2.
4
"SUBSIDIARY" means any entity with respect to which a specified Person (or
a Subsidiary thereof) owns a majority of the common stock or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
board of directors or Persons performing similar functions.
"TAX AFFILIATE" means any affiliated, combined or unitary group of which
the Companies are or were a member, as the case may be.
"TAXES" means all taxes, charges, fees, imposts, levies or other
assessments of any kind, including, without limitation, all income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, and property
taxes, customs duties, fees, assessments and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) and will include
any transferee liability in respect of taxes and any liability under any tax
sharing, tax indemnity, tax allocation or similar agreement (whether or not
written).
"TAX RETURN" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"THIRD-PARTY CLAIM" has the meaning set forth in Section 8(d) below.
"WORKING CAPITAL ADJUSTMENT" means the amount, if any, by which the
Working Capital Target exceeds the Actual Working Capital.
"WORKING CAPITAL TARGET" means $936,000.
2. THE MERGER.
(a) THE MERGER. Subject to and in accordance with the terms and conditions
of this Agreement, the DGCL and the FBCA, the Companies and Buyer will execute
and deliver for filing to (i) the Department of State of the State of Florida
Articles of Merger in the form attached hereto as EXHIBIT B and (ii) the
Secretary of State of the State of Delaware a Certificate of Merger in the form
attached hereto as EXHIBIT C. Upon filing of the Articles of Merger and the
Certificate of Merger, the Companies will be merged (the "Merger") with and into
Buyer, which will be the surviving corporation. The terms and conditions of the
Merger and the Plan of Merger will be as provided in the Certificate of Merger,
the Articles of Merger, the DGCL and the FBCA.
(b) MERGER EFFECTIVE DATE. At the Merger Effective Time (as defined in
Section 2(h)), the Companies will be merged with and into Buyer in accordance
with the Articles of Merger and the Certificate of Merger, and the separate
existence of the Companies will cease. Buyer, as the party surviving the Merger,
is hereinafter sometimes referred to as the "Surviving Company."
5
(c) THE MERGER CONSIDERATION. For purposes of this Agreement, the "Merger
Consideration" will consist of a $10,250,000 payment (the "Closing Payment"),
payable on the Closing Date by Buyer to Seller by wire transfer of immediately
available funds to such account as Seller designates. The Merger Consideration
may be adjusted pursuant to Section 2(g) of this Agreement.
(d) CERTIFICATE OF FORMATION OF SURVIVING COMPANY. At the Merger Effective
Time, the Certificate of Formation of Buyer will become the Certificate of
Formation of the Surviving Company; and, subsequent to the Merger Effective
Time, such Certificate of Formation will be the Certificate of Formation of the
Surviving Company until changed as provided by law.
(e) DELIVERY OF SHARES. At the Merger Effective Time:
(i) in exchange for the outstanding shares of Sub 1 and Sub 2, Buyer
will pay to Seller the Merger Consideration; and
(ii) Seller will deliver to Buyer at the Closing (as defined in
Section 2(h) hereof) the certificates representing the Sub 1 Shares and
Sub 2 Shares, duly endorsed in blank by Seller or accompanied by blank
stock powers. Seller agrees to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with
respect to such Sub 1 Shares or Sub 2 Shares or with respect to the stock
powers accompanying the Sub 1 Shares or Sub 2 Shares. The certificates
representing the Sub 1 Shares and Sub 2 Shares so delivered will forthwith
be canceled.
(f) EFFECTIVENESS OF MERGER. The Merger will become effective and all
transactions contemplated by this Agreement, including the delivery of Sub 1
Shares and Sub 2 Shares and the delivery by wire transfer of the Merger
Consideration will occur on the Closing Date. The time at which the Merger is
effected will be referred to as the "Merger Effective Time."
(g) WORKING CAPITAL ADJUSTMENTS.
(i) WORKING CAPITAL. Within 30 days following the Closing Date, the
Surviving Company will prepare a balance sheet of the Surviving Company as
of the Closing Date (the "Closing Balance Sheet"). The Closing Balance
Sheet will be prepared in accordance with Sub 1's or Sub 2's internal and
actual accounting practices as of June 30, 1999, whether in accordance
with GAAP or otherwise. In the event that the Closing Balance Sheet states
that the Actual Working Capital was less than the Working Capital Target,
then the Surviving Company will deliver a written notice (the "Working
Capital Adjustment Notice") to Seller setting forth the Actual Working
Capital and the Working Capital Adjustment due to the Surviving Company
from Seller; PROVIDED, HOWEVER, the parties acknowledge that the Working
Capital Target was prepared in accordance with Sub 1's or Sub 2's internal
and actual accounting practices as of June 30, 1999, whether in accordance
with GAAP or otherwise. In the event that the Actual Working Capital is
more than the Working Capital Target, then Seller will deliver a Working
Capital Adjustment Notice to Buyer setting forth the Actual Working
Capital and the Working
6
Capital Adjustment due to Seller from the Surviving Company. Any amounts
due pursuant to this Section 2(g)(i) will be paid in cash to the Surviving
Company or Seller, as the case may be, within 15 business days after
delivery of the Working Capital Adjustment Notice; PROVIDED, HOWEVER, that
if the party obligated to make such payment disputes any portion of the
Working Capital Adjustment Notice, no such disputed amounts will be
required to be paid until the resolution of such dispute in accordance
with Section 2(g)(ii), whereupon any amounts due will be paid within five
business days of such resolution, provided that all undisputed amounts
will be promptly paid.
(ii) DISPUTES. Notwithstanding anything in this Section 2(g) to the
contrary, if there is any Working Capital Adjustment and Seller or the
Surviving Company disputes any item on the Working Capital Adjustment
Notice, then such party will notify the other in writing of each disputed
item (collectively, the "Disputed Amounts") and specify the amount thereof
in dispute within 15 business days after the delivery of the Working
Capital Adjustment Notice. If the Surviving Company and Seller cannot
resolve any such dispute, then such dispute will be resolved by an
independent accounting firm which is reasonably acceptable to the
Surviving Company and Seller (the "Independent Accounting Firm"). If the
Surviving Company and Seller cannot agree upon a mutually acceptable
Independent Accounting Firm within 10 days after delivery of the notice
with respect to the Disputed Amounts, the Surviving Company and Seller
will each select an independent accounting firm, and the Independent
Accounting Firm will be selected by the firms chosen by the Surviving
Company and Seller. The determination of the Independent Accounting Firm
(i) will be made as promptly as practicable; (ii) will be prepared in
accordance with Sub 1's or Sub 2's internal and actual accounting
practices as of June 30, 1999, whether GAAP or otherwise, and based solely
on the accounts set forth on EXHIBIT A (Parent, Buyer and Seller
acknowledge that the accounts set forth on EXHIBIT A were used to
calculate the Working Capital Target of $936,000 as of June 30, 1999); and
(iii) will be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm
will be allocated evenly between the Surviving Company and Seller. Pending
resolution of any such dispute by the Independent Accounting Firm, no such
Disputed Amount will be due to the Surviving Company or Seller, provided
that all undisputed amounts will be promptly paid. Upon the final
determination of the amounts due, if any, such amounts will be paid in
accordance with the provisions of this Section 2(g)(ii).
(h) THE CLOSING.
(i) The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Xxxxxxxx Xxxxxxx, LLP in
Atlanta, Georgia, on or before five business days from the date of
execution of this Agreement, or such other date as agreed by the Parties
(the "Closing Date").
7
(ii) On the Closing Date, the Articles of Merger, the Certificate of
Merger and any other documents executed in accordance with the DGCL and
the FBCA, together with any required certificates, will be filed with the
Secretary of State of Delaware and the Secretary of State of Florida in
accordance with the provisions of the DGCL and the FBCA. The Merger will
become effective upon such filing or at such later time as may be
specified in such filing (the "Merger Effective Time").
(i) DELIVERIES AT THE CLOSING. At the Closing, (i) Seller will deliver to
Buyer the various certificates, instruments and documents referred to in Section
7(a) below, (ii) Buyer will deliver to Seller the various certificates,
instruments and documents referred to in Section 7(b) below, (iii) Seller will
deliver to Buyer stock certificates representing all of the outstanding Sub 1
Shares and Sub 2 Shares, endorsed in blank or accompanied by duly executed
assignment documents and (iv) Buyer will deliver to Seller the Closing Payment.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
to Buyer that the statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made on such date and as though the Closing Date
were substituted for the date of this Agreement throughout this Section 3(a))
with respect to itself.
(i) ORGANIZATION OF SELLER. Seller is duly organized, validly
existing and in good standing under the laws of the State of Florida.
(ii) AUTHORIZATION OF TRANSACTION. Seller has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by Seller. This Agreement has been duly executed
and delivered by Seller and constitutes the valid and legally binding
obligation of Seller, enforceable against Seller in accordance with its
terms and conditions, except as the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies may
be limited by equitable principles of general applicability. Except those
that have been made or waived by Buyer in writing, Seller is not required
to give any notice to, make any filing with or obtain any authorization,
consent or approval of any governmental or regulatory body or authority or
other Person in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate its charter or bylaws, (B) 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 is subject or (C) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the
8
right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other
arrangement to which Seller is a party or by which it is bound or to which
any of its assets is subject, except, in the case of clauses (B) and (C),
for such violations, conflicts, breaches or defaults as (i) do not and
will not affect the validity and enforceability of this Agreement or (ii)
do not and will not have, in the aggregate, any Material Adverse Effect.
(iv) BROKERS' FEES. Except as set forth on Section 3(a)(iv) of the
Disclosure Schedule, Seller has no liability or obligation to pay any fees
or commissions to any broker, finder, agent or other Person with respect
to the transactions contemplated by this Agreement.
(v) COMPANIES' SHARES. Seller holds of record and owns beneficially
all of the outstanding Sub 1 Shares and Sub 2 Shares free and clear of any
restrictions on transfer (other than restrictions under the Securities Act
and state securities laws), taxes, pledges, liens, encumbrances, charges,
security interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands except as set forth in Section
3(a)(v) of the Disclosure Schedule. Seller is not a party to any option,
warrant, purchase right or other contract or commitment that could require
Seller to sell, transfer or otherwise dispose of any capital stock of the
Companies (other than this Agreement). Seller is not a party to any voting
trust, proxy or other agreement or understanding with respect to the
voting of any capital stock of the Companies.
(vi) CONSENTS AND APPROVALS. No notice to, declaration, filing or
registration with, or authorization, consent or approval of, or permit
from, any domestic or foreign governmental or regulatory body or authority
or any other Person is required to be made or obtained by Seller in
connection with the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, except for
such permits, consents, licenses, approvals or authorizations or
declarations, exemptions, filings or registrations (a) disclosed in
Section 3(a)(vi) of the Disclosure Schedule hereto or (b) the failure of
which to obtain or make do not and will not (A) affect the validity and
enforceability of this Agreement or (B) either individually or in the
aggregate have a Material Adverse Effect.
(vii) LITIGATION. Except as set forth in Section 3(a)(vii) of the
Disclosure Schedule, there is no action, suit or proceeding pending
against, or to the Knowledge of Seller threatened against or affecting,
Seller before any court or arbitrator or any foreign or domestic
governmental or regulatory body or agency which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement.
9
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT. Buyer and Parent
represent and warrant to Seller that the statements contained in this Section
3(b) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made on such date and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)).
(i) ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation. Parent is a limited partnership duly formed, validly
subsisting and in good standing under the laws of the jurisdiction of its
formation.
(ii) AUTHORIZATION OF TRANSACTION. Buyer has the requisite corporate
power and authority to execute and deliver this Agreement and to perform
its obligations hereunder. Parent has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by Buyer and
Parent. This Agreement has been duly executed and delivered by Parent and
Buyer and constitutes the valid and legally binding obligation of Buyer
and Parent, enforceable against Buyer and Parent in accordance with its
terms and conditions, except as the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies may
be limited by equitable principles of general applicability. Neither Buyer
nor Parent is required to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any governmental or
regulatory body or authority or other Person in order to consummate the
transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction
of any government, governmental agency or court to which Buyer is subject
or any provision of its charter or bylaws or (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel,
or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which Buyer or Parent is a party or by
which they are bound or to which any of their assets are subject, except
for such violations, conflicts, breaches or defaults as (i) do not and
will not affect the validity and enforceability of this Agreement and have
a Material Adverse Effect on Buyer or Parent.
(iv) BROKERS' FEES. Neither Buyer nor Parent has any liability or
obligation to pay any fees or commissions to any broker, finder, agent or
other Person with respect to the transactions contemplated by this
Agreement.
10
(v) FINANCING. Buyer has sufficient funds available to pay the
Merger Consideration.
(vi) LITIGATION. There is no action, suit or proceeding pending
against, or to the Knowledge of Buyer or Parent threatened against or
affecting, Buyer or Parent before any court or arbitrator or any foreign
or domestic governmental or regulatory body or agency which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
(vii) DUE DILIGENCE.
(A) Each of Buyer and Parent is an informed and sophisticated
Person and is experienced in the evaluation and purchase of
companies such as the Companies. In making the decision to enter
into this Agreement and consummate the transactions contemplated
hereby, each of Buyer and Parent has relied on its own independent
investigation of the Companies as of this date and upon the
representations and warranties and covenants in this Agreement and
has relied on the investigations conducted by Buyer's agents
(including, without limitation, Sun Capital Partners, Inc.).
(B) Each of Buyer and Parent acknowledges that Seller has made
no representation or warranty as to the prospects, financial or
otherwise, of the Companies. Buyer has conducted its own inspection
and examination of the Companies or has relied on the inspection and
examination of the Companies conducted by Buyer's agents (including,
without limitation, Sun Capital Partners, Inc.) and is not relying
on representations or warranties of any nature made by or on behalf
of or imputed to Seller except as expressly set forth in this
Agreement.
(viii) NO KNOWLEDGE OF BREACH. Neither Buyer, Parent nor
Buyer's agents (including, without limitation, Sun Capital Partners,
Inc.) knows of any breach of warranty or any misrepresentation by
Seller or the Companies hereunder.
(ix) TOTAL ASSETS AND SALES. Neither Buyer nor Parent and their
subsidiaries, taken in the aggregate, has total assets or annual net sales
of $100,000,000 or more.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES. Seller and the
Companies represent and warrant to Buyer and Parent that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made on such date and as though the Closing Date were substituted for the date
of this Agreement throughout this Section 4), except as set forth in the
disclosure schedule delivered by Seller to Buyer on the date hereof and
initialed by the Parties (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein) (the "Disclosure Schedule").
11
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Companies are
corporations duly organized, validly existing and in good standing under the
laws of the State of Florida. The Companies are duly authorized to conduct
business and are in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a Material Adverse Effect. The copies of the articles of incorporation and
bylaws of the Companies, as previously delivered to Buyer by Seller, are
complete and correct copies of such instruments as currently in effect. The
Companies have the requisite corporate power and authority to carry on the
business in which they are engaged and to own and lease the properties used by
them. Section 4(a) of the Disclosure Schedule lists the directors and officers
of the Companies.
(b) CAPITALIZATION. The entire authorized capital stock of Sub 1 consists
of 100 Sub 1 Shares, all of which are issued and outstanding. The entire
authorized capital stock of Sub 2 consists of 100 Sub 2 Shares, all of which are
issued and outstanding. All of the issued and outstanding Sub 1 Shares and Sub 2
Shares have been duly authorized, are validly issued, fully paid and
nonassessable, and are held of record by Seller. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or commitments that could require the
Companies to issue, sell or otherwise cause to become outstanding any of their
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights with respect to the
Companies.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any governmental or
regulatory body or authority or court to which Sub 1 or Sub 2 is subject (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which Sub 1 or Sub 2 is a party or by which
Sub 1 or Sub 2 is bound or to which any of their assets are subject (or result
in the imposition of any pledge, lien, encumbrance, charge or security interest
upon any of their assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice or Security Interest would not have a Material Adverse Effect or (iii)
violate or conflict with any provision of the articles of incorporation or
bylaws of Sub 1 or Sub 2. Except for any notice which has been provided or will
be provided on or before Closing and which is described in Section 4(c) on the
Disclosure Schedule, the Companies do not need to give any notice to, make any
filing with or obtain any authorization, consent or approval of any governmental
or regulatory body or authority or other Person in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file or to obtain any authorization, consent or
approval would not have a Material Adverse Effect.
(d) BROKERS' FEES. The Companies do not have any liability or obligation
to pay any fees or commissions to any broker, finder, agent or other Person with
respect to the transactions contemplated by this Agreement.
12
(e) PROPERTY. The Companies have good and valid title to, or a valid
leasehold interest in, all personal property owned, leased or used by the
Companies, free and clear of all liens, charges and encumbrances, except for
Security Interests. Section 4(e) of the Disclosure Schedule contains a schedule
of all assets that have been transferred between Seller or any of its Affiliates
on the one hand and Sub 1 or Sub 2 on the other hand since the Most Recent
Financial Statements.
(f) SUBSIDIARIES. Neither Sub 1 nor Sub 2 directly or indirectly owns any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest, in any corporation,
partnership, joint venture or other business association or entity.
(g) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT D are the following
financial statements (collectively the "Financial Statements"): (i) for Sub 1,
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended September 30, 1994,
September 30, 1995 and September 30, 1996, as of and for the three months ended
December 31, 1996 and for the period from January 1, 1997 through January 28,
1997, in each case, together with the reports thereon of BDO Xxxxxxx LLP,
independent certified public accountants; (ii) for Sub 1 and Sub 2, Seller's
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal year ended December 31, 1997,
which include information for the Companies in each case, together with the
reports thereon of BDO Xxxxxxx LLP independent certified public accountants;
(iii) for Sub 1, combined audited balance sheet (the "Audited Balance Sheet")
and Statement of Income, Changes in Stockholder's Equity and Cash Flow (together
with the Audited Balance Sheet, the "Audited Financial Statements") as of and
for the year ended December 31, 1998, in each case, together with the reports
thereon of BDO Xxxxxxx LLP, independent certified public accountants; and (iv)
Sub 1's unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
of and for the six months ended June 30, 1999 (the "Most Recent Fiscal Quarter
End") and Sub 1's unaudited balance sheet and statement of income, changes of
stockholders' equity and cash flow for the month ended July 31, 1999 ("July 1999
Financials"). The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly, in all material respects, the
financial condition of the Companies as of such dates and the results of
operations of the Companies for such periods; PROVIDED, HOWEVER, that the
Audited Financial Statements, Most Recent Financial Statements and the July 1999
Financials may be subject to year-end adjustments and the Most Recent Financial
Statements and the July 1999 Financials lack footnotes and other presentation
items.
(h) NO UNDISCLOSED OR CONTINGENT LIABILITIES. Neither Sub 1 nor Sub 2 has
any liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that are not fully
reflected on the Audited Balance Sheet, except for liabilities and obligations
incurred in the Ordinary Course of Business since the date thereof and which
would not have a Material Adverse Effect.
13
(i) ABSENCE OF CERTAIN CHANGES. Since July 31, 1999, each of Sub 1 and Sub
2 has conducted its business only in the Ordinary Course of Business and has
not:
(i) suffered any material adverse change in its operations,
condition (financial or otherwise), assets, liabilities, earnings or
working capital;
(ii) incurred any liabilities or obligations (absolute, accrued,
contingent or otherwise) except in the Ordinary Course of Business or
which would not have a Material Adverse Effect (including obligations or
liabilities arising from one transaction or a series of related or similar
transactions, and all periodic installments or payments under any lease or
other agreement providing for periodic installments or payments, as a
single obligation or liability), or increased, or experienced any change
in any assumptions underlying or methods of calculating, any bad debt,
contingency or other reserves;
(iii) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the Ordinary Course of Business of
liabilities and obligations reflected or reserved against in the Most
Recent Financial Statements, the July 1999 Financials or incurred in the
Ordinary Course of Business since July 31, 1999.
(iv) permitted or allowed any of its assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or
charge of any kind;
(v) written down the value of any inventory or written off as
uncollectible any notes or accounts receivable, except for writeoffs in
the Ordinary Course of Business;
(vi) canceled any material debts or, to Seller's Knowledge, waived
any claims or rights of substantial value;
(vii) sold, transferred or otherwise disposed of any of its
properties or assets, except in the Ordinary Course of Business;
(viii) disposed of or, to Seller's Knowledge, permitted to lapse any
rights to the use of any material patent, trademark, trade name, service
xxxx or copyright, or disposed of or disclosed to any Person other than an
Affiliate any trade secret, formula, process or know-how not theretofore a
matter of public knowledge or subject to a confidentiality agreement;
PROVIDED, HOWEVER, that Buyer acknowledges that the new General Motors
Service Parts Operations License Agreement will require a letter of credit
in the amount of $315,000 to be provided by Buyer;
(ix) granted any material general increase in the compensation of
employees (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any material increase in
the compensation payable or to become
14
payable to any management employee, and no such increase is customary on a
periodic basis or required by agreement or understanding;
(x) except as set forth in Section 4(i)(x) of the Disclosure
Schedule, made any material capital expenditure or material commitment for
additions to its property, equipment or intangible capital assets;
(xi) made any change in any method of accounting or accounting
practice or failed to maintain its books, accounts and records in the
Ordinary Course of Business;
(xii) failed to maintain in full force and effect all material
existing policies of insurance at least at such levels as were in effect
prior to such date or canceled any such insurance or taken or failed to
take any action that would reasonably be expected to enable the insurers
under such policies to avoid liability for claims arising out of
occurrences prior to the Closing;
(xiii) except for the transaction contemplated hereby, entered into
any material transaction or made or entered into any material contract or
commitment, or terminated or amended any material contract or commitment,
except in the Ordinary Course of Business, and not in excess of current
requirements;
(xiv) to the Knowledge of Seller, taken any action that would
reasonably be expected to have a material adverse effect on its business
organization or its current relationships with its employees, suppliers,
distributors, advertisers, subscribers or others having business
relationships with it;
(xv) declared, paid or set aside for payment any distribution in
respect of its capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of its capital stock; or
(xvi) agreed to take any action with respect to any of the matters
described in this Section 4(i).
(j) COMPLIANCE WITH LAW; LICENSES. Except as set forth in Section 4(j) of
the Disclosure Schedule, the businesses of Sub 1 and Sub 2 have not been and are
not being conducted in violation of any laws (whether statutory or otherwise),
rules, regulations, orders, ordinances, judgments, decrees, writs and
injunctions of all federal, state, local or foreign governmental authorities
(collectively, "Laws"), including all Laws relating to the safe conduct of Sub
1's and Sub 2's business, environmental protection and conservation, antitrust,
taxes, consumer protection, currency exchange, equal opportunity, health,
sanitation, fire, zoning, building, occupational safety, pension, securities and
trademark and copyright, except for such violations as would not, individually
or in the aggregate, have a Material Adverse Effect. Each of Sub 1 and Sub 2
holds all licenses, permits, variances, exemptions, authorizations, operating
certificates, orders and approvals of all governmental and regulatory bodies and
authorities (collectively, "Licenses") that are required for it to own, lease
and operate its properties as currently owned, leased and/or operated, as
applicable, and conduct its business as currently
15
conducted, except where the failure to hold Licenses would not, individually or
in the aggregate, have a Material Adverse Effect. There has occurred no default
under or violation of any such License, except for such violations or defaults
that would not, individually or in the aggregate, have a Material Adverse
Effect.
(k) TAX MATTERS. Except as disclosed in Section 4(k) of the Disclosure
Schedule:
(i) each of the Companies or a Tax Affiliate with respect to the
Companies has timely filed (and through the Closing Date will timely file)
with the appropriate federal, state, local, foreign and other governmental
agencies all Tax Returns required to be filed by or with respect to it,
its operations and assets, and as of the time of filing, all such Tax
Returns were (and, as to Tax Returns not filed as of the date hereof, will
be) true, complete and correct in all material respects;
(ii) each of the Companies or a Tax Affiliate with respect to the
Companies has (A) timely paid (and through the Closing Date will timely
pay) all Taxes that are due and payable with respect to it, its operations
and assets, except for Taxes that are being contested in good faith by
appropriate proceedings and as to which adequate reserves have been
reflected on the Financial Statements; and (B) established (and through
and including the Closing Date will establish) reserves that are adequate
for the payment of all Taxes not yet due and payable with respect to the
results of operations through the Closing Date;
(iii) each of the Companies (or a Tax Affiliate on behalf of any of
the Companies) has complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has
timely withheld from employee wages and paid over (and through the Closing
Date will timely withhold and pay over) to the proper governmental
authorities all amounts required to be so withheld and paid over for all
periods under all applicable laws;
(iv) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has requested (or through the Closing Date will request)
any extension of time within which to file any Tax Return, which Tax
Return has not since been filed;
(v) to the Knowledge of Seller or the Companies, (a) the United
States federal income Tax Returns of each of the Companies have not been
examined by the Internal Revenue Service ("IRS"), (b) the state and local
income or franchise Tax Returns of each of the Companies have not been
examined by the relevant taxing authority and (c) no deficiencies have
been proposed, asserted or assessed by any federal, state, local foreign
or other taxing authority that have not been paid;
(vi) no federal, state, local or foreign Tax audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes for which any of the Companies would be liable;
16
(vii) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has executed or filed (or through the Closing Date will
execute or file) with the IRS or any other taxing authority any agreement
or other document extending or having the effect of extending the period
for assessment or collection of any Taxes for which any of the Companies
would be liable and no power of attorney granted by either of the
Companies with respect to any Tax matter is currently (or through the
Closing Date will be) in force;
(viii) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has executed or entered into (or through the Closing
Date will enter into) any closing agreement pursuant to Section 7121 of
the Code, or any predecessor provision thereof or any similar provision of
state, local or foreign law;
(ix) none of the Companies is (or through the Closing Date will be)
a party to, bound by or subject to any obligation under any Tax sharing,
Tax indemnity, Tax allocation or similar agreement (whether or not
written);
(x) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has filed (or through the Closing Date will file) a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by any of
the Companies.
(xi) no property owned by any of the Companies is property that
Buyer or such Company is or will be required to treat as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code;
(xii) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) (A) has agreed (or through the Closing Date will agree)
to or is required to make any adjustment pursuant to Section 481(a) of the
Code (or any similar provision of state, local or foreign law) by reason
of a change in accounting method initiated by a Company; (B) has Knowledge
that the IRS or any taxing authority has proposed any such adjustment or
change in accounting method, or (C) has an application pending (or through
the Closing Date will file an application) with any taxing authority
requesting permission for any change in accounting methods that relates to
the business and operations of any of the Companies;
(xiii) there is no (and prior to the close of business on the
Closing Date there will be no) contract, agreement, plan or arrangement in
respect of the Companies covering any Person that, individually or
collectively, would reasonably be expected to give rise to the payment of
any amount that would not be deductible by Buyer or any of the Companies
by reason of Section 280G of the Code (or any similar provision of state,
local or foreign law);
17
(xiv) there are no liens for taxes upon the assets of the Companies
except for statutory liens for taxes not yet due;
(xv) true and complete copies of all federal, state, local and
foreign income or franchise Tax Returns of the Companies relating to
taxable periods ending on or after January 1, 1995 have been delivered or
made available to Buyer; and
(xvi) the Companies have not knowingly waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(l) REAL PROPERTY.
(i) The Companies own no real property; and
(ii) Section 4(l)(ii) of the Disclosure Schedule lists all real
property leased or subleased to the Companies. Seller has delivered to
Buyer correct and complete copies of the leases and subleases listed in
Section 4(l)(ii) of the Disclosure Schedule (as amended to date). Each
lease and sublease listed in Section 4(l)(ii) of the Disclosure Schedule
is valid, binding, enforceable against the Companies and in full force and
effect except (A) as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization and other similar laws
relating to or affecting creditors' rights generally and by the
application of general equitable principles (whether considered in
proceedings at law or equity) and (B) where the illegality, invalidity,
nonbinding nature, unenforceability or ineffectiveness would not have a
Material Adverse Effect. There is not, under any such lease, any existing
default or event of default that would have a Material Adverse Effect (or
event which with notice or lapse of time, or both, would constitute a
default and in respect of which Sub 1 or Sub 2 has not taken adequate
steps to prevent such a default from occurring).
(m) INTELLECTUAL PROPERTY.
(i) Except as set forth in Section 4(m) of the Disclosure Schedule,
each of Sub 1 and Sub 2 owns, free and clear of all liens, mortgages,
security interests, charges and encumbrances, and has good title to, or
hold adequate Licenses or otherwise possess all rights necessary to use,
all patents, trademarks, service marks, trade names, copyrights (including
any applications for any of the foregoing), inventions, discoveries,
processes, know-how, trade secrets, scientific, technical, engineering and
marketing data, object and source codes, and techniques used in the
conduct of its business as now conducted (collectively, the "Intellectual
Property").
(ii) Section 4(m) of the Disclosure Schedule contains an accurate
and complete list of (i) all such trademarks, trade names, service marks
and copyrights, and all applications therefor and, with respect to
registered items, contains a list of all jurisdictions in which such items
are registered and all registration numbers; (ii) all
18
Licenses and other agreements relating thereto; and (iii) all agreements
relating to any of the Intellectual Property that Sub 1 or Sub 2 is
licensed or authorized to use by others. To the Knowledge of Seller, the
trademarks and copyrights constituting a part of the Intellectual Property
are valid, subsisting and enforceable, and are duly recorded in the name
of Sub 1 and Sub 2 except where failure to duly record will not have a
Material Adverse Effect.
(iii) To the Knowledge of Seller, no claims have been asserted by
any Person challenging or questioning the ownership, validity,
enforceability or use by Sub 1 or Sub 2 of any of the Intellectual
Property and, to the Knowledge of Seller, there is no valid basis for any
such claim; and, to the Knowledge of Seller, no other Person is infringing
on the rights of Sub 1 or Sub 2 with respect to any of the Intellectual
Property and, to the Knowledge of Seller, the use or other exploitation of
the Intellectual Property by Sub 1 and Sub 2 does not infringe on or
dilute the rights of any Person.
(iv) Seller has delivered to Buyer all documents with respect to any
invention, process, design, computer program or other know-how or trade
secret included in the Intellectual Property, which documents are accurate
in all material respects and reasonably sufficient in detail and content
to identify and explain such invention, process, design or computer
program.
(n) CONTRACTS.
(i) Section 4(n)(i) of the Disclosure Schedule lists all written
and, to Seller's Knowledge, oral contracts and other agreements to which
the Companies are a party the performance of which will involve
consideration in excess of $10,000. Seller has delivered to Buyer a
correct and complete copy of each written contract or other agreement and
a summary of each oral contract or agreement listed in Section 4(n) of the
Disclosure Schedule (as amended to date).
(ii) To the Knowledge of Seller, all parties to the contracts,
commitments, instruments and agreements listed in Section 4(n) of the
Disclosure Schedule have complied with the provisions thereof in all
material respects and no party is in material default thereunder.
(iii) Except as set forth in Section 4(n)(iii) of the Disclosure
Schedule, neither Sub 1 nor Sub 2 is a party to or bound by any contracts
that require payments in excess of $25,000 by any party thereto and are
not cancelable by Sub 1 or Sub 2, as the case may be, on notice of not
longer than 30 days.
(iv) Subject to obtaining any requisite consents of third parties,
the enforceability of the contracts and commitments referred to in Section
4(n)(i) will not be affected in any manner by the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby or by the other agreements referred to herein.
19
(v) Except as set forth in Section 4(n)(v) of the Disclosure
Schedule, neither Sub 1 nor Sub 2 is a party to or bound by any contracts
or commitments with officers, employees, agents, consultants, advisors,
salesmen, sales representatives, distributors or dealers that are not
cancelable by it on notice of not longer than 30 days and without
liability, penalty or premium or any agreement or arrangement providing
for the payment of any bonus or commission based on sales or earnings.
(o) POWERS OF ATTORNEY. To the Knowledge of Seller, there are no
outstanding powers of attorney executed on behalf of the Companies.
(p) LITIGATION, ORDERS. Except as set forth in Section 4(p) of the
Disclosure Schedule, there are no claims, actions, suits or proceedings pending
before any court, arbitrator or governmental or regulatory authority
(collectively, "Legal Actions"), or, to the Knowledge of Seller, threatened
against or affecting Seller (with respect to its operation of Sub 1 and Sub 2),
Sub 1 or Sub 2, except as would not individually or in the aggregate, have a
Material Adverse Effect. Except as set forth in Section 4(p) of the Disclosure
Schedule, there are no Legal Actions questioning the validity of this Agreement,
the transactions contemplated hereby or any action taken or to be taken by
Seller, Sub 1 or Sub 2 pursuant to this Agreement or any other agreement
contemplated hereby, at law or in equity, before or by any federal, state, local
or foreign governmental authority. Neither the Company, Sub 1 nor Sub 2 is
subject to any judgment, order or decree entered in any lawsuit or proceeding
that has had or is expected to have a Material Adverse Effect.
(q) EMPLOYEE BENEFITS.
(i) Section 4(q) of the Disclosure Schedule lists each Employee
Benefit Plan that Sub 1 or Sub 2 maintains or to which Sub 1 or Sub 2
contributes.
(A) To the Knowledge of Seller, 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 and the Code, except where the failure to
comply would not have a Material Adverse Effect.
(B) 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.
(C) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has received a determination letter from the
Internal Revenue Service to the effect that it meets the
requirements of Code (ss)401(a).
(D) As of the last day of the most recent prior plan year, the
market value of assets under each such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than any Multiemployer
Plan) equaled or exceeded
20
the present value of liabilities thereunder (determined in
accordance with then current funding assumptions).
(E) Seller has delivered to Buyer 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.
(ii) With respect to each Employee Benefit Plan that the Companies
maintain or ever have maintained or to which they contribute, ever have
contributed or ever have been required to contribute:
(A) No Employee Benefit Plan is a "multiemployer plan" (as
defined in (ss)4001(a)(3) of ERISA) and neither Seller nor any
ERISA Affiliate (defined as any corporation or trade or business
(whether or not incorporated) which would be treated as a member of
a controlled group including Seller under (ss)4001(a)(14)) has
sponsored or contributed to any "multiemployer plan." No event or
condition has occurred in connection with which Seller or any of its
ERISA Affiliates would be subject to any liability, encumbrance or
lien with respect to any Employee Benefit Plan under ERISA, the Code
or any other applicable law or under any agreement or arrangement
pursuant to or under which Seller or any of its ERISA Affiliates are
required to indemnify any Person against such liability, where such
liability, individually or in the aggregate, would have a Material
Adverse Effect. Except as would not have a Material Adverse Effect,
(i) there are no pending or, to the Knowledge of Seller, threatened
claims, suits, audits or investigations related to any Employee
Benefit Plan and (ii) no Employee Benefit Plan provides
post-retirement welfare benefits to any Employees other than as
required by law.
(B) No such Employee Benefit Plan which is an Employee Pension
Benefit 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 has been instituted.
(C) 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, except where the action, suit, proceeding, hearing or
investigation would not have a Material Adverse Effect on the
financial condition of the Companies, taken as a whole.
21
(D) The Companies have not incurred any liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal liability) with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(E) The consummation of the transactions contemplated by this
Agreement (alone or in connection with any subsequent event,
including a termination of employment) will not (i) accelerate the
vesting or payment of any economic benefit provided or made
available to any employees of Sub 1 or Sub 2, (ii) increase the
amount of any economic benefit provided or made available to any
such employees or (iii) accelerate or increase the funding
obligation of Sub 1 or Sub 2 with respect to any Employee Benefit
Plan.
(F) Since December 31, 1998, there has not occurred any
amendment to, or adoption of, any Employee Benefit Plan that
increases the obligations of Sub 1 or Sub 2 or any granting by
either of them to a current or former director or officer of any
increase in compensation or bonus, except as required under
then-existing employment agreements.
(r) ENVIRONMENTAL MATTERS.
(i) Except as would not reasonably be expected to have a Material
Adverse Effect or as disclosed on Section 4(r)(i) of the Disclosure
Schedule, as of the date hereof, no written notice, notification, demand,
request for information, citation, summons or complaint has been received
or order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or, to Seller's
Knowledge, threatened by any governmental entity or other Person with
respect to any (A) alleged violation by the Companies of any Environmental
Law or liability thereunder, (B) alleged failure by the Companies to have
any permit, certificate, license, approval, registration or authorization
required under any Environmental Law in connection with the conduct of
their businesses or (C) release of Hazardous Substances by the Companies.
(ii) Except as disclosed on Section 4(r)(ii) of the Disclosure
Schedule, to Seller's Knowledge, as of the date hereof, there are no
Environmental Liabilities that have had, or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
(iii) Except as set forth in Section 4(r)(iii) of the Disclosure
Schedule, to the Knowledge of Seller, no state of facts exists as to
environmental matters or Hazardous Substances that involves the reasonable
likelihood of a material capital expenditure by Sub 1 or Sub 2 or that may
otherwise have a Material Adverse Effect, and no Hazardous Substances have
been treated, stored or disposed of, or otherwise deposited, in or on or
are present beneath the properties owned, leased or used by Sub 1 or Sub 2
in violation of or which may be required to be investigated or remediated
under any applicable
22
Environmental Laws. The environmental compliance programs of Sub 1 and
Sub 2 comply in all material respects with all Environmental Laws.
(iv) Except as set forth in Section 4(r)(iv) of the Disclosure
Schedule, to the Knowledge of Seller, there are no Hazardous Substances
present, and there has been no disposal, escape, seepage, leakage,
spillage, discharge, emission, release or threatened release of any
Hazardous Substance (a) on, from or affecting any of the Subject
Properties, or (b) for which Sub 1 or Sub 2 is or is alleged to be
responsible as a result of conduct occurring or conditions existing at or
before Closing except those that are used by Sub 1 or Sub 2 in the
Ordinary Course of Business and are stored and used in compliance with all
Environmental Laws.
(s) SEVERANCE ARRANGEMENTS. Except as set forth on Section 4(s) of the
Disclosure Schedule, neither Sub 1 nor Sub 2 has entered into any severance or
similar arrangement in respect of any Personnel that will result in any
obligation (absolute or contingent) of Buyer, the Companies or any other Person
to make any payment to any such Personnel following termination of employment or
consummation of the transactions contemplated hereby.
(t) INSURANCE. The assets, properties and operation of the Companies are
insured under various policies of general liability and other forms of
insurance, all of which are listed on Section 4(t) of the Disclosure Schedule.
All such policies are in full force and effect in accordance with their terms,
all premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, no notice of cancellation has been received and
there is no existing default or event which, with the giving of notice or lapse
of time or both, would constitute a default thereunder and the coverage provided
thereby, with respect to any act or event occurring on or prior to the Closing
Date, will not in any way be affected by or terminate or lapse by reason of the
transactions contemplated by this Agreement. Such policies are in amounts which
are adequate in relation to the businesses and assets of the Companies. No risks
with respect to the business of Sub 1 or Sub 2 have been designated by any of
them or Seller as being self-insured. Neither Sub 1 or Sub 2, nor Seller in
respect of either of Sub 1 or Sub 2, has been refused any insurance nor has
coverage been limited by any insurance carrier to which any of them has applied
for such insurance or with which any of them has carried such insurance in the
last three years.
(u) SUPPLIERS. Section 4(u) of the Disclosure Schedule sets forth a list
of Sub 1's and Sub 2's ten largest suppliers in terms of purchases during the
five months ended May 31, 1998, showing the approximate total purchases by Sub 1
and Sub 2 from each such supplier during such year. No material adverse change
has occurred in the business relationship of Sub 1 or Sub 2 with any such
supplier since June 1, 1999, and, to Seller's Knowledge, no facts exist and no
events have occurred that would reasonably be expected result in a material
adverse change to any such relationship.
(v) ACCOUNTS RECEIVABLE. Section 4(v) of the Disclosure Schedule sets
forth a true and complete list of all accounts receivable of Sub 1 and Sub 2 as
of the date of the Most Recent Financial Statements and the Most Recent Fiscal
Quarter End and the aging thereof. All
23
accounts receivable of Sub 1 and Sub 2, whether reflected on such balance sheets
or subsequently created through the Closing Date, represent sales actually made
or services actually performed in the Ordinary Course of Business and, except as
otherwise listed as uncollectible on Schedule 4(v), are current and either have
been collected in full or will be collectable in full, without any setoff
subject to any returns in the Ordinary Course of Business.
(w) CERTAIN INTERESTS. Except as set forth in Section 4(w) of the
Disclosure Schedule, neither Seller, Sub 1 nor Sub 2, nor any officer, director
or shareholder thereof, nor any of their respective Affiliates, has (a) any
direct or indirect interest (other than the ownership of less than one percent
of the outstanding securities of a publicly held company) in any corporation or
business that is involved in or competes with Sub 1 or Sub 2 and as owner of the
property leased to the Companies or (b) any direct or indirect interest in any
property or assets used by, or relating to, Sub 1 or Sub 2 or their respective
businesses, except through the ownership of common stock of Sub 1 and Sub 2. The
Disclosure Schedule sets forth a complete list of all agreements and
arrangements among Sub 1 and Sub 2, on the one hand, and each of their
respective officers, directors, shareholders and their respective immediate
family members, on the other hand, and true and correct copies of all such
agreements and arrangements have been delivered to Buyer.
(x) LABOR MATTERS.
(i) Each of Sub 1 and Sub 2 has for the past three years and is
currently complying in all material respects with all applicable laws
relating to employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair labor
practice or unlawful employment practice.
(ii) There is no unfair labor practice charge or complaint against
Sub 1 or Sub 2, or against Seller with respect to Sub 1 or Sub 2, pending
or, to the Knowledge of Seller, threatened before the National Labor
Relations Board nor, to the Knowledge of Seller, is there any basis for
any such charge or complaint.
(iii) To the Knowledge of Seller, there is no labor strike, slowdown
or work stoppage pending or threatened against Sub 1 or Sub 2.
(iv) Neither Sub 1 nor Sub 2 has experienced any significant work
stoppages or been a party (nor has Seller been a party with respect to Sub
1 or Sub 2) to any proceedings before the National Labor Relations Board
involving any issues which would have a Material Adverse Effect for the
past three years or been a party to any arbitration proceeding arising out
of or under collective bargaining agreements for the past three years.
(v) Except as set forth in Section 4(x)(v) of the Disclosure
Schedule, there is no material charge or complaint pending or, to the
Knowledge of Seller, threatened against Sub 1 or Sub 2, or against Seller
with respect to Sub 1 or Sub 2, before the Equal Employment Opportunity
Commission or the Department of Labor or any state or local agency of
similar jurisdiction. No employees of Sub 1 or Sub 2 are represented by
any
24
labor union and there is no collective bargaining agreement in effect with
respect to such employees. During the past five years, to the Knowledge of
Seller, no labor union has engaged in any organizing activities with
respect to the employees of Sub 1 or Sub 2.
(y) BANK ACCOUNTS. Section 4(y) of the Disclosure Schedule sets forth the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which Sub 1 or Sub 2 maintains safe deposit
boxes or accounts of any nature and the names of all persons authorized to draw
thereon, make withdrawals therefrom or have access thereto. On and after the
Closing, all monies and accounts arising out of, relating to or established for
the businesses will be held by, and accessible only to, Sub 1 or Sub 2.
(z) TRANSACTIONS WITH AFFILIATES. Except as set forth in Section 4(z) of
the Disclosure Schedule, (i) no Affiliate of Sub 1 or Sub 2 is an employee,
consultant, competitor, customer, distributor, supplier or vendor of, or is
party to any contractual obligations with, Sub 1 or Sub 2 and (ii) no officer or
director of Sub 1 or Sub 2 is an Affiliate of any competitor, customer,
distributor, supplier or vendor of Sub 1 or Sub 2. Except as set forth in
Section 4(z) of the Disclosure Schedule, none of the assets (real, personal,
tangible or intangible) or other property owned by or used in the conduct of the
business of Sub 1 or Sub 2 are owned by any Affiliate of Sub 1 or Sub 2 or
subject to any license or similar arrangement allowing use thereof by an
Affiliate. Seller has not willfully and intentionally made an improper
allocation of any intercompany services and charges by Seller to Sub 1 or Sub 2
for the period covered by the Most Recent Financial Statements nor has Seller
willfully and intentionally changed the method of allocation between fiscal year
1998 and the Most Recent Financial Statements, wherein the failure to make the
proper allocation or the making of such change, (individually or in the
aggregate) would have a Material Adverse Effect on Xxxxxx; provided, however,
that Buyer acknowledges that certain intercompany services and charges have been
identified by Buyer, its Affiliates and their respective advisors and agents
(including without limitation, Sun Capital Partners, Inc. and Xxxxx Xxxxxxxx
LLP, C.P.A.), including without limitation, those listed on Schedule 4(z), or
have been provided to, or brought to the attention of, one or more of such
parties, by Seller, its Affiliates and their respective advisors and agents
(including, without limitation, BDO Xxxxxxx LLP and Xxxxxxxx Inc.), also as set
forth on Schedule 4(z) ("Identified Intercompany Services and Charges"), and
Buyer acknowledges and agrees that the Identified Intercompany Services and
Charges will not be deemed to have been improperly allocated or changed (as such
changes are specifically set forth on Schedule 4(z)) for purposes of this
Section 4(z).
(aa) PRODUCT WARRANTIES, DEFECTS AND LIABILITIES. Except as set forth in
Section 4(aa) of the Disclosure Schedule, each product manufactured, sold,
leased, or delivered by Sub 1 or Sub 2 has been in conformity in all material
respects with all applicable federal, state, local or foreign laws and
regulations, contractual commitments and all express and implied warranties,
except where a failure to conform, singly or in the aggregate, would not have a
Material Adverse Effect, and, to Seller's Knowledge, neither Sub 1 nor Sub 2 has
any liability for replacement or repair thereof or other damages in connection
therewith, except for liabilities incurred in the Ordinary Course of Business.
Other than guaranties, warranties and
25
indemnities granted in the Ordinary Course of Business (which guarantees,
warranties and indemnities would not, individually or in the aggregate, have a
Material Adverse Effect), no product manufactured, sold, leased or delivered by
Sub 1 or Sub 2 is subject to any guaranty, warranty, or other indemnity beyond
their standard terms and conditions of sale or lease for such products. To
Seller's Knowledge, neither Sub 1 nor Sub 2 has any material liability arising
out of any injury to individuals or property as a result of the ownership,
possession or use of any product manufactured, sold, leased, or delivered by Sub
1 or Sub 2 and, to the Knowledge of Seller, there has been no inquiry or
investigation made in respect thereof by any Person.
(bb) INVENTORIES. Except as disclosed in Section 4(bb) of the Disclosure
Schedule, the inventories of the Companies as reflected on the Most Recent
Financial Statements consist only of items in good condition and salable or
usable in the Ordinary Course of Business except to the extent of the inventory
reserve included on the Most Recent Financial Statements, which reserve is
adequate for such purpose, and are recorded on such balance sheet in accordance
with GAAP applied in a manner consistent with past practices and experience with
respect to the time required to sell slow-moving inventory.
(cc) PRICES; FINANCIAL CONDITION. To Seller's Knowledge, (i) since the
date of the Most Recent Financial Statements, there have been no changes in the
pricing of products purchased by Sub 1 or Sub 2, other than in the Ordinary
Course of Business and (ii) there have not been any changes in the financial
condition of any supplier of Sub 1 or Sub 2, which, individually or in the
aggregate, would have a Material Adverse Effect.
(dd) DISCLOSURE. No representation or warranty by Seller or the Companies
contained in this Agreement or the Disclosure Schedule, and no statement
contained in any document, list, certificate or other writing furnished or to be
furnished by or on behalf of Seller, to Buyer or any of its representatives in
connection with the transactions contemplated hereby, and no statement or other
information concerning the Companies contained in the annual report on Form 10-K
dated December 31, 1998 and the quarterly report on Form 10-Q dated June 30,
1999 filed by Seller with the Securities and Exchange Commission, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).
26
(b) NOTICES AND CONSENTS. Seller will cause the Companies to give all
notices to third parties, unless notice is otherwise waived by Buyer, and will
cause the Companies to use their reasonable efforts to obtain all third-party
consents, that are required to consummate the transactions contemplated hereby.
Buyer and/or Seller, as applicable, will (and Seller will cause the Companies
to) give any notices to, make any filings with, and use its reasonable efforts
to obtain any authorizations, consents and approvals of governments and
governmental agencies in connection with the matters referred to in Section
3(a)(ii), Section 3(b)(ii), Section 4(c) and Section 5(g) hereof. Without
limiting the generality of the foregoing, each of the Parties will file (and
Seller will cause the Companies to file) any Notification and Report Forms and
related material that they may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Xxxx-Xxxxx-Xxxxxx Act, will use their reasonable efforts to obtain
(and Seller will cause the Companies to use their reasonable efforts to obtain)
a waiver from the applicable waiting period, and will make (and Seller will
cause the Companies to make) any further filings pursuant thereto that may be
necessary in connection therewith.
(c) CONDUCT OF BUSINESS. From the date of this Agreement to the Closing,
(a) Seller will cause each of Sub 1 and Sub 2 to conduct its business only in
the ordinary course and consistent with past practice, and (b) all intercompany
transactions between Seller, on the one hand, and Sub 1 or Sub 2, on the other
hand, will be effected only in the Ordinary Course of Business, and will be paid
in full prior to the Closing. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement or consented to in
writing by Buyer, from the date of this Agreement to the Closing, Seller will,
with respect to Sub 1 and Sub 2, and will cause each of Sub 1 and Sub 2 to:
(i) maintain its properties and equipment in substantially the same
operating condition and repair as in effect on the date hereof;
(ii) continue all existing policies of insurance in full force and
effect and at least at such levels as are in effect on the date hereof, up
to and including the Closing, and not cancel any such insurance or take or
fail to take any action that would enable the insurers under such policies
to avoid liability for claims arising out of occurrences prior to the
Closing;
(iii) not enter into any transaction or make or enter into any
material contract or commitment, or terminate or amend any material
contract or commitment, except in the Ordinary Course of Business, or
enter into any contract or commitment with any officer, director,
shareholder, consultant or Affiliate, except as contemplated by this
Agreement;
(iv) use reasonable efforts to preserve its business organization
and its current relationships with its employees, suppliers, customers,
distributors, advertisers, subscribers and others having business
relationships with it and to keep available to Sub 1 and Sub 2 the
services of their employees;
27
(v) not grant any increase in the compensation payable to any
officer or other employee of Sub 1 or Sub 2, and not contribute or make
any commitment to, or representation that it will, contribute any amounts
to any Employee Benefit Plan, or adopt any new Employee Benefit Plan;
(vi) maintain its books, accounts and records in the Ordinary Course
of Business;
(vii) not incur any obligation or liability, whether absolute, fixed
or contingent, except in the Ordinary Course of Business;
(viii) not issue any capital stock, or any rights, options or
warrants to acquire any capital stock, or declare, set aside or pay any
dividend or distribution in respect of any of its capital stock, or
redeem, purchase or otherwise acquire any of its capital stock;
(ix) not terminate, discontinue, close or dispose of any facility;
(x) not make any capital expenditures or any commitments for capital
expenditures that individually exceed $50,000 or in the aggregate exceed
$100,000 except as set forth in Section 5(c)(viii) of the Disclosure
Schedule;
(xi) not transfer, lease or otherwise dispose of any property or
assets except in the Ordinary Course of Business;
(xii) not pay, discharge or satisfy any claim, lien, encumbrance,
obligation or liability (whether absolute, accrued, contingent or
otherwise and whether due or to become due) other than in the Ordinary
Course of Business;
(xiii) not permit any of its properties or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge,
lien, encumbrance, restriction or charge of any kind, except those in
effect on the date of this Agreement;
(xiv) not cancel any debts or waive any claims or rights of
substantial value;
(xv) not reduce the quality or quantity of services provided to
customers or change the prices of any of its products or services except
in the Ordinary Course of Business;
(xvi) not make any loans, advances or capital contributions to, or
investments in, any Person, except loans and advances to employees in the
Ordinary Course of Business; or
(xvii) not take any action that would result in any of the
representations or warranties of Seller set forth in this Agreement
becoming untrue or cause any of the conditions to the Closing set forth in
Section 7 to not be satisfied.
28
(d) FULL ACCESS. Seller will permit, and Seller will cause the Companies
to permit, representatives of Buyer to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Companies, to all premises, properties, personnel, books, records (including
tax records), contracts and documents of or pertaining to the Companies. Buyer
will treat and hold as such any Confidential Information it receives from
Seller, and the Companies, in the course of the reviews contemplated by this
Section 5(d), will not use any of the Confidential Information except in
connection with this Agreement and, if this Agreement is terminated for any
reason whatsoever, will return to Seller and the Companies all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession. No such investigation by Buyer or its representatives will affect
any of Sellers' representations and warranties in this Agreement; PROVIDED,
HOWEVER, that Buyer affirms that the representation and warranty contained in
Section 3(b)(viii) of this Agreement is true and correct.
(e) NOTICE OF DEVELOPMENTS.
(i) Seller may elect at any time to notify Buyer of any development
causing a breach of any of the representations and warranties of the
Companies in Section 4 above. Unless Buyer has the right to terminate this
Agreement pursuant to Section 9(a)(ii) below by reason of the development
and exercises that right within the period of 10 business days referred to
in Section 9(a)(ii) below, the written notice pursuant to this Section
5(e)(i) will be deemed to have amended the Disclosure Schedule, to have
qualified the representations and warranties contained in Section 4 above,
and to have cured any misrepresentation or breach of warranty that
otherwise might have existed hereunder by reason of the development.
(ii) Parent, Buyer and Seller will give prompt written notice to the
others of any material adverse development causing a breach of any of its
representations and warranties in Section 3 above. No disclosure by
Parent, Buyer or Seller pursuant to this Section 5(e), however, will be
deemed to amend or supplement the Disclosure Schedule or to prevent or
cure any misrepresentation or breach of warranty.
(f) EXCLUSIVITY. Seller will not, and will not authorize any officer,
director, employee or agent of Seller or the Companies to, or authorize any
investment banker, attorney, accountant or other representative retained by
Seller or any Affiliate of Seller to (and Seller will not cause or permit the
Companies to), directly or indirectly, solicit offers for sale or negotiate or
discuss a possible merger, sale or restructuring, refinancing or other
disposition of all or any material part of the Companies, their assets or
capital stock with any other potential purchaser, nor provide any information to
any other potential purchaser regarding the Companies in that connection until
the Closing. Seller will promptly advise Buyer of any offer, solicitation or
request for information received by it from any Person, including the identity
of the Person making such offer, solicitation or request and the nature and
terms (if any) of any such offer, solicitation or request.
29
(g) ENVIRONMENTAL MATTERS.
(i) Seller will take all reasonable actions necessary to continue in
full force and effect all existing permits issued to Sub 1 or Sub 2, and,
with Buyer's prior approval, review and consent, to apply for any permits,
and/or file or submit any notices or registration statements, needed or
expected to be needed to enable the businesses of Sub 1 or Sub 2 to
continue in normal operation after Closing, including, without limitation,
any transfers of existing permits and/or any filings necessary for
existing permits to remain in full force and effect notwithstanding the
transaction contemplated by this Agreement.
(ii) Seller will provide, or will cause the Companies to provide, to
Buyer:
(A) the originals, or, if not available, copies, of any
applications, statements, or reports filed or given by or with
respect to Sub 1 or Sub 2 with or to the EPA, any state department
of environmental regulations, or any similar department of
environmental regulations, or any similar state or local regulatory
body, authority, or agency in the past five years;
(B) the originals, or, if not available, copies, of any
governmental permits, authorizations or approvals for Seller or Sub
1 or Sub 2 and/or their operations issued in the past five years;
and
(C) all reports and documentation of Sub 1 and Sub 2 (whether
or not generated internally) concerning past waste disposal and
compliance with waste disposal regulations (hazardous or otherwise).
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 8 below). Promptly following
Closing, Seller will take all actions necessary to transfer to Buyer, for no
additional consideration, (i) a Ford F150 truck (VIN# 0XXXX00XXXXX00000) and
(ii) three Router Com Super Stack II-Netbuilder (model# 3C8224C), free and clear
of all liens or other encumbrances.
(b) LITIGATION SUPPORT. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Companies, each of the other Parties will cooperate with it and
its counsel in the defense or
30
contest, make available their personnel, and provide such testimony and access
to their books and records as will be necessary in connection with the defense
or contest, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 below).
(c) TRANSITION. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier or other business associate of the Companies from maintaining the same
business relationships with the Companies after the Closing as it maintained
with the Companies prior to the Closing.
(d) GUARANTEES. Buyer will use reasonable efforts to assist Seller to
secure the release of Seller from all guarantees entered into by Seller or its
Affiliates on behalf of Sub 1 or Sub 2 under letters of credit, loans,
guarantees, leases, including all equipment and real property leases, mortgages
or other similar arrangements which guarantees are set forth in Section 6(d) of
the Disclosure Schedule (the "Guaranteed Obligations"); provided that Buyer will
not be required to pay money or incur any expenses in connection therewith.
(e) COMPETITION.
(i) Seller acknowledges that Buyer would be irreparably damaged if
Seller's confidential knowledge of the business of Sub 1 or Sub 2 (the
"Business") were disclosed to or utilized on behalf of any Person that is
in competition with Sub 1 or Sub 2. Accordingly, Seller will not, and will
cause its Affiliates not to, at any time, without the prior written
consent of Buyer, disclose or use any such Confidential Information. For
purposes hereof, Confidential Information will not include information
that is approved in writing for release by Buyer or Parent, is generally
known by the recipient prior to its disclosure to the recipient, is
received by a recipient from a third party rightfully in possession of
such information or is otherwise required by law to be disclosed.
(ii) In furtherance of this Section 6(e) and to secure the interests
of Buyer hereunder, Seller will not, and will not permit any of its
Affiliates to, directly or indirectly, participate in the ownership,
management, operation or control of, or have any financial interest in or
assist any person in the conduct of, any business (a "Competitive
Operation") that competes with the Business as conducted by Sub 1 and Sub
2, respectively, at any time during the two-year period immediately
preceding the date of this Agreement in any area where the Business is
then conducted; PROVIDED, HOWEVER, that ownership of note more than one
percent of the equity securities of any publicly held Competitive
Operation will not constitute a violation of this paragraph (ii).
(iii) Seller acknowledges that a violation by it or any of its
Affiliates of any of the covenants contained in this Section 6(e) would
cause immeasurable and irreparable damage to Buyer. Seller accordingly
acknowledges that Buyer will be entitled to injunctive relief in any court
of competent jurisdiction for any actual or threatened violation of any
covenant, without posting a bond or other security, in addition to any
other remedies available to Buyer.
31
(f) TRADEMARKS. Seller will cooperate with Buyer and take all action
reasonably requested by Buyer to transfer and assign to Buyer all rights of
Seller, Sub 1 or Sub 2 in the trademarks referred to in the Assignment of
Trademarks attached hereto as EXHIBIT E, including without limitation filing
such documents and other materials with the U.S. Patent and Trademark Office and
other governmental and regulatory agencies as may be necessary to effect such
transfer and assignment.
(g) NAME CHANGE OF SELLER'S SUBSIDIARY. Seller will change the name of its
wholly owned subsidiary "Xxxxxx Corvette Sales, Inc." so as to remove the name
"Xxxxxx" on or prior to the Closing Date.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF BUYER AND PARENT. The obligations of Buyer
and Parent to consummate the transactions contemplated by this Agreement are
subject to satisfaction at or before the Closing of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above and the statements contained in any schedule, amended
schedule, instrument, list, certificate or writing delivered by Seller or
the Companies pursuant to this Agreement, that are qualified as to
materiality will be true and correct as of the date when made and as of
the Closing Date as if made at and as of the Closing Date and each of such
representations, warranties and statements that are not so qualified will
be true and correct in all material respects as of the date when made and
as of the Closing Date as if made at and as of the Closing Date (except,
in each case, for those representations, warranties and statements that
address matters only as of a particular date, in which case they will be
true and correct, or true and correct in all material respects, as
applicable, as of such date);
(ii) Seller will have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) There will not be instituted or pending any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that (a)
restrains or prohibits the consummation of any of the transactions
contemplated hereby, (b) would reasonably be expected to have a Material
Adverse Effect on Buyer's ability to exercise control over or manage the
Companies after the Closing or (c) would reasonably be expected to have a
Material Adverse Effect.
(iv) no statute, rule, regulation, executive order, decree or
injunction will have been enacted, entered, promulgated or enforced by any
court or governmental authority that prohibits the consummation of any of
the transactions contemplated hereby;
32
(v) all Licenses, consents, approvals and authorizations of all
third parties and governmental and regulatory authorities will have been
obtained that are necessary except as set forth on Schedule 7(a)(v) of the
Disclosure Schedule , in the opinion of counsel to Buyer, in connection
with (a) the execution and delivery by Seller and the Companies of this
Agreement, (b) the consummation by Seller and the Companies of the
transactions contemplated hereby and (c) the ownership and operation by
Buyer of the Companies, and copies of all such Licenses and consents,
approvals and authorizations will have been delivered to Buyer;
(vi) from the date of this Agreement through the Closing Date, there
will not have occurred any change in the financial condition, business or
operations of Sub 1 or Sub 2 that would be reasonably likely to have a
Material Adverse Effect;
(vii) Seller will have delivered to Buyer a certificate to the
effect that each of the conditions specified above in Section 7(a)(i)-(vi)
is satisfied in all respects;
(viii) all actions to be taken by Seller and the Companies in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer;
(ix) as of the Closing Date, none of the Companies will have any
indebtedness for borrowed money or obligations in respect of any such
indebtedness, including indebtedness to Seller or any of its Affiliates,
except for a $315,000 letter of credit required under the General Motors
Service Parts Operations License Agreement or as set forth in Section
7(a)(ix) of the Disclosure Schedule;
(x) at the Closing, Seller will have entered into a ten-year lease
agreement in the form of EXHIBIT F for Buildings Two and Three at Seller's
headquarters in Titusville, Florida;
(xi) at the Closing, Buyer and Seller will enter into a Transition
Services Agreement substantially in the form of EXHIBIT G hereto;
(xii) Buyer will have received from Xxxxxx, Xxxxx & Xxxxxxx LLP,
counsel to Seller, an opinion in form and substance as set forth in
EXHIBIT H attached hereto, addressed to Buyer and dated as of the Closing
Date;
(xiii) all applicable waiting periods (and any extensions thereof)
under the Xxxx-Xxxxx-Xxxxxx Act (if applicable) will have expired or
otherwise been terminated and the Parties and the Companies will have
received all other authorizations, consents and approvals of the
governmental or regulatory bodies or authorities referred to in Section
3(a)(ii), Section 3(b)(ii) and Section 4(c);
33
(xiv) Seller will have delivered to Buyer an executed counterpart of
the Assignment of Trademarks, in the form attached hereto as EXHIBIT E;
(xv) Seller will have secured the release of Sub 1 and Sub 2 from
all guarantees entered into by Sub 1 or Sub 2 on behalf of Seller or its
Affiliates under all Guaranteed Obligations set forth on Section 6(d) of
the Disclosure Schedule unless waived by the Buyer in writing.
Buyer and Parent may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF SELLER AND THE COMPANIES. The obligation
of Seller and the Companies to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 3(b)
above and the statements contained in any schedule, amended schedule,
instrument, list, certificate or writing delivered by Buyer or Parent
pursuant to this Agreement, that are qualified as to materiality will be
true and correct as of the date when made and as of the Closing Date as if
made at and as of the Closing Date and each of such representations,
warranties and statements that are not so qualified will be true and
correct in all material respects as of the date when made and as of the
Closing Date as if made at and as of the Closing Date (except, in each
case, for those representations, warranties and statements that address
matters only as of a particular date, in which case they will be true and
correct, or true and correct in all material respects, as applicable, as
of such date);
(ii) Buyer and Parent will have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) there will not be instituted or pending any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that (a)
restrains or prohibits the consummation of any of the transactions
contemplated hereby, (b) would reasonably be expected to have a Material
Adverse Effect on Buyer's or Parent's ability to exercise control over or
manage the Companies after the Closing or (c) would reasonably be expected
to have a Material Adverse Effect;
(iv) no statute, rule, regulation, executive order, decree or
injunction will have been enacted, entered, promulgated or enforced by any
court or governmental authority that prohibits the consummation of any of
the transactions contemplated hereby;
23
(v) Buyer and Parent will have delivered to Seller a certificate to
the effect that each of the conditions specified above in Section
7(b)(i)-(iv) is satisfied in all respects;
(vi) all applicable waiting periods (and any extensions thereof)
under the Xxxx-Xxxxx-Xxxxxx Act (if applicable) will have expired or
otherwise been terminated and the Parties and the Companies will have
received all other authorizations, consents and approvals of governmental
or regulatory bodies or authorities referred to in Section 3(a)(ii),
Section 3(b)(ii) and Section 4(c), above;
(vii) all actions to be taken by Buyer and Parent in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to Seller;
(viii) at the Closing, Buyer will have entered into a ten-year lease
agreement in the form of EXHIBIT D for Buildings Two and Three at Seller's
headquarters in Titusville, Florida;
(ix) Seller will have received the Closing Payment;
(x) at the Closing, Buyer and Seller will enter into a Transition
Services Agreement substantially in the form of EXHIBIT G hereto; and
(xi) Seller will have received from counsel to Buyer an opinion in
form and substance as set forth in EXHIBIT I attached hereto, addressed to
Seller and dated as of the Closing Date.
Seller may waive any condition specified in this Section 7(b) if it executes a
writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of Seller contained in Section 4 above will survive the Closing
hereunder (unless Buyer or Parent knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of one year thereafter. All of the
representations and warranties of the Parties contained in Section 3 above will
survive the Closing (unless the damaged Party or Party's agents (including,
without limitation, in the case of Buyer, Sun Capital Partners, Inc.) knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for the applicable statutes of
limitations.
35
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(i) In the event (A) either Seller or the Companies breaches any of
its representations, warranties and covenants contained herein (other than
the covenants in Section 2(a) above and the representations and warranties
in Section 3(a) above which are covered by paragraph (ii) below), and, if
there is an applicable survival period pursuant to Section 8(a) above, (B)
any claim is asserted against Buyer or any Affiliate with respect to any
Taxes relating to Seller's, Sub 1's or Sub 2's operations or properties on
or prior to the Closing Date, (C) any Taxes that may be due from Seller
directly and solely as a result of the sale of the stock of the Companies
pursuant to this Agreement, provided that Buyer or Parent makes a written
claim for indemnification against Seller within such survival period, (D)
any liability or obligation relating to events prior to the Closing with
regard to any Employee Benefit Plan, unless otherwise accrued or provided
for in the July 1999 Financial Statements, or as otherwise provided in
this Agreement, (E) any liability arising out of products sold by Sub 1 or
Sub 2 prior to the Closing Date, unless otherwise accrued or provided for
in the July 1999 Financial Statements, or as otherwise provided in this
Agreement, (F) any violation by Seller, Sub 1 or Sub 2 of any
Environmental Law or (G) any claims, lawsuits, injunctions or other
actions brought or threatened by any Person against any of Sub 1, Sub 2,
Buyer or any of Buyer's Affiliates based on a claim by any Person of a
right to acquire Sub 1 or Sub 2 from Seller, then Seller agrees to
indemnify Buyer from and against any Adverse Consequences Buyer will
suffer through and after the date of the claim for indemnification caused
proximately by the breach; PROVIDED, HOWEVER, that Seller will not have
any obligation to indemnify Buyer or Parent from and against any Adverse
Consequences caused by (A) through (G) above (except Adverse Consequences
relating to Taxes or Employee Benefit Plans): (x) until Buyer or Parent
has suffered Adverse Consequences by reason of all such breaches in excess
of a $100,000 aggregate deductible (the "Indemnification Threshold")
(after which point Seller will be obligated only to indemnify Buyer or
Parent from and against further such Adverse Consequences, that is, for
amounts greater than $100,000) or thereafter (y) to the extent the Adverse
Consequences Buyer has suffered by reason of all such breaches exceeds a
$10,250,000 aggregate ceiling (after which point Seller will have no
obligation to indemnify Buyer from and against further such Adverse
Consequences).
(ii) In the event either Seller or the Companies breaches any of its
covenants in Section 2(a) above or any of its representations and
warranties in Section 3(a) above, and, if there is an applicable survival
period pursuant to Section 8(a) above, provided that Buyer or Parent makes
a written claim for indemnification against Seller within such survival
period, then Seller agrees to indemnify Buyer or Parent from and against
the entirety of any Adverse Consequences Buyer or Parent will suffer
through and after the date of the claim for indemnification caused
proximately by the breach.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event either
Buyer or Parent breaches any of its representations, warranties and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 8(a) above, provided that Seller makes a written claim for
indemnification against Buyer or Parent pursuant to Section 10(g) below
36
within such survival period, then Buyer or Parent agrees to indemnify Seller
from and against the entirety of any Adverse Consequences Seller will suffer
through and after the date of the claim for indemnification caused proximately
by the breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party will 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 8, then the Indemnified Party
will promptly (and in any event within 10 business days after receiving
notice of the Third-Party Claim) notify each Indemnifying Party thereof in
writing.
(ii) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third-Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party; PROVIDED,
HOWEVER, that 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 and does not impose an
injunction or other equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the defense of
the Third-Party Claim as provided in Section 8(d)(ii) above, however, the
Indemnified Party may defend against the Third-Party Claim in any manner
it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party 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 each of the Indemnifying
Parties (not to be withheld unreasonably).
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties will make
appropriate adjustments for tax benefits and insurance coverage in determining
the amount of Adverse Consequences actually incurred by a party for purposes of
this Section 8. To the extent that utilization of tax benefits, insurance
coverage or indemnification payments reduces the amount of Adverse Consequences
actually incurred by Buyer or Parent, such Adverse Consequences will not be
counted against the Indemnification Threshold. All indemnification payments
under this Section 8 will be deemed adjustments to the Merger Consideration.
(f) OTHER INDEMNIFICATION PROVISIONS. The indemnification provisions in
this Section 8 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 Buyer and Parent acknowledge and
agree that the foregoing indemnification provisions in this Section 8 will be
the exclusive remedy of Buyer for any breach of the representations and
warranties in Section 4 above.
37
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement may be terminated as provided
below:
(i) The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Buyer and Parent may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing in the event (A) Seller
has within the then previous 10 business days given Buyer or Parent any
notice pursuant to Section 5(e)(i) above and (B) the development that is
the subject of the notice has had a Material Adverse Effect;
(iii) Buyer and Parent may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing (A) in the event
either Seller or the Companies has breached any material representation,
warranty or covenant contained in this Agreement in any material respect,
either Buyer or Parent has notified Seller of the breach, and the breach
has continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing will not have occurred on or before August
31, 1999, by reason of the failure of any condition precedent under
Section 7(a) hereof which is not otherwise waived by Buyer (unless the
failure results primarily from either Buyer or Parent itself breaching any
representation, warranty or covenant contained in this Agreement); and
(iv) Seller and the Companies may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing (A) in the event
either Buyer or Parent has breached any material representation, warranty
or covenant contained in this Agreement in any material respect, Seller
has notified Buyer of the breach, and the breach has continued without
cure for a period of 15 days after the notice of breach or (B) if the
Closing will not have occurred on or before August 31, 1999, by reason of
the failure of any condition precedent under Section 7(b) hereof which is
otherwise waived by Seller (unless the failure results primarily from
either Seller or the Companies breaching any representation, warranty or
covenant contained in this Agreement, in which event such date will be
extended until such breach is cured).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 9(a) above, all rights and obligations of the Parties hereunder will
terminate without any liability of any Party to any other Party (except for any
liability of any Party then in breach); PROVIDED, HOWEVER, that the
confidentiality provisions contained in Section 5(d) above will survive
termination.
38
10. TAX INDEMNIFICATION. Notwithstanding anything to the contrary
contained in Section 8 of this Agreement:
(a) TAX SHARING AND INDEMNIFICATION. Seller will indemnify, defend and
hold harmless Buyer from and against any and all Taxes that may be imposed on or
assessed against or otherwise claimed to be due from Buyer with respect to any
of the Companies or Tax Affiliate, or the assets of any such Company or its Tax
Affiliates (A) with respect to taxable periods ending on or prior to the Closing
Date; (B) with respect to any and all Taxes of any member of a consolidated,
combined or unitary group of which any of the Companies or any predecessor
thereof is or was a member (other than a Company) on or prior to the Closing
Date, by reason of the liability of such Company pursuant to Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or foreign law or
regulation; (C) arising by reason of any breach by Seller of the
representations, warranties and covenants contained in Section 4(k); (D) by
reason of being a successor-in-interest or transferee of another entity on or
prior to the Closing Date; (E) with respect to any and all Taxes allocated to
Seller pursuant to Section 10(c) hereof; and (F) arising from an election or
deemed election imposed by a taxing authority under Section 338 (h)(10) of the
Code (or any comparable provision of state, local or foreign law) with respect
to the purchase of the Sub 1 Shares and Sub 2 Shares. Seller will also pay or
cause to be paid and will indemnify and hold harmless Buyer, each Company and
their Tax Affiliates from and against (x) any liability arising under any Tax
sharing, Tax indemnity, Tax allocation or similar agreement (whether or not
written) to which any of the Companies or any predecessor or transferor with
respect thereto is a party or is bound ("Tax Sharing Payments") and (y) all
losses, damages and reasonable third party costs and expenses (including
reasonable attorney, accountant and expert witness fees) ("Related Costs")
incurred in connection with the Taxes or Tax Sharing Payments for which Seller
indemnifies Buyer, each Company and their Tax Affiliates pursuant to this
Section 10(a) (or any asserted deficiency, claim, demand or assessment,
including the defense or settlement thereof relating to such Taxes or Tax
Sharing Payments) or the enforcement of this Section 10(a).
(b) Buyer will be responsible for, and will pay or cause to be paid, and
will indemnify and hold harmless Seller from and against, any and all Taxes that
may be imposed on or assessed against a Company (i) with respect to taxable
periods of the Company beginning after the Closing Date and (ii) with respect to
any and all Taxes allocated to Buyer pursuant to Section 10(c) hereof. Buyer
will also pay or cause to be paid and will indemnify and hold harmless Seller
from and against all Related Costs of Seller incurred in connection with the
Taxes for which Buyer indemnifies Seller pursuant to this Section 10(b) (or any
asserted deficiency, claim, demand or assessment, including the settlement
thereof, relating to such Taxes) or the enforcement of this Section 10(b).
(c) (i) Taxes, attributable to any taxable period of any of the Companies
beginning before and ending after the Closing Date hereof will be
allocated (A) to Seller for the portion of the period up to and including
the Closing Date, and (B) to Buyer (or such Company) for the portion of
the period subsequent to the Closing Date.
39
(ii) For purposes of this Section 10(c), Taxes for the period up to
and including the Closing Date, ("Seller's Taxes"), will be determined on
the basis of an interim closing of the books as of the end of the Closing
Date, PROVIDED, HOWEVER, that in the case of a franchise tax not based on
income, such Seller's Taxes will be equal to the amount of franchise tax
for the taxable year multiplied by a fraction, the numerator of which will
be the number of days from the beginning of the taxable year through the
Closing Date, as the case may be, and the denominator of which will be the
number of days in the taxable year.
(d) (i) Except as otherwise specifically provided herein, Seller will be
responsible for filing or causing to be filed all Tax Returns required to
be filed by or on behalf of any of the Companies or their assets or
operations for taxable periods ending on or before the Closing Date
including extensions, and Buyer will be responsible for filing or causing
to be filed all other Tax Returns required to be filed by or on behalf of
any of the Companies or their assets or operations for taxable periods
ending after the Closing Date including extensions.
(ii) With respect to any Tax Returns of any of the Companies
required to be filed by Seller as set forth in clause (i) above for
taxable periods ending on or before the Closing Date, at least 15 days
prior to the due date for filing of such Tax Returns (including
extensions), Seller will provide Buyer with copies of such Tax Return for
Buyer's approval (which approval will not be unreasonably withheld).
(iii) With respect to any Tax Returns of any of the Companies
required to be filed by Buyer after the Closing Date that include any
period before the Closing Date, if any, at least 15 days prior to the due
date for filing of such Tax Return, (including extensions), Buyer will
provide Seller with copies of such Tax Return for Seller's approval (which
approval will not be unreasonably withheld), together with a statement
setting forth the amount of Tax shown due thereon that is allocable to
Seller pursuant to Section 10(c) hereof (the "Statement"). Not later that
five days before the due date for payment of Taxes with respect to such
Tax Return, Seller will pay to Buyer an amount equal to the Taxes shown on
the Statement as being allocable to Seller pursuant to Section 10(c)
hereof. No payment pursuant to this Section 10(d)(iii) will excuse Seller
from its indemnification obligations pursuant to Section 10(a) hereof
should the amount of Taxes as ultimately determined (on audit or
otherwise), for the periods covered by such Tax Return and which are the
responsibility of Seller, exceed the amount of Seller's payment under this
Section 10(d)(iii).
(iv) Any dispute with respect to any Tax Return referred to in this
Section 10(d)(iv) will be resolved by the independent accounting firm
referred to in Section 10(h) hereof.
40
(e) Seller and Buyer will cooperate fully with each other and make
available to each other in a timely fashion such tax data and other information
as may be reasonably required for the preparation of any Tax Returns required to
be prepared and filed by Buyer hereunder. Seller and Buyer will make available
to the other, as reasonably requested, all information, records or documents in
their possession relating to Tax liabilities of each Company for all taxable
periods of such Company ending on, prior to or including the Closing Date and
will preserve all such information, records and documents until the expiration
of any applicable Tax statute of limitations or extensions thereof; PROVIDED,
HOWEVER, that in the event a proceeding has been instituted for which the
information, records or documents is required prior to the expiration of the
applicable statute of limitations such information, records or documents will be
retained until there is a final determination with respect to such proceeding.
(f) Buyer and Seller will promptly notify each other in writing upon
receipt by Buyer, any of the Companies or Seller, as the case may be, of any
notice of any Tax audits of or assessments against any of the Companies for
taxable periods of such Company ending on, prior to or including the Closing
Date. Seller will have the right to represent such Company's interests in any
Tax audit or administrative or court proceeding (a "Tax Proceeding") relating to
taxable periods of such Company ending on or prior to the Closing Date and to
employ counsel of its choice at its expense; PROVIDED, HOWEVER, that Seller may
not agree to a settlement or compromise thereof without the prior consent of
Buyer, if such settlement or compromise could be expected to have an adverse
effect on such Company, Buyer or its Tax Affiliates with respect to Taxes or
taxable periods for which Buyer is responsible hereunder. Buyer will have the
right, at its expense, to represent a Company's interests in any Tax Proceeding
relating to any taxable period ending after the Closing Date. Buyer and Seller
each agree that they will cooperate fully with each other and their respective
counsel in the defense against or compromise of any claim in any Tax Proceeding.
(g) Seller and Buyer agree that any payment made under Sections 8 and 10
will be treated by the parties on their Tax Returns as an adjustment to the
aggregate consideration for the Sub 1 Shares and Sub 2 Shares. If,
notwithstanding such treatment by the parties, any indemnity payment is
determined to be taxable to the indemnified party by any taxing authority, the
indemnifying party will also indemnify the indemnified party for any Taxes and
Related Costs payable by the indemnified party by reason of the receipt of such
indemnity payment.
(h) Any dispute as to any matter covered under this Section 10 will be
resolved by an independent accounting firm mutually acceptable to Seller and
Buyer. The fees and expenses of such accounting firm will be borne equally by
the parties.
41
11. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party will issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of Buyer and
Seller; PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to afford the other
Parties the opportunity to review and comment upon the disclosure prior to the
making thereof).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein and the schedules and exhibits attached hereto) and the documents
delivered pursuant hereto constitute the entire agreement between the Parties
and supersede any prior understandings, agreements, including the letter of
intent dated April 27, 1999, between Seller and an Affiliate of Buyer, or
representations by or between the Parties, written or oral, to the extent they
have related in any way to the subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement will be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
Buyer and Seller; PROVIDED, HOWEVER, that Buyer may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates, (ii) designate
one or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases Buyer nonetheless will remain responsible for the performance
of all of its obligations hereunder) and (iii) assign all of its rights
hereunder to Deutsche Financial Services Corporation and its assigns in the
instance of default under the Loan and Security Agreement by and between
Deutsche Financial Services Corporation and Buyer dated August 23, 1999.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder will be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below, or if sent by facsimile transmission, on the date of receipt by the
recipient:
42
If to Seller: Smart Choice Automotive Group, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Fax: 000-000-0000
Attn: Xxxx X. Xxxxx,
President and Chief Executive Officer
copy to: Xxxxxx, Xxxxx & Bockius LLP
5300 First Union Financial Center
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000-0000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Buyer or Parent: Xxxxxx Industries, LLC
c/o Sun Capital Partners, Inc.
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Fax: 000-000-0000
Attn: Xxxx X. Xxxxx and Xxxxxx X. Xxxxxx
copy to: Xxxxx, Harrison, Harney, Branzburg & Xxxxxx LLP
000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication will be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Florida without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida.
(i) WAIVER OF JURY TRIAL. To the extent not prohibited by applicable law
which cannot be waived, each of the Parties hereby waives and covenants that it
will not assert (whether as plaintiff, defendant or otherwise) any right to
trial by jury in any forum in respect of any issue or action arising out of or
based upon this Agreement or any other document or agreement entered into in
connection herewith or the subject matter hereof or thereof or in any way
43
connected with or related or incidental to the transactions contemplated hereby
or thereby, in each case whether now existing or hereafter arising. Each Party
acknowledges that it has been informed by the other Party that this Section
11(i) constitutes a material inducement upon which such other Party is relying
and will rely in entering into this Agreement and any other agreements relating
hereto or contemplated hereby. Either party hereto may file an original
counterpart or a copy of this Section 11(i) with any court as written evidence
of the consent of each Party to the waiver of its right to trial by jury.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement will be valid unless the same will be in writing and signed by Buyer
and Seller. No waiver by any Party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, will be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction will not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Except as set forth in Section 4(d) and 9(c), each of Buyer
and Seller will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement will be construed as if drafted jointly
by the Parties and no presumption or burden of proof will arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute or
law will be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" will
mean including without limitation.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and the
Disclosure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
*****
44
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SMART CHOICE AUTOMOTIVE XXXXXX INDUSTRIES, INC.
GROUP, INC.
By /s/ XXXXXX X. XXXXXXX By /s/ XXXXXX X. XXXXXXX
------------------------------ -----------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Vice President Title: Vice President
XXXXXX INDUSTRIES, LLC XXXXXX'X RACING BODIES, INC.
By /s/ XXXXXX X. XXXXXX By /s/ XXXXXX X. XXXXXXX
------------------------------ -----------------------------
Name: Xxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Vice President Title: Vice President
SUN AUTOMOTIVE PARTNERS, L.P.
By: Sun Automotive Advisers, Inc.
By /s/ XXXXXX X. XXXXXX
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
