Exhibit 2.1
PLAN OF REORGANIZATION
AND
AGREEMENT FOR SHARE EXCHANGE OFFERS
DATED AS OF AUGUST [27], 1997
BY AND AMONG
PRECISION AUTO CARE, INC.
a Virginia corporation
(the "Holding Company")
WE JAC CORPORATION MIRACLE INDUSTRIES, INC.
a Delaware corporation an Ohio corporation
("WEJAC") ("Miracle Industries")
LUBE VENTURES, INC. MIRACLE PARTNERS, INC.
a Delaware corporation a Delaware corporation
("Lube Ventures") ("Miracle Partners")
ROCKY MOUNTAIN VENTURES, INC. ROCKY MOUNTAIN VENTURES II, INC.
a Colorado corporation a Colorado corporation
("Rocky Mountain I") ("Rocky Mountain II")
PREMA PROPERTIES, LTD. XXXXXXX CAR WASH, LTD.
an Ohio limited liability a Colorado limited liability
company company
("Prema Properties") ("Xxxxxxx Car Wash")
and
THE XXXX XXXXX GROUP, INC.
a Colorado corporation
("KBG")
TABLE OF CONTENTS
i
SCHEDULES
Schedule 5.5(j) Sales of Assets Outside of Ordinary Course
Schedule 5.14 Option Property of Prema Property
Schedule 5.15 Option Property of Lube Ventures
Schedule 5.16 Option Property of Miracle Partners
Schedule 13.5 Encumbrances against Software
Schedule 19.1 Debt Level Guarantees
Schedule 22.1 WE JAC Options and Warrants
Schedule 23.1 Debt to be Discharged
EXHIBITS
Exhibit A Articles of Incorporation
Exhibit B By Laws
Exhibit C Non-Compete Agreements
Exhibit D Tax Opinion
Exhibit E Financial Statements
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PLAN OF REORGANIZATION
AND
AGREEMENT FOR SHARE EXCHANGE OFFERS
THIS PLAN OF REORGANIZATION AND AGREEMENT FOR SHARE EXCHANGE OFFERS
(together with the Schedules and Exhibits hereto, hereinafter referred to as
this "Agreement") is made and entered into as of the 27th day of August, 1997,
by and among PRECISION AUTO CARE, INC., a Virginia corporation (the "Holding
Company"), WE JAC CORPORATION, a Delaware corporation, having its principal
place of business at 000 Xxxxxx Xxxxx, X.X., Xxxxxxxx, Xxxxxxxx ("WE JAC"),
MIRACLE INDUSTRIES, INC., a Ohio corporation having its principal place of
business at 0000 Xxxx Xxxxxx Xxxx, Xxxxxxxxx, Xxxx 00000 ("Miracle Industries"),
LUBE VENTURES, INC., a Delaware corporation having its principal place of
business at 0000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000 ("Lube Ventures"),
MIRACLE PARTNERS, INC., a Delaware corporation having its principal place of
business at 0000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000 ("Miracle Partners"),
PREMA PROPERTIES, LTD., an Ohio limited liability company having its principal
place of business at 00 Xxxx 00xx Xxxxxx, Xxxxxxxx, Xxxx 00000 ("Prema
Properties"), ROCKY MOUNTAIN VENTURES, INC., a Colorado corporation having its
principal place of business at 00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxxxxx 00000-0000 ("Rocky Mountain I"), ROCKY MOUNTAIN VENTURES II, INC., a
Colorado corporation having its principal place of business at 00000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000-0000 ("Rocky Mountain II"), XXXXXXX
CAR WASH, LTD., a Colorado limited liability company having its principal place
of business at 00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000-0000
("Xxxxxxx Car Wash"), and THE XXXX XXXXX GROUP, INC., a Colorado corporation
having its principal place of business at 0000 X. Xxxxxxx Xxx #000, Xxxxxx,
Xxxxxxxx 00000 ("KBG").
Certain capitalized terms used herein without definition shall have the
meanings given to such terms in Section 25.10 hereof.
EXPLANATORY STATEMENT:
1. WE JAC is the holder, directly and indirectly, of all of the issued and
outstanding capital stock of, among other corporations, Precision Tune Auto
Care, Inc., a Virginia corporation, which are engaged in the businesses of (i)
owning and operating retail centers devoted to providing automotive services for
automobiles and light trucks and (ii) franchising a system of operating such
retail centers; and
2. Miracle Industries is engaged in the businesses of (i) owning and
operating a chain of car washes in the central Ohio area and (ii) manufacturing
chemicals for use by operators of car wash businesses, and is the holder of a
90% membership interest in Hydro Spray Car Wash Equipment Co., Ltd., an Ohio
limited liability company ("Hydro-Spray") and a 50% membership interest in Indy
Ventures, L.L.C., an Indiana limited liability company ("Indy Ventures") and
HydroSpray is engaged in the business of manufacturing and selling equipment
designed for use in the car wash business; and Indy Ventures is engaged in the
business of owning and operation a chain of car wash businesses in the
Indianapolis, Indiana area; and
3. Prema Properties is engaged in the business of owning and operating a
chain of car washes, as well as a franchised "Lube Depot" fast lube center, in
the Columbus, Ohio area; and
4. Lube Ventures is engaged in the businesses of (i) manufacturing and
selling modular fast lube center buildings, (ii) owning and operating fast lube
centers and (iii) franchising a system for the operation of fast lube centers;
and
5. Rocky Mountain I, Rocky Mountain II and Xxxxxxx Car Wash are each
engaged in the business of owning and operating car washes in the greater
Denver, Colorado area; and
6. Miracle Partners is engaged in the business of owning and operating a
chain of car washes in the Columbus, Ohio area; and
7. KBG has developed a proprietary computer software system designed to
operate car wash centers; and
8. Each of the parties hereto believes that it would be in their respective
best interests to combine the ownership of their respective businesses in the
manner provided for herein, and, in connection with such combination, to
initiate an initial public offering of a portion of the capital stock of the
Holding Company following such combination;
NOW, THEREFORE, this Agreement witnesseth that, in consideration of the
foregoing premises and the mutual covenants and agreements of the parties
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
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ARTICLE I
FORMATION OF HOLDING COMPANY
AND
REGISTRATION OF A PORTION OF THE SHARES OF THE HOLDING COMPANY
FOR OFFER AND SALE TO THE PUBLIC
SECTION 1.1 FORMATION OF HOLDING COMPANY.
1.1.1 Form of Holding Company. Each of the parties to this Agreement hereby
confirms and ratifies their authorization and approval of the formation by WE
JAC, on their behalf, of a corporation under the laws of the Commonwealth of
Virginia, known as "Precision Auto Care, Inc." Following the consummation of the
transactions described in Article III hereof, the corporation so formed by WE
JAC shall be the "holding company" for the various subsidiary corporations and
other entities that will arise as a result of the transactions contemplated
hereby, and such corporation shall be referred to hereinafter as the "Holding
Company." WE JAC has capitalized the Holding Company initially by contributing
to the Holding Company the amount of $1000, for which WE JAC has received in
exchange 100 shares of the Common Stock, par value $.01 of the Holding Company,
as the nominee of each of the parties hereto. All of the shares of Common Stock
of the Holding Company issued to WE JAC pursuant to its initial capitalization
shall be redeemed by the Holding Company substantially contemporaneously with,
but immediately prior to, the consummation of the transactions contemplated by
the provisions of Article III of this Agreement.
1.1.2 Charter and Bylaws. The Articles of Incorporation of the Holding
Company shall be substantially in the form attached hereto as Exhibit A and the
Bylaws of the Holding Company shall be substantially in the form attached hereto
as Exhibit B. Neither the Articles of Incorporation nor the Bylaws of the
Holding Company shall be amended or modified in any manner prior to the Closing
of the transactions contemplated hereby, except with the prior written consent
of each of the parties to this Agreement.
1.1.3 Initial Officers and Directors. The initial officers of the Holding
Company shall be the following persons, each of whom shall hold the offices and
have the titles indicated opposite their respective names, and shall serve in
such capacities until the first annual meeting of the Board of Directors of the
Holding Company held after the first annual meeting of the stockholders of the
Holding Company, or until his or her earlier death or resignation, or until such
later time as may be specified in a written Employment Agreement with such
person, and until his or her respective successor shall have been duly elected
and qualified:
NAME OFFICES AND TITLES
--------------------- -----------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxxxx Chairman of the Board
Xxxxxxx X. Clineberg Vice Chairman of the Board
Xxxx X. Xxxxxx President and Chief Executive Officer
Xxxxxx Xxxxxxxx Senior Vice President, Secretary & General Counsel
Xxxxx Xxxxxxxx Senior Vice President, Chief Financial Officer and Treasurer
Xxxxx X. Xxxxxxx Senior Vice President -- Franchise Development
Xxxxx X. Xxx Senior Vice President -- Retail Operations
Xxxxxxx X. Xxxxx Vice President -- Precision Auto Wash Operations
Xxxx X. Xxxxxxxxx Vice President -- Communications
Xxxx X. Xxxxx Vice President -- Precision Auto Wash Development
Xxxx Xxxxxxxx Vice President -- Precision Auto Care and Precision Lube Express Operations
Xxxxx Xxxxxxx Vice President -- Controller
Xxxxx Xxxxxxxxx Vice President
Xxxx X. Xxxxxxxxxx Vice President -- Precision Auto Care M&D
Xxxxx Xxxxxx Vice President -- Franchise Sales
Notwithstanding anything contained in the Articles of Incorporation or the
Bylaws which may be inconsistent or to the contrary, none of the persons named
herein to serve as an initial officer of the Holding Company shall be removed
from any such office prior to the closing of the IPO except with the prior
written approval of each of the parties to this Agreement.
The parties have agreed that the initial Board of Directors of the Holding
Company shall consist of thirteen (13) directors, of which the WE JAC Group
shall have the right to designate seven (7) directors, the Ohio Group shall have
the right to designate five (5) directors and the Rocky Mountain Group shall
have the right to designate one (1) director. Consistent with
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the foregoing, the parties agree that the initial directors of the Holding
Company shall be the following persons, each of whom shall be appointed to the
Class of directorship indicated opposite their respective names, and shall serve
in such capacities until the expiration of the term of the Class of directorship
to which he or she has been appointed, as provided in the Articles of
Incorporation of the Holding Company, or until his or her earlier death or
resignation, and until his or her respective successor shall have been duly
elected and qualified:
NAME CLASS OF DIRECTORS
------------------------- -----------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxxxx III (initial 3 year term)
Xxxx X. Xxxxxx I (initial 1 year term)
Xxxxx X. Xxxxxx, Xx. I (initial 1 year term)
Xxxxxxx X. Xxxxx XX (initial 2 year term)
Xxxxxxx X. Xxxxxxxxx III (initial 3 year term)
Xxxxxx Xxxxxxx XX (initial 2 year term)
Xxxxxx Xxxxxx XX (initial 2 year term)
Xxxxx Xxxxxxxxx III (initial 3 year term)
Xxxxxxx X. Xxxxxxx I (initial 1 year term)
Xxxxxx Xxxxxxxx XX (initial 2 year term)
Xxxxxx Xxxxxxx III (initial 3 year term)
C. Xxxxxx Deal I (initial 1 year term)
Xxxxxxx X. Xxxxx III (initial 3 year term)
Notwithstanding anything contained in the Articles of Incorporation or the
Bylaws which may be inconsistent or to the contrary, none of the persons named
herein to serve as an initial director of the Holding Company shall be removed
as a director prior to the closing of the IPO except with the prior written
approval of the Participant Group which was entitled to designate such person as
a director of the Holding Company. In the event that a director dies or resigns
prior to the closing of the IPO, the Participant Group which was entitled to
designate such person as a director of the Holding Company shall have the right
to designate his successor.
The parties have further agreed that, initially, there shall be at least 3
committees of the Board of Directors of the Holding Company; namely, an Audit
Committee, an Executive Committee and a Finance Committee. Although the members
of the Audit Committee and the Executive Committee have yet to be determined,
Xxxxx Xxxxxxxxx, Xxxxxxx X. Xxxxx, Xxxx X. Xxxxxx and Xxxx X. Xxxxxxxxx shall be
the initial members of the Finance Committee. The Finance Committee shall have
all of the powers of the Board of Directors delegated to the Finance Committee
pursuant to the Bylaws of the Holding Company as well as the power and authority
to take the actions contemplated by Section 18.3 of this Agreement.
Notwithstanding anything contained in the Articles of Incorporation or the
Bylaws which may be inconsistent or to the contrary, none of the persons named
herein to serve as an initial member of the Finance Committee shall be removed
by the Board of Directors as a member of the Finance Committee prior to the
closing of the IPO except with the prior written approval of the Participant
Group which was entitled to designate such person as a director of the Holding
Company.
SECTION 1.2 REGISTRATION OF SHARES OF THE HOLDING COMPANY.
1.2.1 Engagement of Securities Counsel. Each of the parties hereby agrees
and consents to, and ratifies, the prior engagement by WE JAC on behalf of the
Holding Company of the law firm of Miles & Stockbridge, a Professional
Corporation, a Maryland professional corporation ("M&S"), to act as counsel to
the Holding Company, and agrees that the legal fees of such legal counsel and
the expenses incurred by them in rendering services for the Holding Company
shall be deemed to be part of the Transaction Expenses. Each of the parties
hereto (other than WE JAC) hereby acknowledges that it or he understands that
(i) M&S has represented WE JAC and its Subsidiaries as its principal outside
legal counsel, (ii) M&S has represented, and will continue to represent, WE JAC
in connection with the negotiations relating to this Agreement and the
preparation of this Agreement, and (iii) M&S also will be representing the
Holding Company in connection with negotiations relating to this Agreement. Each
such party acknowledges that it has been advised by M&S and their respective
legal counsel that there may be potential conflicts of interest as a result of
such dual representation by M&S. WE JAC further acknowledges that it has been
advised by M&S that in the event of a conflict between WE JAC and the Holding
Company, M&S could not ethically favor either WE JAC's or the Holding Company's
interests over the interests of the other, and that M&S' representation of the
Holding Company in connection with these transactions may limit the protections
that normally would be afforded to WE JAC by the attorney/client privilege
doctrine as it relates to communications between WE JAC and M&S relating to
these matters and that M&S may be required to disclose to the other parties to
this Agreement certain otherwise
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confidential communications between WE JAC and M&S. The parties to this
Agreement also understand and agree that in the event that any dispute or
controversy should arise by and between or by and among any of the parties to
this Agreement (other than disputes between WE JAC and the Holding Company), M&S
will continue to represent WE JAC and its interests in connection with such
dispute or controversy. Nevertheless, despite having been advised as to these
matters, each of the parties hereto, in the interest of cost-savings and
efficiency, consents to the dual representation by M&S of the Holding Company
and WE JAC. M&S may rely on the acknowledgments, agreements and consents of the
parties pursuant to this Section 1.2.1.
1.2.2 Engagement of Underwriters. Each of the parties hereby agrees and
consents to, and ratifies, the prior engagement by WE JAC on behalf of the
Holding Company of the firm of X.X. Xxxxxxx & Sons, Inc. to act as the lead
underwriter for the proposed IPO and the engagement by WE JAC on behalf of the
Holding Company of Xxxxxx Xxxxx Xxxxx, Incorporated to act as co- managing
underwriter for the proposed IPO.
1.2.3 Engagement of Certified Public Accountants. Each of the parties
hereby agrees and consents to, and ratifies, the prior engagement by WE JAC on
behalf of the Holding Company of the accounting firm of Ernst & Young LLP
("Ernst & Young") to act as the certified independent public accountants for the
Holding Company, and agrees that the fees of such accounting firm and the
expenses incurred by Ernst & Young in rendering services for the Holding Company
shall be deemed to be part of the Transaction Expenses.
1.2.4 Preparation of Registration Statement(s).
(a) Form S-4 Registration Statement; Proxy Statement. From and after
the date hereof, the Holding Company shall (and each of the parties hereto
agrees to devote its or his reasonable best efforts to cause the Holding Company
to) prepare a registration statement or registration statements (including a
joint proxy statement or proxy statements to be included therein) on Form S-4
for registration with the Commission of each of the shares of the Common Stock
of the Holding Company to be issued by the Holding Company in connection with
the transactions contemplated by Article III hereof, and file such Form S-4
Registration Statement with the Commission as soon as reasonably practicable.
Each of the parties hereto further agrees to cooperate with the other parties
and the Holding Company in connection with the preparation thereof and to devote
its reasonable best efforts to having the same declared effective by the
Commission.
(b) Form S-1 Registration Statement. From and after the date hereof,
the Holding Company shall (and each of the parties hereto agrees to devote its
or his reasonable best efforts to cause the Holding Company to) prepare a
registration statement (and the prospectus to be included in such registration
statement) on Form S-1 for registration with the Commission for offer and sale
to the public following the Closing on account of the Holding Company of
2,645,000 shares of the Common Stock of the Holding Company, and up to 19% of
the number of shares to be issued to the Selling Stockholders and the Selling
Members by the Holding Company pursuant to the transactions contemplated by
Article III, and shall file such Form S-1 Registration Statement with the
Commission as soon as reasonably practicable. Each of the parties hereto further
agrees to cooperate with the other parties in the preparation thereof, and to
devote its reasonable best efforts to having such Form S-1 Registration
Statement declared effective by the Commission.
(c) Obligations of the Holding Company. The Holding Company shall (i)
use its reasonable best efforts to prepare and file with the Commission the
registration statements, proxy statements and prospectuses contemplated hereby,
and shall use its reasonable best efforts thereafter to cause such registration
statements to become and remain effective until the sale or exchange of all of
the shares of the Common Stock of the Holding Company covered thereby; (ii)
prepare and file with the Commission such amendments and supplements to the
registration statements and the prospectuses filed by the Holding Company as may
be reasonably necessary to keep such registration statements effective until the
sale or exchange of all of the shares of the Common Stock of the Holding Company
covered thereby; (iii) use its reasonable best efforts to register or qualify
the shares of the Common Stock of the Holding Company covered by such
registration statements under the securities or blue sky laws of such
jurisdictions as may be applicable to the transactions contemplated by Article
III hereof or as may be directed by the underwriter in the IPO; and (iv) do any
and all other acts and things which may be reasonably necessary or advisable to
enable the Holding Company to consummate the issuance, sale or exchange of the
shares of the Common Stock of the Holding Company in such jurisdictions.
(d) Information to be Provided to the Holding Company. Each of the
Predecessor Companies agrees that, from and after the date hereof through and
including the earlier to occur of the Closing or the termination of this
Agreement, in order to enable the Holding Company to prepare and file the
registration statements contemplated by this Agreement, it shall provide to the
Holding Company and to the underwriters for the proposed IPO (and to their
respective employees, counsel, accountants and other representatives), so long
as each remains a party to this Agreement, all information concerning the
business,
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operations, assets, liabilities, properties, indebtedness, condition, finances
or prospects of such Predecessor Company reasonably available to the management
of such Predecessor Company, and such other material information as may be
reasonably necessary to ensure that the information so requested may be properly
evaluated so as not to be misleading. Each of the Predecessor Companies hereby
further represents and warrants to the Holding Company that all of the
information to be provided to the Holding Company or the underwriters pursuant
to the terms of this Section 1.2.4(d) by such Predecessor Company shall not
contain any untrue or misleading statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading.
(e) Effective Date of Registration Statements. The parties shall use
their reasonable best efforts to cause the Holding Company to file all such
registration statements with the Commission on or before August 28, 1997 and to
have all such registration statements declared effective by the Commission, such
that the Closing and the IPO may be consummated on or before November 14, 1997.
ARTICLE II
TRANSACTION EXPENSES
SECTION 2.1 AGREEMENT AS TO TRANSACTION EXPENSES.
Except as otherwise provided for herein, all attorneys', brokers',
accountants', investment banking and finders fees and other expenses incurred by
each of the Predecessor Companies prior to the date hereof in connection with
the preparation and negotiation of this Agreement and the transactions
contemplated hereby that the parties have agreed will be Transaction Expenses
pursuant to the terms of the Memorandum of Understanding and which are to be
incurred by each of the Predecessor Companies from and after the date hereof in
taking all actions contemplated by this Agreement to be taken prior to or at the
Closing of the transactions contemplated by this Agreement (other than Income
Taxes and other Taxes imposed upon gross receipts and recordation, transfer,
stamp duties, documentary or notarial fees or Taxes imposed upon or incurred by
any of the parties in connection with the transactions contemplated by this
Agreement and other fees and expenses that the parties have specified herein
will not be considered part of the Transaction Expenses), or otherwise
reasonably necessary to consummate the Closing and the IPO, including those
expenses that the parties have agreed will be Transaction Expenses pursuant to
Sections 1.2.1 and 1.2.3 of this Agreement, except for costs and expenses
previously or hereafter incurred by the Predecessor Companies for meals, travel
and lodging of its officers, agents and representatives and managerial time
incurred in connection with or devoted to the transactions contemplated hereby
(collectively, the "Transaction Expenses"), will be paid for or contributed to
by the Contributing Companies as follows (hereinafter, the "Transaction Expense
Shares"): the members of the Ohio Group will be responsible, jointly and
severally, for 32.5% of the aggregate dollar amount of the Transaction Expenses;
the members of the Rocky Mountain Group will be responsible, jointly and
severally, for 8.3% of the aggregate dollar amount of the Transaction Expenses;
Miracle Partners will be responsible for 2.9% of the aggregate dollar amount of
the Transaction Expenses; and the members of the WE JAC Group will be
responsible, jointly and severally, for 56.3% of the aggregate dollar amount of
the Transaction Expenses. KBG will not be obligated to contribute to the
Transaction Expenses, unless KBG shall fail to comply with the provisions of
Section 3.2.4(a) of this Agreement or fail to exchange its Membership Interest
in KBG, LLC for shares of the Common Stock of the Holding Company pursuant to
the terms of the KBG Exchange. If KBG shall fail to comply with the provisions
of Section 3.2.4(a) of this Agreement or fail to exchange its Membership
Interest in KBG, LLC for shares of the Common Stock of the Holding Company
pursuant to the terms of the KBG Exchange, KBG shall be liable to contribute
$100,000 toward the Transaction Expenses, as liquidated damages for its failure
to do so, which amount shall be allocated and disbursed to the Contributing
Companies in accordance with their respective Transaction Expense Shares.
SECTION 2.2 ACCOUNTING FOR TRANSACTION EXPENSES.
From and after the date hereof through and including the Closing or the
earlier termination of this Agreement, the Holding Company and each of the
Contributing Companies shall maintain detailed records of all Transaction
Expenses incurred by them and shall account to each other for the Transaction
Expenses they have incurred on a monthly basis.
SECTION 2.3 REIMBURSEMENT OF CERTAIN FEES AND EXPENSES.
Notwithstanding the terms of the Memorandum of Understanding, from and
after the date hereof through and including the Closing or the earlier
termination of this Agreement, each of the Contributing Companies and the
Holding Company shall pay for all of the Transaction Expenses that are comprised
of fees and expenses of third party providers of services (including
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investment bankers, lawyers, accountants, printers and architectural and
environmental consultants) incurred by them respectively through the Closing
Date (the "Professional Expenses") as the same become due and payable, and,
notwithstanding anything contained herein which may be inconsistent or to the
contrary, each of the Contributing Companies shall be entitled to declare and
pay, prior to the Closing Date, a dividend or distribution in an amount equal to
the aggregate dollar amount actually expended by such Contributing Company for
Professional Expenses in connection with the transactions contemplated hereby
(the "Professional Expense Dividend");provided, however, that each Contributing
Company shall only be entitled to declare such a dividend or distribution and to
the extent that, such Professional Expenses would qualify as Transaction
Expenses pursuant to the terms of this Agreement. If this Agreement shall
terminate and the transactions contemplated hereby shall not be consummated, to
the extent that they have not already done so, each of the Contributing
Companies shall, within 10 business days following the date of such termination,
make appropriate contributions to and reimbursements of each of the other
Contributing Companies in respect of all Transaction Expenses incurred by each
such Contributing Company and the Holding Company through the date of the
termination of this Agreement in accordance with their respective Transaction
Expense Shares (it being understood and agreed that the obligations of each of
the Contributing Companies to contribute to and to reimburse the other
Contributing Companies in respect of Transaction Expenses shall survive the
termination of this Agreement). If, however, the Closing of the transactions
contemplated hereby shall be consummated, the Holding Company shall discharge,
out of the net cash proceeds received by the Holding Company in the IPO, all of
the Transaction Expenses incurred by the Holding Company and each of the
Contributing Companies which have not been discharged as of the Closing Date. No
interest shall be payable on any declared but unpaid Professional Expense
Dividend.
ARTICLE III
PLAN OF REORGANIZATION
AND
AGREEMENT FOR SHARE EXCHANGE OFFERS
SECTION 3.1 PLAN OF REORGANIZATION OF CORPORATE PREDECESSOR COMPANIES.
3.1.1 Formation of Merger Subsidiaries. Following the execution of this
Agreement and prior to the Closing Date, the Holding Company shall form, solely
for the purpose of consummating the transactions contemplated by this Section
3.1, five subsidiary corporations (hereinafter referred to as the "Merger
Subsidiaries") under the laws of the jurisdictions which correspond to the
jurisdiction in which the corporation into which each such Merger Subsidiary
shall merged as hereinafter provided, which shall be known, respectively, as
follows: (i) "WE JAC Acquisition Subsidiary, Inc." (hereinafter referred to as
"WE JAC Acquisition"); (ii) "Miracle Industries Acquisition Subsidiary, Inc."
(hereinafter referred to as "Miracle Industries Acquisition"); (iii) "Lube
Ventures Acquisition Subsidiary, Inc." (hereinafter referred to as "Lube
Ventures Acquisition"); (iv) "Rocky Mountain I Acquisition Subsidiary, Inc."
(hereinafter referred to as "Rocky Mountain I Acquisition"); and (v) "Rocky
Mountain II Acquisition Subsidiary, Inc." (hereinafter referred to as "Rocky
Mountain II Acquisition").
3.1.2 Merger of WE JAC Acquisition with and into WE JAC.
(a) WE JAC Merger. Subject to the prior satisfaction of each of the
conditions precedent set forth in Section 4.1 hereof, and of each of the
conditions precedent set forth in Section 4.2, which have not been waived in
writing by WE JAC, and of each of the conditions precedent set forth in Section
4.10, which have not been waived in writing by the Holding Company, on the
Closing Date, WE JAC Acquisition shall be merged with and into WE JAC (the "WE
JAC Merger"); whereupon, (i) the separate existence of WE JAC Acquisition shall
cease; (ii) WE JAC shall continue in existence and shall thereafter possess all
of the purposes and powers of WE JAC Acquisition; (iii) WE JAC shall succeed to
all of the assets, rights, properties, licenses, franchises and privileges of WE
JAC Acquisition (if any), which shall be transferred to, vested in and devolved
upon WE JAC without further act or deed, subject to all of the debts and
obligations of WE JAC Acquisition (if any); and (iv) WE JAC shall thereafter be
liable and responsible for all of the liabilities, duties, indebtedness,
obligations and responsibilities of WE JAC Acquisition (if any). The Certificate
of Incorporation and Bylaws of WE JAC in effect as of the Effective Time of the
WE JAC Merger shall continue to be the Certificate of Incorporation and Bylaws
of WE JAC. In addition, as part of the WE JAC Merger, each warrant and option to
purchase shares of WE JAC Common Stock issued and outstanding immediately prior
to the Effective Time of the WE JAC Merger shall be converted into a warrant or
an option, as the case may be, to purchase the same number of shares of the
Common Stock of the Holding Company on the same terms as set forth in such
warrant or option.
(b) Conversion of Shares. As part of the WE JAC Merger, each share of
the WE JAC Common Stock issued and outstanding immediately prior to the
Effective Time of the WE JAC Merger (other than WE JAC Dissenting Shares) shall
be
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converted into one share of the Common Stock of the Holding Company, and all of
the authorized but unissued shares of WE JAC, if any, shall be canceled and
retired, all without the need for further act or deed. Each of the shares of the
capital stock of WE JAC Acquisition issued and outstanding at the Effective Time
of the WE JAC Merger shall be converted into one share of the Common Stock, par
value $0.01, of WE JAC, which shall be held of record by the Holding Company
following the WE JAC Merger.
(c) WE JAC Dissenting Shares. Notwithstanding the foregoing, each of
the shareholders of WE JAC shall have the rights provided to them under Section
262 of the Delaware Corporation Law (the "DCL") as in effect at the Effective
Time of the WE JAC Merger ("WE JAC Dissenter's Rights") with respect to their
shares of WE JAC Common Stock, and, notwithstanding anything contained herein
which may be inconsistent or to the contrary, none of the shares of WE JAC
Common Stock issued and outstanding at the Effective Time of the WE JAC Merger
that are held by any WE JAC shareholder who has the right, to the extent that
such right is available by law, to exercise WE JAC Dissenter's Rights pursuant
thereto shall be converted into shares of the Holding Company Common Stock
pursuant to the WE JAC Merger, unless such shareholder shall have failed to
perfect his or her WE JAC Dissenter's Rights or shall have withdrawn or lost the
same in accordance with the terms of the DCL. If, however, any WE JAC
shareholder shall fail to perfect or shall withdraw or lose his or her WE JAC
Dissenter's Rights with respect to his or her shares of WE JAC Common Stock,
each of his or her shares shall be deemed to have been converted into shares of
the Common Stock of the Holding Company as provided for herein effective as of
the Effective Time of the WE JAC Merger.
(d) WE JAC Merger Filings. The WE JAC Merger shall be accomplished as
follows: WE JAC and WE JAC Acquisition shall each cause a Certificate of Merger
in form suitable for filing with the Delaware Secretary of State (the "WE JAC
Certificate of Merger") to be executed by the appropriate officers of each of
them and filed with the Delaware Secretary of State on the Closing Date.
(e) Effective Time of the WE JAC Merger. The WE JAC Merger shall
become effective at the time that the WE JAC Certificate of Merger shall become
effective with the Delaware Secretary of State in accordance with the DCL (the
"Effective Time of the WE JAC Merger").
(f) Surrender and Exchange of Common Stock of WE JAC. After the
Effective Time of the WE JAC Merger, each holder of shares of WE JAC Common
Stock outstanding as of the Effective Time of the WE JAC Merger (other than
shares held by those holders who have perfected or could perfect WE JAC
Dissenter's Rights) shall surrender to the Exchange Agent all outstanding
certificates theretofore evidencing shares of the Common Stock of WE JAC, and
shall receive in exchange therefor, upon delivery to the Exchange Agent together
with satisfactory and customary delivery requirements, certificates evidencing
the full number of shares of the Common Stock of the Holding Company into which
such shares of the WE JAC Common Stock have been converted pursuant to the WE
JAC Merger, less the number of Indemnity Escrow Shares and Debt Level Escrow
Shares attributable to each such holder, plus a cash payment in lieu of
fractional shares in the amount determined under Section 3.3. Until so
surrendered or exchanged, each outstanding certificate evidencing shares of the
WE JAC Common Stock shall be deemed for all purposes solely as evidencing the
number of shares of the Common Stock of the Holding Company into which such
shares shall have been converted pursuant to the WE JAC Merger; provided,
however, that no dividends or other distributions, if any, declared by the
Holding Company after the Effective Time of the WE JAC Merger in respect of any
shares of the Common Stock of the Holding Company payable to holders of record
after the Effective Time of the WE JAC Merger shall be paid to the holders of
any unsurrendered certificates evidencing shares of WE JAC Common Stock until
such certificates shall have been surrendered to the Exchange Agent. After the
surrender and exchange of such certificates, the record holders thereof will be
entitled to receive any such dividends or distributions, without interest
thereon, to the extent that the same shall have become payable with respect to
the number of shares of the Common Stock of the Holding Company for which such
certificate was exchangeable. The Exchange Agent shall be authorized to require
an indemnification agreement or the posting of a bond or other financial
accommodation satisfactory to the Exchange Agent from any holder of shares of WE
JAC Common Stock in the event that such holder shall allege that any certificate
evidencing shares of the WE JAC Common Stock shall have been lost, stolen or
destroyed prior to surrender thereof to the Exchange Agent.
3.1.3 Merger of Lube Ventures Acquisition with and into Lube Venture.
(a) Lube Ventures Merger. Subject to the prior satisfaction of each of
the conditions precedent set forth in Section 4.1 hereof, and of each of the
conditions precedent set forth in Section 4.3, which have not been waived in
writing by Lube Ventures, and of each of the conditions precedent set forth in
Section 4.10, which have not been waived in writing by the Holding Company, on
the Closing Date, Lube Ventures Acquisition shall be merged with and into Lube
Ventures (the "Lube Ventures Merger"); whereupon, (i) the separate existence of
Lube Ventures Acquisition shall cease; (ii) Lube Ventures shall
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continue in existence and shall thereafter possess all of the purposes and
powers of Lube Ventures Acquisition; (iii) Lube Ventures shall succeed to all of
the assets, rights, properties, licenses, franchises and privileges of Lube
Ventures Acquisition (if any), which shall be transferred to, vested in and
devolved upon Lube Ventures without further act or deed, subject to all of the
debts and obligations of Lube Ventures Acquisition (if any); and (iv) Lube
Ventures shall thereafter be liable and responsible for all of the liabilities,
duties, indebtedness, obligations and responsibilities of Lube Ventures
Acquisition (if any). The Certificate of Incorporation and Bylaws of Lube
Ventures in effect as of the Effective Time of the Lube Ventures Merger shall
continue to be the Certificate of Incorporation and Bylaws of Lube Ventures.
(b) Conversion of Shares. As part of the Lube Ventures Merger, each of
the 100 shares of the Lube Ventures Common Stock issued and outstanding
immediately prior to the Effective Time of the Lube Ventures Merger (other than
Lube Ventures Dissenting Shares) shall be converted into 1,691.68 shares of the
Common Stock of the Holding Company and all of the authorized but unissued
shares of Lube Ventures, if any, shall be canceled and retired, all without the
need for further act or deed. Each of the shares of the capital stock of Lube
Ventures Acquisition issued and outstanding at the Effective Time of the Lube
Ventures Merger shall be converted into one share of the Common Stock, par value
$0.00, of Lube Ventures, all which shall be held of record by the Holding
Company following the Lube Ventures Merger.
(c) Lube Ventures Dissenting Shares. Notwithstanding the foregoing,
each of the shareholders of Lube Ventures shall have the rights provided to them
under Section 262 of the DCL as in effect at the Effective Time of the Lube
Ventures Merger ("Lube Ventures Dissenter's Rights") with respect to their
shares of Lube Ventures Common Stock, and, notwithstanding anything contained
herein which may be inconsistent or to the contrary, none of the shares of Lube
Ventures Common Stock issued and outstanding at the Effective Time of the Lube
Ventures Merger that are held by a Lube Ventures shareholder who has the right,
to the extent that such right is available by law, to exercise Lube Ventures
Dissenter's Rights pursuant thereto shall be converted into shares of the
Holding Company Common Stock pursuant to the Lube Ventures Merger, unless such
shareholder shall have failed to perfect his or her Lube Ventures Dissenter's
Rights or shall have withdrawn or lost the same in accordance with the terms of
the DCL. If, however, any Lube Ventures shareholder shall fail to perfect or
shall withdraw or lose his or her Lube Ventures Dissenter's Rights with respect
to his or her shares of Lube Ventures Common Stock, each of his or her shares
shall be deemed to have been converted into shares of the Holding Company Common
Stock as provided for herein effective as of the Effective Time of the Lube
Ventures Merger.
(d) Merger Filings. The Lube Ventures Merger shall be accomplished as
follows: Lube Ventures and Lube Ventures Acquisition shall each cause a
Certificate of Merger (the "Lube Ventures Certificate of Merger") in form
suitable for filing with the Delaware Secretary of State to be executed by its
appropriate officers and filed with the Delaware Secretary of State in
accordance with the DCL on the Closing Date.
(e) Effective Time of the Lube Ventures Merger. The Lube Ventures
Merger shall become effective at the time that the Lube Ventures Certificate of
Merger shall become effective with the Delaware Secretary of State shall become
effective in accordance with the DCL (the "Effective Time of the Lube Ventures
Merger").
(f) Surrender and Exchange of Common Stock of Lube Ventures. After the
Effective Time of the Lube Ventures Merger, each holder of shares of Lube
Ventures Common Stock outstanding as of the Effective Time of the Lube Ventures
Merger (other than shares held by those holders who have perfected or could
perfect Lube Ventures Dissenter's Rights) shall surrender to the Exchange Agent
all outstanding certificates theretofore evidencing shares of the Common Stock
of Lube Ventures, and shall receive in exchange therefor, upon delivery to the
Exchange Agent together with satisfactory and customary delivery requirements,
certificates evidencing the greatest whole number of shares of the Common Stock
of the Holding Company into which such shares of the Lube Ventures Common Stock
have been converted pursuant to the Lube Ventures Merger, less the number of
Indemnity Escrow Shares and Debt Level Escrow Shares attributable to each such
holder, plus a cash payment in lieu of fractional shares in the amount
determined under Section 3.3. Until so surrendered or exchanged, each
outstanding certificate evidencing shares of the Lube Ventures Common Stock
shall be deemed for all purposes solely as evidence of the number of shares of
the Common Stock of the Holding Company into which such shares shall have been
converted pursuant to the Lube Ventures Merger; provided, however, that no
dividends or other distributions, if any, declared by the Holding Company after
the Effective Time of the Lube Ventures Merger in respect of any shares of the
Common Stock of the Holding Company payable to holders of record after the
Effective Time of the Lube Ventures Merger shall be paid to the holders of any
unsurrendered certificates evidencing shares of Lube Venture Common Stock until
such certificates shall have been surrendered to the Exchange Agent. After the
surrender and exchange of such certificates, the record holders thereof will be
entitled to receive any such dividends or distributions, without interest
thereon, to the extent that the same shall have become payable with respect to
the number of shares of the Common Stock of the Holding Company for which such
certificate was exchangeable. The Exchange Agent shall be authorized to require
an indemnification agreement or the
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posting of a bond or other financial accommodation satisfactory to the Exchange
Agent from any holder of shares of Lube Ventures Common Stock in the event that
such holder shall allege that any certificate evidencing shares of the Lube
Ventures Common Stock shall have been lost, stolen or destroyed prior to
surrender thereof to the Exchange Agent.
3.1.4 Merger of Miracle Industries Acquisition with and into Miracle
Industries.
(a) Miracle Industries Merger. Subject to the prior satisfaction of
each of the conditions precedent set forth in Section 4.1 hereof, and of each of
the conditions precedent set forth in Section 4.4, which have not been waived in
writing Miracle Industries, and of each of the conditions precedent set forth in
Section 4.10, which have not been waived in writing by the Holding Company, on
the Closing Date, Miracle Industries Acquisition shall be merged with and into
Miracle Industries (the "Miracle Industries Merger"); whereupon, (i) the
separate existence of Miracle Industries Acquisition shall cease; (ii) Miracle
Industries shall continue in existence and shall thereafter possess all of the
purposes and powers of Miracle Industries Acquisition; (iii) Miracle Industries
shall succeed to all of the assets, rights, properties, licenses, franchises and
privileges of Miracle Industries Acquisition (if any), which shall be
transferred to, vested in and devolved upon Miracle Industries without further
act or deed, subject to all of the debts and obligations of Miracle Industries
Acquisition (if any); and (iv) Miracle Industries shall thereafter be liable and
responsible for all of the liabilities, duties, indebtedness, obligations and
responsibilities of Miracle Industries Acquisition (if any). The Certificate of
Incorporation and Bylaws of Miracle Industries in effect as of the Effective
Time of the Miracle Industries Merger shall continue to be the Certificate of
Incorporation and Bylaws of Miracle Industries.
(b) Conversion of Shares. As part of the Miracle Industries Merger,
each of the 34,943 shares of the Miracle Industries Common Stock issued and
outstanding immediately prior to the Effective Time of the Miracle Industries
Merger (other than Miracle Industries Dissenting Shares) shall be converted into
21.442 shares of the Holding Company Common Stock and all of the authorized but
unissued shares of Miracle Industries, if any, shall be canceled and retired,
all without the need for further act or deed. Each of the shares of the capital
stock of Miracle Industries Acquisition issued and outstanding at the Effective
Time of the Miracle Industries Merger shall be converted into one share of the
Common Stock, par value $0.00, of Miracle Industries, all which shall be held of
record by the Holding Company following the Miracle Industries Merger.
(c) Miracle Industries Dissenting Shares. Notwithstanding the
foregoing, each of the shareholders of Miracle Industries shall have the rights
provided to them under Section 1701.84(A) of the Ohio General Corporation Law
(the "OGCL") as in effect at the Effective Time of the Miracle Industries Merger
("Miracle Industries Dissenter's Rights") with respect to their shares of
Miracle Industries Common Stock, and, notwithstanding anything contained herein
which may be inconsistent or to the contrary, none of the shares of Miracle
Industries Common Stock issued and outstanding at the Effective Time of the
Miracle Industries Merger that are held by a Miracle Industries shareholder who
has the right, to the extent that such right is available by law, to exercise
Miracle Industries Dissenter's Rights pursuant thereto shall be converted into
shares of the Common Stock of the Holding Company pursuant to the Miracle
Industries Merger, unless such shareholder shall have failed to perfect his or
her Miracle Industries Dissenter's Rights or shall have withdrawn or lost the
same in accordance with the terms of the OGCL. If, however, any Miracle
Industries shareholder shall fail to perfect or shall withdraw or lose his or
her Miracle Industries Dissenter's Rights with respect to his or her shares of
Miracle Industries Common Stock, each of his or her shares shall be deemed to
have been converted into shares of the Common Stock of the Holding Company as
provided for herein effective as of the Effective Time of the Miracle Industries
Merger.
(d) Merger Filings. The Miracle Industries Merger shall be
accomplished as follows: Miracle Industries and Miracle Industries Acquisition
shall each cause Articles of Merger in form suitable for filing with the Ohio
Secretary of State (the "Miracle Industries Articles of Merger") to be executed
by its appropriate officers and filed with the Ohio Secretary of State in
accordance with OGCL on the Closing Date.
(e) Effective Time of the Miracle Industries Merger. The Miracle
Industries Merger shall become effective at the time that the Miracle Industries
Articles of Merger shall become effective with the Ohio Secretary of State in
accordance with the OGCL (the "Effective Time of the Miracle Industries
Merger").
(f) Surrender and Exchange of Common Stock of Miracle Industries.
After the Effective Time of the Miracle Industries Merger, each holder of shares
of Miracle Industries Common Stock outstanding as of the Effective Time of the
Miracle Industries Merger (other than shares held by those holders who have
perfected or could perfect Miracle Industries Dissenter's Rights) shall
surrender to the Exchange Agent all outstanding certificates theretofore
evidencing shares of the Common Stock of Miracle Industries, and shall receive
in exchange therefor, upon delivery to the Exchange Agent satisfactory and
customary delivery requirements, certificates evidencing the greatest whole
number of shares of the Common Stock of the Holding
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Company into which such shares of the Miracle Industries Common Stock have been
converted pursuant to the Miracle Industries Merger, less the number of
Indemnity Escrow Shares and Debt Level Escrow Shares attributable to each such
holder, plus a cash payment in lieu of fractional shares as determined pursuant
to Section 3.3. Until so surrendered or exchanged, each outstanding certificate
evidencing shares of the Miracle Industries Common Stock shall be deemed for all
purposes solely as evidence of the number of shares of the Common Stock of the
Holding Company into which such shares shall have been converted pursuant to the
Miracle Industries Merger; provided, however, that no dividends or other
distributions, if any, declared by the Holding Company after the Effective Time
of the Miracle Industries Merger in respect of any shares of the Common Stock of
the Holding Company payable to holders of record after the Effective Time of the
Miracle Industries Merger shall be paid to the holders of any unsurrendered
certificates evidencing shares of Miracle Industries Common Stock until such
certificates shall have been surrendered to the Exchange Agent. After the
surrender and exchange of such certificates, the record holders thereof will be
entitled to receive any such dividends or distributions, without interest
thereon, to the extent that the same shall have become payable with respect to
the number of shares of the Common Stock of the Holding Company for which such
certificate was exchangeable. The Exchange Agent shall be authorized to require
an indemnification agreement or the posting of a bond or other financial
accommodation satisfactory to the Exchange Agent from any holder of shares of
Miracle Industries Common Stock in the event that such holder shall allege that
any certificate evidencing shares of the Miracle Partners Common Stock shall
have been lost, stolen or destroyed prior to surrender thereof to the Exchange
Agent.
3.1.5 Merger of Rocky Mountain I Acquisition with and into Rocky Mountain
I.
(a) Rocky Mountain I Merger. Subject to the prior satisfaction of each
of the conditions precedent set forth in Section 4.1 hereof, and of each of the
conditions precedent set forth in Section 4.5, which have not been waived in
writing by Rocky Mountain I, and of each of the conditions precedent set forth
in Section 4.10, which have not been waived in writing by the Holding Company,
on the Closing Date, immediately following the consummation of the transactions
contemplated by Section 3.2 of this Agreement, Rocky Mountain I Acquisition
shall be merged with and into Rocky Mountain I (the "Rocky Mountain I Merger");
whereupon, the separate existence of Rocky Mountain I Acquisition shall cease;
(ii) Rocky Mountain I shall continue in existence and shall thereafter possess
all of the purposes and powers of Rocky Mountain I Acquisition; (iii) Rocky
Mountain I shall succeed to all of the assets, rights, properties, licenses,
franchises and privileges of Rocky Mountain I Acquisition (if any), which shall
be transferred to, vested in and devolved upon Rocky Mountain I without further
act or deed, subject to all of the debts and obligations of Rocky Mountain I
Acquisition (if any); and (iv) Rocky Mountain I shall thereafter be liable and
responsible for all of the liabilities, duties, indebtedness, obligations and
responsibilities of Rocky Mountain I Acquisition (if any). The Articles of
Incorporation and Bylaws of Rocky Mountain I in effect as of the Effective Time
of the Rocky Mountain I Merger shall continue to be the Articles of
Incorporation and Bylaws of Rocky Mountain I.
(b) Conversion of Shares. As part of the Rocky Mountain I Merger, each
of the 5,198 shares of the Rocky Mountain I Common Stock issued and outstanding
immediately prior to the Effective Time of the Rocky Mountain I Merger (other
than Rocky Mountain I Dissenting Shares) shall be converted into 12.355 shares
of the Common Stock of the Holding Company and all of the authorized but
unissued shares of Rocky Mountain I, if any, shall be canceled and retired, all
without the need for further act or deed. Each of the shares of the capital
stock of Rocky Mountain I Acquisition issued and outstanding at the Effective
Time of the Rocky Mountain I Merger shall be converted into one share of the
Common Stock, par value $100.00, of Rocky Mountain I, all which shall be held of
record by the Holding Company following the Rocky Mountain I Merger.
(c) Rocky Mountain I Dissenting Shares. Notwithstanding the foregoing,
each of the shareholders of Rocky Mountain I shall have the rights provided to
them under Article 113 of the Colorado Business Corporation Act (the "CBCA") as
in effect at the Effective Time of the Rocky Mountain I Merger ("Rocky Mountain
I Dissenter's Rights") with respect to their shares of Rocky Mountain I Common
Stock, and, notwithstanding anything contained herein which may be inconsistent
or to the contrary, none of the shares of Rocky Mountain I Common Stock issued
and outstanding at the Effective Time of the Rocky Mountain I Merger that are
held by any Rocky Mountain I shareholder who has the right, to the extent that
such right is available by law, to exercise Rocky Mountain I Dissenter's Rights
pursuant thereto shall be converted into shares of the Holding Company Common
Stock pursuant to the Rocky Mountain I Merger, unless such shareholder shall
have failed to perfect his or her Rocky Mountain I Dissenter's Rights or shall
have withdrawn or lost the same in accordance with the terms of the CBCA. If,
however, any Rocky Mountain I shareholder shall fail to perfect or shall
withdraw or lose his or her Rocky Mountain I Dissenter's Rights with respect to
his or her shares of Rocky Mountain I Common Stock, each of his or her shares
shall be deemed to have been converted into shares of the Common Stock of the
Holding Company as provided for herein effective as of the Effective Time of the
Rocky Mountain I Merger.
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(d) Merger Filings. The Rocky Mountain I Merger shall be accomplished
as follows: Rocky Mountain I and Rocky Mountain I Acquisition shall each cause
Articles of Merger in form suitable for filing with the Colorado Secretary of
State (the "Rocky Mountain I Articles of Merger") to be executed by its
appropriate officers and filed with the Colorado Secretary of State on the
Closing Date.
(e) Effective Time of the Rocky Mountain I Merger. The Rocky Mountain
I Merger shall become effective at the time that the Rocky Mountain I Articles
of Merger shall become effective with the Colorado Secretary of State in
accordance with the CBCA (the "Effective Time of the Rocky Mountain I Merger").
(f) Surrender and Exchange of Common Stock of Rocky Mountain I. After
the Effective Time of the Rocky Mountain I Merger, each holder of shares of
Rocky Mountain I Common Stock outstanding as of the Effective Time of the Rocky
Mountain I Merger shall surrender to the Exchange Agent (other than those
holders who have perfected or could perfect Rocky Mountain I Dissenter's Rights)
all outstanding certificates theretofore evidencing shares of the Common Stock
of Rocky Mountain I, and shall receive in exchange therefor, upon delivery to
the exchange agent together with satisfactory and customary delivery
requirements, certificates evidencing the greatest whole number of shares of the
Common Stock of the Holding Company into which such shares of the Rocky Mountain
I Common Stock have been converted pursuant to the Rocky Mountain I Merger, less
the number of Indemnity Escrow Shares and Debt Level Escrow Shares attributable
to each such holder, plus a cash payment in lieu of fractional shares in the
amount determined pursuant to Section 3.3. Until so surrendered or exchanged,
each outstanding certificate evidencing shares of the Rocky Mountain I Common
Stock shall be deemed for all purposes solely as evidencing the number of shares
of the Common Stock of the Holding Company into which such shares shall have
been converted pursuant to the Rocky Mountain I Merger; provided, however, that
no dividends or other distributions, if any, declared by the Holding Company
after the Effective Time of the Rocky Mountain I Merger in respect of any shares
of the Common Stock of the Holding Company payable to holders of record after
the Effective Time of the Rocky Mountain I Merger shall be paid to the holders
of any unsurrendered certificates evidencing shares of Rocky Mountain I Common
Stock until such certificates shall have been surrendered to the Exchange Agent.
After the surrender and exchange of such certificates, the record holders
thereof will be entitled to receive any such dividends or distributions, without
interest thereon, to the extent that the same shall have become payable with
respect to the number of shares of the Common Stock of the Holding Company for
which such certificate was exchangeable. The Exchange Agent shall be authorized
to require an indemnification agreement or the posting of a bond or other
financial accommodation satisfactory to the Exchange Agent from any holder of
shares of Rocky Mountain I Common Stock in the event that such holder shall
allege that any certificate evidencing shares of the Rocky Mountain I Common
Stock shall have been lost, stolen or destroyed prior to surrender thereof to
the Exchange Agent.
3.1.6 Merger of Rocky Mountain II Acquisition with and into Rocky Mountain
II.
(a) Rocky Mountain II Merger. Subject to the prior satisfaction of
each of the conditions precedent set forth in Section 4.1 hereof, and of each of
the conditions precedent set forth in Section 4.6, which have not been waived in
writing by Rocky Mountain II, and of each of the conditions precedent set forth
in Section 4.10, which have not been waived in writing by the Holding Company,
on the Closing Date, immediately following the consummation of the transactions
contemplated by Section 3.2 of this Agreement, Rocky Mountain II Acquisition
shall be merged with and into Rocky Mountain II (the "Rocky Mountain II
Merger"); whereupon, (i) the separate existence of Rocky Mountain II Acquisition
shall cease; (ii) Rocky Mountain II shall continue in existence and shall
thereafter possess all of the purposes and powers of Rocky Mountain II
Acquisition; (iii) Rocky Mountain II shall succeed to all of the assets, rights,
properties, licenses, franchises and privileges of Rocky Mountain II Acquisition
(if any), which shall be transferred to, vested in and devolved upon Rocky
Mountain II without further act or deed, subject to all of the debts and
obligations of Rocky Mountain II Acquisition (if any); and (iv) Rocky Mountain
II shall thereafter be liable and responsible for all of the liabilities,
duties, indebtedness, obligations and responsibilities of Rocky Mountain II
Acquisition (if any). The Articles of Incorporation and Bylaws of Rocky Mountain
II in effect as of the Effective Time of the Rocky Mountain II Merger shall
continue to be the Articles of Incorporation and Bylaws of Rocky Mountain II.
(b) Conversion of Shares. As part of the Rocky Mountain II Merger,
each of the 14,539 shares of the Rocky Mountain II Common Stock issued and
outstanding immediately prior to the Effective Time of the Rocky Mountain II
Merger (other than Rocky Mountain II Dissenting Shares) shall be converted into
12.356 of shares of the Holding Company Common Stock, and all of the authorized
but unissued shares of Rocky Mountain II, if any, shall be canceled and retired,
all without the need for further act or deed. Each of the shares of the capital
stock of Rocky Mountain II Acquisition issued and outstanding at the Effective
Time of the Rocky Mountain II Merger shall be converted into one share of the
Common Stock,
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par value $1.00, of Rocky Mountain II, all which shall be held of record by the
Holding Company following the Rocky Mountain II Merger.
(c) Rocky Mountain II Dissenting Shares. Notwithstanding the
foregoing, each of the shareholders of Rocky Mountain II shall have the rights
provided to them under Article 113 of the CBCA as in effect at the Effective
Time of the Rocky Mountain II Merger ("Rocky Mountain II Dissenter's Rights")
with respect to their shares of Rocky Mountain II Common Stock, and,
notwithstanding anything contained herein which may be inconsistent or to the
contrary, none of the shares of Rocky Mountain II Common Stock issued and
outstanding at the Effective Time of the Rocky Mountain II Merger that are held
by any Rocky Mountain II shareholder who has the right, to the extent that such
right is available by law, to exercise Rocky Mountain II Dissenter's Rights
pursuant thereto shall be converted into shares of the Holding Company Common
Stock pursuant to the Rocky Mountain II Merger, unless such shareholder shall
have failed to perfect his or her Rocky Mountain II Dissenter's Rights or shall
have withdrawn or lost the same in accordance with the terms of the CBCA. If,
however, any Rocky Mountain II shareholder shall fail to perfect or shall
withdraw or lose his or her Rocky Mountain II Dissenter's Rights with respect to
his or her shares of Rocky Mountain II Common Stock, each of his or her shares
shall be deemed to have been converted into shares of the Holding Company Common
Stock as provided for herein effective as of the Effective Time of the Rocky
Mountain II Merger.
(d) Merger Filings. The Rocky Mountain II Merger shall be accomplished
as follows: Rocky Mountain II and Rocky Mountain II Acquisition shall each cause
Articles of Merger in form suitable for filing with the Colorado Secretary of
State (the "Rocky Mountain II Articles of Merger") to be executed by its
appropriate officers and filed with the Colorado Secretary of State on the
Closing Date.
(e) Effective Time of the Rocky Mountain II Merger. The Rocky Mountain
II Merger shall become effective at the time that the Rocky Mountain II Articles
of Merger become effective with the Colorado Secretary of State in accordance
with the CBCA (the "Effective Time of the Rocky Mountain II Merger").
(f) Surrender and Exchange of Common Stock of Rocky Mountain II. After
the Effective Time of the Rocky Mountain II Merger, each holder of shares of
Rocky Mountain II Common Stock outstanding as of the Effective Time of the Rocky
Mountain II Merger shall surrender to the Exchange Agent (other than those
holders who have perfected or could perfect Rocky Mountain II Dissenter's
Rights) all outstanding certificates theretofore evidencing shares of the Common
Stock of Rocky Mountain II, and shall receive in exchange therefor, upon
delivery to the exchange agent together with satisfactory and customary delivery
requirements, certificates evidencing the greatest whole number of shares of the
Common Stock of the Holding Company into which such shares of the Rocky Mountain
II Common Stock have been converted pursuant to the Rocky Mountain II Merger,
less the number of Indemnity Escrow Shares and Debt Level Escrow Shares
attributable to each such holder, plus a cash payment in lieu of fractional
shares in an amount determined pursuant to Section 3.3. Until so surrendered or
exchanged, each outstanding certificate evidencing shares of the Rocky Mountain
II Common Stock shall be deemed for all purposes solely as evidencing the number
of shares of the Common Stock of the Holding Company into which such shares
shall have been converted pursuant to the Rocky Mountain II Merger; provided,
however, that no dividends or other distributions, if any, declared by the
Holding Company after the Effective Time of the Rocky Mountain II Merger in
respect of any shares of the Common Stock of the Holding Company payable to
holders of record after the Effective Time of the Rocky Mountain II Merger shall
be paid to the holders of any unsurrendered certificates evidencing shares of
Rocky Mountain II Common Stock until such certificates shall have been
surrendered to the Exchange Agent. After the surrender and exchange of such
certificates, the record holders thereof will be entitled to receive any such
dividends or distributions, without interest thereon, to the extent that the
same shall have become payable with respect to the number of shares of the
Common Stock of the Holding Company for which such certificate was exchangeable.
The exchange agent shall be authorized to require an indemnification agreement
or the posting of a bond or other financial accommodation satisfactory to the
exchange agent from any holder of shares of Rocky Mountain II Common Stock in
the event that such holder shall allege that any certificate evidencing shares
of the Rocky Mountain II Common Stock shall have been lost, stolen or destroyed
prior to surrender thereof to the Exchange Agent.
SECTION 3.2 EXCHANGE OFFERS.
3.2.1 Miracle Partners Exchange Offer.
(a) As provided in Section 5.1, the Holding Company shall commence an
offer, in accordance with the terms and conditions set forth in the Form S-4
Registration Statement and the form of Letter of Transmittal reasonably
satisfactory to the Board of Directors of the Holding Company, to each of the
holders of the issued and outstanding shares of the capital stock of Miracle
Partners which offer shall provide that each of the 500 issued and outstanding
shares capital stock of Miracle
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Partners may be exchanged pursuant to such offer for 188.64 shares of the Common
Stock of the Holding Company (the "Miracle Partners Exchange Offer").
(b) Subject to the prior satisfaction of each of the conditions
precedent to the obligations of the Holding Company set forth in Sections 4.1
and 4.10, which have not been waived in writing by the Holding Company, at the
Closing, the Holding Company shall issue to each holder of shares of the capital
stock of Miracle Partners who elects to exchange his or her shares for shares of
the Common Stock of the Holding Company, against the receipt by the Exchange
Agent of all outstanding certificates evidencing shares of the capital stock of
Miracle Partners and other satisfactory and customary delivery requirements,
certificates evidencing the greatest whole number of shares of the Common Stock
of the Holding Company for which such shares may be exchanged as provided
herein, less the number of Indemnity Escrow Shares and Debt Level Escrow Shares
attributable to each such holder, plus a cash payment in lieu of fractional
shares in an amount determined pursuant to Section 3.3.
(c) The terms of the Miracle Partners Exchange Offer shall provide
that the tender by the holder of shares of the capital stock of Miracle Partners
of his or her shares for exchange pursuant to such offer shall be irrevocable.
The Exchange Agent shall be authorized to require an indemnification agreement
or the posting of a bond or other financial accommodation satisfactory to the
Exchange Agent from any holder of shares of the capital stock of Miracle
Partners who tenders his or her shares for exchange in the event that such
holder shall allege that any certificate evidencing shares of Miracle Partners
shall have been lost, stolen or destroyed prior to surrender thereof to the
Exchange Agent.
3.2.2 Prema Properties Exchange Offer.
(a) As provided in Section 5.1, the Holding Company shall commence an
offer, in accordance with the terms and conditions set forth in the Form S-4
Registration Statement and in a form of Letter of Transmittal reasonably
satisfactory to the Board of Directors of the Holding Company, to each of the
Prema Properties members to exchange an aggregate of 1,488.89 shares of the
Common Stock of the Holding Company for each 1% Percentage Interest in the
profits of Prema Properties represented by such Membership Interest (the "Prema
Properties Exchange Offer").
(b) Subject to the prior satisfaction of each of the conditions
precedent to the obligations of the Holding Company set forth in Sections 4.1
and 4.10, which have not been waived in writing by the Holding Company, at the
Closing, the Holding Company shall issue to each Prema Properties Member who
elects to exchange his or her Membership Interests for shares of the Common
Stock of the Holding Company pursuant to the Prema Properties Exchange Offer,
against the receipt by the Exchange Agent of an Assignment of Membership
Interest in a form reasonably satisfactory to the Board of Directors of the
Holding Company, duly executed with signatures guaranteed, and other
satisfactory and customary delivery requirements, certificates evidencing the
greatest whole number of shares of the Common Stock of the Holding Company for
which each such Membership Interest may be exchanged as provided herein, less
the number of Indemnity Escrow Shares and Debt Level Escrow Shares attributable
to each of the Prema Properties Members who elects to exchange his or her
Membership Interests for shares of the Common Stock of the Holding Company
pursuant to the Prema Properties Exchange Offer, plus cash payment in lieu of
fractional shares in the amount determined pursuant to Section 3.3.
(c) The Prema Properties Exchange Offer shall further provide that the
tender by a Prema Properties Member of his or her Membership Interest for
exchange in accordance with the Prema Properties Exchange Offer shall be
irrevocable.
3.2.3 Xxxxxxx Car Wash Exchange Offer.
(a) As provided in Section 5.1, the Holding Company shall commence an
offer, in accordance with the terms and conditions set forth in the Form S-4
Registration Statement and a form of Letter of Transmittal reasonably
satisfactory to the Board of Directors of the Holding Company to each of the
Xxxxxxx Car Wash Members to exchange 291.61 shares of the Common Stock of the
Holding Company for each 1% Percentage Interest in the profits of Xxxxxxx Car
Wash represented by such Membership Interest (the "Xxxxxxx Car Wash Exchange
Offer").
(b) Subject to the prior satisfaction of each of the conditions
precedent to the obligations of the Holding Company set forth in Sections 4.1
and 410, which have not been waived in writing by the Holding Company, at the
Closing, the Holding Company shall issue to each of the Xxxxxxx Car Wash Members
who elects to exchange his or her Membership Interest for shares of the Common
Stock of the Holding Company, against the receipt by the Exchange Agent of an
Assignment of Membership Interest in a form reasonably satisfactory to the Board
of Directors of the Holding Company, duly executed with signatures guaranteed,
and other satisfactory and customary delivery requirements, certificates
evidencing the greatest whole number of shares of the Common Stock of the
Holding Company for which each such Membership Interest
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may be exchanged as provided herein, less the number of Indemnity Escrow Shares
and Debt Level Escrow Shares attributable to each Xxxxxxx Car Wash Member who
elects to exchange his or her Membership Interest for shares of the Common Stock
of the Holding Company, plus a cash payment in lieu of fractional shares in the
amount determined pursuant to Section 3.3.
(c) The Xxxxxxx Car Wash Exchange Offer shall further provide that the
tender by any Xxxxxxx Car Wash Member of his or her Membership Interest for
exchange pursuant to the Xxxxxxx Car Wash Exchange Offer shall be irrevocable.
3.2.4 KBG Car Wash Exchange Offer.
(a) KBG has formed a limited liability company under and pursuant to
the laws of the State of Colorado known as "KBG, LLC."
(b) As provided in Section 5.1 the Holding Company shall commence an
offer to KBG, in accordance with the terms and conditions set forth in the Form
S-4 Registration Statement and a form of Letter of Transmittal reasonably
satisfactory to the Board of Directors of the Holding Company, to exchange an
aggregate of 12,411 shares of the Common Stock of the Holding Company for all of
the Membership Interests in KBG, LLC, subject to the compliance by KBG with the
terms of this Agreement (the "KBG Exchange Offer"). The terms of the KBG
Exchange Offer shall, among other things, require KBG to contribute to KBG, LLC
prior to the Closing Date, in exchange for all of the Membership Interests of
KBG, LLC, all of the right, title and interest of KBG and Xxxxx in and to the
Proprietary Car Wash Software System, together with any and all copyrights
therein, patents of any portion thereof, pending applications for patents of any
portion thereof, patent rights therein, and pending applications for
registrations of copyrights therein, anywhere in the world, and all of its
rights, title and interest in and to any and all licenses or privileges granted
by KBG with respect thereto, free and clear of any and all liens, claims,
charges, encumbrances, rights, licenses or privileges of any other party
whatsoever, except those approved in writing by the Board of Directors of the
Holding Company or its designee, pursuant to an Assignment of Intellectual
Property Rights in form and content reasonably acceptable to the Board of
Directors of the Holding Company.
(c) Pursuant to the KBG Exchange Offer, and subject to the prior
satisfaction of each of the conditions precedent to the obligations of the
Holding Company set forth in Sections 4.1 and 4.10, which have not been waived
in writing by the Holding Company, at the Closing, the Holding Company shall
issue to KBG, against the receipt by the Exchange Agent of an Assignment of
Membership Interests, duly executed with signatures guaranteed, covering all of
the Membership Interests of KBG, LLC, and other satisfactory and customary
delivery requirements, certificates evidencing the full number of shares of the
Common Stock of the Holding Company for which each such Membership Interest may
be exchanged as provided herein, less the number of Indemnity Escrow Shares
attributable to KBG.
SECTION 3.3 FRACTIONAL SHARES.
The Holding Company shall not issue any fractional shares pursuant to any
of the Subsidiary Mergers or any of the Exchange Offers. Rather, in lieu of the
issuance of fractional shares, the Holding Company shall issue to each holder of
shares of or a Membership Interest in a Predecessor Company who otherwise would
be entitled to receive fractional shares pursuant to consummation of any of the
Subsidiary Mergers or any of the Exchange Offers cash in an amount equal to the
product obtained by multiplying such fractional share interest by the price per
share at which shares of the Common Stock shall be offered to the public
pursuant to the IPO. No interest shall be paid by the Holding Company on any
cash payment to be made by the Holding Company in lieu of fractional shares.
ARTICLE IV
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
SECTION 4.1 CONDITIONS TO THE OBLIGATIONS OF EACH OF THE PARTIES.
The obligations of each of the parties to this Agreement to consummate the
transactions contemplated by Article III to be consummated at the Closing and to
perform the other obligations under this Agreement which are to be performed at
and after the Closing are subject to the satisfaction at or prior to the Closing
of each of the conditions precedent set forth in this Section 4.1:
4.1.1 Effective Registration Statements.
(a) Form S-1 Registration Statement. A registration statement on Form
S-1 covering the issuance, offer and sale to the public by the Holding Company
of not more than 2,645,000 shares of the Common Stock of the Holding Company in
the
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proposed IPO for the account of the Company, and, subject to the limitations
provided for in Section 22.7 of this Agreement, such number of Combination
Shares that the Selling Stockholders and Selling Members shall have elected in
accordance with the terms of this Agreement to include therein, shall have been
filed by the Holding Company with the Commission in accordance with the
Securities Act and declared effective by the Commission, and be effective as of
the Closing Date, and no stop order shall have been issued and be in effect as
of the Closing Date with respect thereto.
(b) Form S-4 Registration Statement; Joint Proxy Statement. A
registration statement on Form S-4 covering the issuance by the Holding Company
of the shares of the Common Stock of the Holding Company to be issued by the
Holding Company pursuant to the transactions contemplated by Article III of this
Agreement shall have been filed by the Holding Company with the Commission in
accordance with the Securities Act and declared effective by the Commission, and
be effective as of the Closing Date, and no stop order shall have been issued
and be in effect as of the Closing Date with respect thereto.
4.1.2 Underwriting Agreement. The Holding Company shall have entered into
an underwriting agreement which shall provide for (i) the issuance and sale by
the Holding Company to the several underwriters who are parties to the
underwriting agreement, on a firm commitment basis, of all of the IPO Shares
(and, subject to the limitations provided for in this Agreement, all of the
Combination Shares that the Selling Stockholders and the Selling Members shall
have elected to include therein in accordance with the terms of this Agreement),
and (ii) the issuance and sale by the Holding Company of the IPO Shares (andsuch
Combination Shares) at a gross price to the public (before the deduction of
underwriting discounts) of at least $10 per share or such lower price as may be
approved by the Finance Committee or the Board of Directors of the Holding
Company pursuant to Section 18.3, and shall further provide that each of the IPO
Shares and Combination Shares to be offered and sold to the public shall be
deemed to be "stapled" and part of a common pool of shares, such that each
investor in the IPO shall be deemed to have purchased from the underwriters a
proportionate interest in the IPO Shares and the Combination Shares (the
"Underwriting Agreement"). The Underwriting Agreement shall be in full force and
effect as of the Closing Date, each of the conditions precedent to the
obligations of the parties thereunder shall have been satisfied or waived in
writing by the party entitled to the benefit thereof, and the underwriters shall
be ready, willing and able to perform their obligations thereunder, subject only
to the occurrence of the Closing hereunder.
4.1.3 Compliance with the Terms of this Agreement. Each of the parties to
this Agreement shall have performed or complied with in all material respects
all of the covenants and agreements made by each of them, respectively, which
are to be performed or complied with prior to the Closing Date or at the Closing
pursuant to the terms of this Agreement unless the failure to have so performed
or complied with such covenants and agreements in the aggregate has not had or
is not reasonably likely to have a Material Adverse Effect on the Predecessor
Companies taken as a whole.
4.1.4 Representations and Warranties True. Each of the representations and
warranties made by the parties to this Agreement pursuant to the terms of this
Agreement shall have been true and correct as of the date hereof and be true and
correct in all material respects as of the Closing Date (except with respect to
those representations and warranties made with respect to a certain date other
than the date of this Agreement or the Closing Date, which representations and
warranties need be true and correct only as of such certain date) unless the
falsety or inaccuracy of such representations and warranties in the aggregate
has not had or is not reasonably likely to have Material Adverse Effect on the
Predecessor Companies taken as a whole.
4.1.5 Consents and Approvals Obtained. Each of the parties shall have
obtained, prior to the Closing, all consents, approvals, waivers, and
authorizations from governmental authorities, courts, lenders and other third
parties whose consent, approval, waiver or authorization is necessary or
advisable in order to consummate the transactions contemplated hereby unless the
failure to obtain such consents, approvals, waivers or authorizations in the
aggregate is not reasonably likely to have a Material Adverse Effect on the
Predecessor Companies taken as whole.
4.1.6 No Injunctions or Restraining Orders. There shall be no injunction,
restraining order or decree of any nature whatsoever that is in effect which
restrains or prohibits the consummation of the transactions contemplated hereby.
4.1.7 Agreements Not to Compete. Each natural person who as of the Closing
Date is the holder of 10% or more of the common stock or membership interests of
a Predecessor Company (other than any such Person who is subject to another
agreement not to compete with the Holding Company) shall have entered into
Agreements Not to Compete with the Holding Company substantially in the forms
attached hereto collectively as Exhibit C and, subject to the occurrence of the
Closing, each such Agreement Not to Compete shall be in full force and effect as
of the Closing Date.
4.1.8 Waivers of Indemnification Rights. Each of the officers and directors
of the Corporate Predecessor Companies who also are Selling Stockholders and
entitled to be indemnified under the terms of the applicable charter or bylaws
of a Corporate Predecessor Company and each of the members of Prema Properties
and of Xxxxxxx Car Wash who also are Selling
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Members and entitled to be indemnified under an operating agreement of any
Predecessor Company shall have executed and delivered in favor of the Holding
Company and such Predecessor Company a written waiver of such rights to
indemnification from such Predecessor Company to the extent that the Holding
Company may be entitled to indemnification from each such Person pursuant to the
terms of this Agreement.
4.1.9 Closing Documentation. Each of the parties to this Agreement shall
have received duplicate originals of all of the documents, instruments or
certificates required by Article XV hereof to be executed and delivered by the
parties to this Agreement at the Closing.
4.1.10 Financial Statements. The Financial Statements of each of the
Predecessor Companies for their respective fiscal years of 1994, 1995, 1996 and
1997 (and any other applicable periods that the Holding Company reasonably
determines it must include in the registration statements that the Holding
Company intends to file with the Commission in the manner contemplated by this
Agreement) shall have been audited (except for unaudited financial statements
that the Holding Company reasonably determines can be included in such
registration statements) and shall comply in all material respects with GAAP and
the accounting requirements of the Securities Act and the Commission,
consistently applied. Each of the Predecessor Companies shall have provided to
the Holding Company consents from Ernst & Young to the inclusion of their audit
reports in all filings to be made by the Holding Company with the Commission,
"comfort letters" and such other assurances from Ernst & Young and its other
independent accountants that may be reasonably requested by the Holding Company
or any underwriter involved in the public offering by the Holding Company of its
common stock or other securities.
4.1.11 Exercise of Dissenter's Rights. The aggregate amount of cash that
will be required to be paid to the former stockholders of the Corporate
Predecessor Companies who validly exercise and perfect "dissenter's rights" with
respect to any applicable Subsidiary Merger under the laws of the jurisdiction
in which any such Corporate Predecessor Company shall be incorporated (or who
have voted against an applicable Subsidiary Merger and have taken the necessary
steps to perfect "dissenter's rights" and are entitled to perfect "dissenter's
rights" after the Closing by taking additional actions in accordance with
applicable law), assuming that each such dissenting stockholder would be
entitled to receive cash in exchange for each dissenting share of a Corporate
Predecessor Company equal to the gross price to the public (before the deduction
of underwriting discounts) of each of the IPO Shares multiplied by the exchange
ratio provided in Article III for each dissenting share shall not exceed 10% of
the amount of the net cash proceeds expected to be realized by the Holding
Company pursuant to the IPO.
4.1.12 Tender of Shares and Interests. The stockholders of Miracle Partners
shall have tendered to the Holding Company for exchange in accordance with the
terms of the Miracle Partners Exchange Offer all of the issued and outstanding
shares of the capital stock of Miracle Partners; the members of Prema Properties
(or other holders of interests in Prema Properties) shall have tendered to the
Holding Company for exchange in accordance with the terms of the Prema
Properties Exchange Offer all of their respective rights, title and interests in
and to Membership Interests in Prema Properties representing at least 75% of all
of the Percentage Interests in Prema Properties; the members of Xxxxxxx Car Wash
(or other holders of interests in Xxxxxxx Car Wash) shall have tendered to the
Holding Company for exchange in accordance with the terms of the Xxxxxxx Car
Wash Exchange Offer all of their respective rights, title and interests in and
to Membership Interests in Xxxxxxx Car Wash representing at least 95% of all of
the Percentage Interests in Xxxxxxx Car Wash; and KBG shall have tendered to the
Holding Company for exchange in accordance with the terms of the KBG Exchange
Offer all of its right, title and interest in and to all of the Membership
Interests in KBG, LLC.
4.1.13 Resignations of Officers and Directors of Predecessor Companies.
Each of the officers and directors of each of the Corporate Predecessor
Companies shall have resigned from their respective offices and directorships,
effective as of the Closing; the General Manager of Prema Properties shall have
resigned as General Manager, effective as of the Closing; and the Manager of
Xxxxxxx Car Wash shall have resigned as Manager, effective as of the Closing.
4.1.14 Environmental Due Diligence. With respect to each of the properties
of the Predecessor Companies, (i) the Holding Company shall have been satisfied
with the environmental condition of such property, (ii) each Predecessor Company
owning any property the environmental condition of which the Holding Company
finds unsatisfactory shall have remediated such unsatisfactory environmental
condition (or adequately provided for such remediation) to the satisfaction of
the Holding Company or (iii) each Predecessor Company owning any property the
environmental condition of which the Holding Company finds unsatisfactory and
the other parties hereto shall have agreed to an appropriate reduction in the
number of Combination Shares to be issued by the Holding Company to the Selling
Stockholders or Selling Members of such Predecessor Company as contemplated in
Section 5.20.
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SECTION 4.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF WE JAC.
In addition to the conditions precedent set forth in Section 4.1 above, the
obligations of WE JAC to consummate the transactions contemplated by Article III
to be consummated by WE JAC at the Closing and to perform its other obligations
under this Agreement which are to be performed at and after the Closing by WE
JAC are subject to the satisfaction at or prior to the Closing of each of the
conditions precedent set forth in this Section 4.2:
4.2.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
WE JAC and its shareholders, in substantially the form attached hereto as
Exhibit D.
4.2.2 Fairness Opinion. The Board of Directors of WE JAC shall have
received the written opinion of Xxxxxx, Xxxxx Xxxxx, Incorporated, dated as of
the date that the Form S-4 Registration Statement is declared effective by the
Commission, that the terms of the WE JAC Merger and of this Agreement, as
ultimately negotiated by the parties, is fair, from a financial point of view,
to the shareholders of WE JAC.
4.2.3 Shareholder Approval. The shareholders of WE JAC shall have approved
and authorized the WE JAC Merger in the manner and by the vote required by its
Certificate of Incorporation and Bylaws and the applicable provisions of the
DCL.
SECTION 4.3 CONDITIONS TO THE OBLIGATIONS OF LUBE VENTURES.
In addition to the conditions precedent set forth in Section 4.1 above, the
obligations of Lube Ventures to consummate the transactions contemplated by
Article III to be consummated by Lube Ventures at the Closing and to perform its
other obligations under this Agreement which are to be performed at and after
the Closing by Lube Ventures are subject to the satisfaction at or prior to the
Closing of each of the conditions precedent set forth in this Section 4.3:
4.3.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
Lube Ventures and its shareholders, in substantially the form attached hereto as
Exhibit D.
4.3.2 Shareholder Approval. The shareholders of Lube Ventures shall have
approved and authorized the transactions contemplated by this Agreement in the
manner and by the vote required by its Certificate of Incorporation and Bylaws
and the applicable provisions of the DCL.
SECTION 4.4 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF MIRACLE INDUSTRIES.
In addition to the conditions precedent set forth in Section 4.1 above, the
obligations of Miracle Industries to consummate the transactions contemplated by
Article III to be consummated by Miracle Industries at the Closing and to
perform its other obligations under this Agreement which are to be performed at
and after the Closing by Miracle Industries are subject to the satisfaction at
or prior to the Closing of each of the conditions precedent set forth in this
Section 4.4:
4.4.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
Miracle Industries and its shareholders, in substantially the form attached as
Exhibit D.
4.4.2 Shareholder Approval. The shareholders of Miracle Industries shall
have approved and authorized the transactions contemplated by this Agreement in
the manner and by the vote required by its Certificate of Incorporation and
Bylaws and the applicable provisions of the DCL.
SECTION 4.5 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ROCKY MOUNTAIN I.
In addition to the conditions precedent set forth in Section 4.1 above, the
obligations of Rocky Mountain I to consummate the transactions contemplated by
Article III to be consummated by Rocky Mountain I at the Closing and to perform
its other obligations under this Agreement which are to be performed at and
after the Closing by Rocky Mountain I are subject to the satisfaction at or
prior to the Closing of each of the conditions precedent set forth in this
Section 4.5:
4.5.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
Rocky Mountain I and its shareholders, in substantially the form attached as
Exhibit D.
4.5.2 Fairness Opinion. The Board of Directors of Rocky Mountain I shall
have received the written opinion of Xxxxx Financial, Inc., dated as of the date
that the S-4 Registration Statement is declared effective by the Commission,
that the terms of the Rocky Mountain I and of this Agreement, as ultimately
negotiated by the parties, is fair, from a financial point of view, to the
shareholders of Rocky Mountain I.
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4.5.3 Shareholder Approval. The shareholders of Rocky Mountain I shall have
approved and authorized the transactions contemplated by this Agreement in the
manner and the vote required by its Articles of Incorporation and Bylaws and the
applicable provisions of the CBCA.
SECTION 4.6 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ROCKY MOUNTAIN II.
In addition to the conditions precedent set forth in Section 4.1 above, the
obligations of Rocky Mountain II to consummate the transactions contemplated by
Article III to be consummated by Rocky Mountain II at the Closing and to perform
its other obligations under this Agreement which are to be performed at and
after the Closing by Rocky Mountain II are subject to the satisfaction at or
prior to the Closing of each of the conditions precedent set forth in this
Section 4.6:
4.6.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
Rocky Mountain II and its shareholders, in substantially the form attached as
Exhibit D.
4.6.2 Fairness Opinion. The Board of Directors of Rocky Mountain II shall
have received the written opinion of Xxxxx Financial, Inc., dated as of the date
that the Form S-4 is declared effective by the Commission, that the terms of the
Rocky Mountain I and of this Agreement, as ultimately negotiated by the parties,
is fair, from a financial point of view, to the shareholders of Rocky Mountain
II.
4.6.3 Shareholder Approval. The shareholders of Rocky Mountain II shall
have approved and authorized the transactions contemplated by this Agreement in
the manner and the vote required by its Articles of Incorporation and Bylaws and
the applicable provisions of the CBCA.
SECTION 4.7 ADDITIONAL CONDITION TO THE OBLIGATIONS OF THE MIRACLE PARTNERS
STOCKHOLDERS.
Notwithstanding the fact that all tenders made by the holders of capital
stock of Miracle Partners in acceptance of the Miracle Partners Exchange Offer
will be irrevocable, subject to the terms of the Miracle Partners Exchange
Offer, the obligation of the holders of shares of the capital stock of Miracle
Partners to consummate the exchange of their shares at the Closing, and to
perform their other obligations under this Agreement which are to be performed
at and after the Closing, also are subject to the satisfaction at or prior to
the Closing of the following condition precedent:
4.7.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
Miracle Partners and its shareholders, in substantially the form attached as
Exhibit D.
SECTION 4.8 ADDITIONAL CONDITION TO THE OBLIGATIONS OF THE XXXXXXX CAR WASH
MEMBERS.
Notwithstanding the fact that all tenders of Membership Interests in
Xxxxxxx Car Wash made by the Xxxxxxx Car Wash Members in acceptance of the
Xxxxxxx Car Wash Exchange Offer will be irrevocable, subject to the terms of the
Xxxxxxx Car Wash Exchange Offer, the obligation of the Xxxxxxx Car Wash Members
to consummate the exchange of their Membership Interests in Xxxxxxx Car Wash at
the Closing, and to perform their other obligations under this Agreement which
are to be performed at and after the Closing, also are subject to the
satisfaction at or prior to the Closing of the each of the following conditions
precedent set forth in this Section 4.8:
4.8.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
the Xxxxxxx Car Wash Members, in substantially the form attached as Exhibit D.
SECTION 4.9 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE PREMA PROPERTIES
MEMBERS.
Notwithstanding the fact that all tenders of Membership Interests in Prema
Properties made by the Prema Properties Members in acceptance of the Prema
Properties Exchange Offer will be irrevocable, subject to the terms of the Prema
Properties Exchange Offer, the obligation of the Prema Properties Members to
consummate the exchange of their Membership Interests in Prema Properties at the
Closing, and to perform their other obligations under this Agreement which are
to be performed at and after the Closing, also are subject to the satisfaction
at or prior to the Closing of the following condition precedent:
4.9.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
the Prema Properties Members, in substantially the form attached as Exhibit D.
SECTION 4.10 ADDITIONAL CONDITION TO THE OBLIGATIONS OF THE HOLDING COMPANY.
In addition to the conditions precedent set forth in Section 4.1 above, the
obligations of the Holding Company to consummate the transactions contemplated
by Article III to be consummated by the Holding Company at the Closing and to
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cause the Merger Subsidiaries to consummate the Subsidiary Mergers in accordance
with the terms of Article III, and to perform its other obligations under this
Agreement which are to be performed at and after the Closing by the Holding
Company are subject to the satisfaction at or prior to the Closing of each of
the condition precedent set forth in this Section 4.10:
4.10.1 No Material Adverse Effects. None of the Predecessor Companies shall
have suffered any casualty and no event shall have occurred which has had a
Material Adverse Effect on such Predecessor Company or which would be reasonably
likely to have a Material Adverse Effect on such Predecessor Company following
the Closing.
SECTION 4.11 ADDITIONAL CONDITION TO THE OBLIGATIONS OF KBG.
Notwithstanding the fact that all tenders of Membership Interests in KBG,
LLC made by KBG in acceptance of the KBG Exchange Offer will be irrevocable,
subject to the terms of the KBG Exchange Offer, the obligation of KBG to
consummate the exchange of Membership Interests in KBG, LLC at the Closing, and
to perform other obligations under this Agreement which are to be performed at
and after the Closing, also are subject to the satisfaction at or prior to the
Closing of the following condition precedent:
4.11.1 Tax Opinion. Ernst & Young shall have rendered a written opinion to
KBG, in substantially the form attached as Exhibit D.
ARTICLE V
COVENANTS AND AGREEMENTS RELATING TO PRE-CLOSING PERIOD
SECTION 5.1
Special Shareholder Meetings/Exchange Officers. The parties shall cooperate
and use their reasonable best efforts to cause the Form S-4 Registration
Statement to be filed with, and declared effective by, the Securities and
Exchange Commission as soon as practicable. Each of WE JAC, Lube Ventures,
Miracle Industries, Rocky Mountain I and Rocky Mountain II shall call, provide
notice of, and convene a special meeting of its shareholders for the purpose of
considering and voting upon the approval of the transactions contemplated by,
and the adoption of the terms of, this Agreement (or solicit the appropriate
written consent of their shareholders). Such special meetings and consent
solicitations shall be conducted in accordance with the respective charters,
bylaws and the applicable corporation laws of the jurisdiction in which each
such party is incorporated. Each of Miracle Partners, Prema Properties, Xxxxxxx
Car Wash and KBG shall commence the Exchange Offers contemplated by this
Agreement in accordance with the terms of Section 3.2 hereof. The parties shall
cooperate in order to cause their respective special meetings and consent
solicitations and their respective Exchange Offers to be commenced as soon as
practicable and as soon as such meetings and Exchange Offers may be lawfully
called, conducted and commenced, taking into account the parties'
responsibilities under applicable securities laws, including the responsibility
to deliver the Joint Proxy Statement/Prospectus forming a part of the Form S-4
Registration Statement to each of the parties' respective stockholders or
members. The Boards of Directors of each of the Corporate Predecessor Companies
and the Managing Member of each of the LLC Predecessor Companies each
acknowledge and agree that such Proxy Statement-Prospectus shall state that each
such Board or Managing Member approves of and supports such transactions and the
terms of this Agreement and recommends that its respective stockholders vote in
favor of the same or tender their membership interests, as the case may be.
Furthermore, in the event that a special meeting of stockholders or shareholders
of any such corporation shall be held as provided for herein, at such special
meeting, the Boards of Directors of each of the Corporate Predecessor Companies
actively shall encourage its respective stockholders or shareholder to vote in
favor of the transactions contemplated hereby and in favor of the terms of this
Agreement.
SECTION 5.2 CORPORATE STATUS.
From and after the date hereof through and including the Closing Date or
the earlier termination of this Agreement, each of the corporate parties to this
Agreement shall take all actions, corporate or otherwise, reasonably necessary
or appropriate to maintain its respective status as a corporation validly
existing and in good standing under the laws of its the state of its
incorporation and to maintain its qualifications as a foreign corporation in
good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership or operation of its assets and properties requires
such qualification. In addition, from and after the date hereof through and
including the Closing or the earlier termination of this Agreement, Miracle
Industries and Lube Ventures shall each take all actions, corporate or
otherwise, as may be reasonably necessary to maintain its respective election
under the Code to be subject to federal income taxation as a "small business
corporation" under Subchapter S of the Code.
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SECTION 5.3 STATUS OF LIMITED LIABILITY COMPANIES.
5.3.1 Prema Properties. From and after the date hereof through and
including the Closing Date or the earlier termination of this Agreement, Prema
Properties shall take all actions reasonably necessary or appropriate to
maintain the status of Prema Properties as a limited liability company validly
existing and in good standing under the laws of the state of its organization
and to maintain its qualifications as a foreign limited liability company in
good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership or operation of its assets and properties requires
such qualification. In addition, from and after the date hereof through and
including the Closing Date or the earlier termination of this Agreement, Prema
Properties shall take all actions reasonably necessary or appropriate to
maintain the status of Prema Properties as a "partnership" for federal income
tax purposes.
5.3.2 Xxxxxxx Car Wash. From and after the date hereof through and
including the Closing Date or the earlier termination of this Agreement, Xxxxxxx
Car Wash shall take all actions reasonably necessary or appropriate to maintain
the status of Xxxxxxx Car Wash as a limited liability company validly existing
and in good standing under the laws of the state of its organization and to
maintain its qualifications as a foreign limited liability company in good
standing under the laws of each jurisdiction in which the conduct of its
business or the ownership or operation of its assets and properties requires
such qualification. In addition, from and after the date hereof through and
including the Closing Date or the earlier termination of this Agreement, Xxxxxxx
Car Wash shall take all actions reasonably necessary or appropriate to maintain
the status of Xxxxxxx Car Wash as a "partnership" for federal income tax
purposes.
5.3.3 Hydro-Spray and Indy Ventures. From and after the date hereof through
and including the Closing Date or the earlier termination of this Agreement,
Miracle Industries shall take all actions reasonably necessary or appropriate to
maintain the status of each of Hydro-Spray and Indy Ventures as limited
liability companies validly existing and in good standing under the laws of the
state of their respective organization and to maintain their respective
qualifications as foreign limited liability companies in good standing under the
laws of each jurisdiction in which the conduct of their respective businesses or
the ownership or operation of their respective assets and properties requires
such qualification. In addition, from and after the date hereof through and
including the Closing Date or the earlier termination of this Agreement, Miracle
Industries shall take all actions reasonably necessary or appropriate to
maintain the status of each of Hydro-Spray and Indy Ventures as a "partnership"
for federal income tax purposes.
SECTION 5.4 ACCESS TO INFORMATION.
Except as prohibited or limited by law or regulation, each of the parties
to this Agreement shall, from and after the date of this Agreement and until the
Closing Date or the earlier termination of this Agreement, provide to each of
the other parties, and their respective employees, counsel, accountants and
other representatives, so long as each remains a party to this Agreement, full
and complete access upon reasonable notice during normal business hours, to all
officers, employees, offices, properties, agreements, records and affairs of
such party and its business, and will provide copies of such information
concerning such party and its business as any other party hereto may reasonably
request in connection with the transactions contemplated by this Agreement.
SECTION 5.5 CONDUCT OF BUSINESSES OF PREDECESSOR COMPANIES PENDING CLOSING.
From and after the date hereof through the Closing Date or the earlier
termination of this Agreement, except with the prior written consent of a
majority of the Operating Committee each of the Predecessor Companies shall
conduct their respective businesses in the ordinary course in a manner
consistent with its past practices (it being understood and agreed that (i) the
Constituent Companies of the WE JAC Group shall have the right hereafter to
enter into strategic alliances, joint ventures and other arrangements even
though not consistent with its past practices if the Board of Directors of WE
JAC determines in good faith that to do so would be in the best interests of the
WE JAC Group and would not materially adversely affect the transactions
contemplated hereby. In addition, without limiting the generality of the
foregoing, each of the Predecessor Companies covenants and agreement that, from
and after the date hereof through and including the Closing, it shall abide by
and comply with the following:
(a) No Changes in Accounting Methods. None of the Predecessor
Companies shall adopt any change in any method of accounting or accounting
practice, except as contemplated or required by GAAP or in order to conform such
methods or practices to GAAP;
(b) No Amendments to Corporate or Similar Documents. None of the
Predecessor Companies shall, in the case of corporations, amend its charter or
by-laws, or, in the case of limited liability companies, amend its articles of
organization or
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operating agreement, and Miracle Industries shall not agree to any amendment of
the Articles of Organization or Operating Agreements of Hydra-Spray or Indy
Ventures;
(c) No New Employees or Employee Benefits. Except as may be required
in accordance with contractual obligations existing on the date hereof that are
contained in written agreements in effect on the date hereof which have been
disclosed in the Disclosure Letter submitted by such party to the other parties
pursuant to this Agreement, none of the Predecessor Companies shall employ any
additional employees otherwise than as may be necessary in the ordinary course
of business, pay to any current or former Employee any benefit that is not
required by any Employee Benefit Plan or Benefit Arrangement or adopt, amend, or
increase any benefits payable under, any Employee Benefit Plan or Benefits
Arrangement, trust, agreement or other arrangement covering any existing or
former Employee (or beneficiary or dependent);
(d) No Mergers, Etc. None of the Predecessor Companies shall merge or
consolidate with, or agree to merge or consolidate with, or purchase or agree to
purchase all or substantially all of the assets of, or otherwise acquire, or
make any investments in any other business entity or interest therein or enter
into any joint venture or similar arrangement with any other person, party or
business entity except as may be contemplated specifically by the terms of this
Agreement without the prior written consent of a majority or more of the
Operating Committee (it being understood and agreed that the purchase by
Precision Tune from time to time of area subfranchise rights or area development
rights from its area subfranchisors or master licensees shall not be deemed to
be a violation of the foregoing covenant);
(e) No Issuance or Redemption of Securities. Except as may be required
in accordance with obligations under options, warrants, or other contractually
enforceable obligations to sell or issue stock or equity interests or securities
convertible into or exchangeable for stock or equity interests, none of the
Predecessor Companies shall authorize for issuance, issue or sell any additional
shares of its capital stock or any additional equity interests or any securities
or obligations convertible into or exchangeable for shares of its capital stock
or equity interests or issue or grant any option, warrant or other right to
purchase any shares of its capital stock or equity interests or redeem, purchase
or otherwise acquire, or propose or commit to, redeem, purchase or otherwise
acquire, any shares of its capital stock or other equity interests or securities
or any securities or obligations convertible into or exchangeable for shares of
its capital stock or equity interests;
(f) No New Debt or Debt Restructuring. Except (i) in the ordinary
course of business, (ii) to pay Transaction Expenses or pay a Professional
Expense Dividend or pay Professional Expense Dividends, (iii) with the prior
approval of the Operating Committee or (iv) in connection with transactions
otherwise permitted by this Section 5.5, none of the Predecessor Companies shall
incur or agree to incur any Debt or restructure any existing Debt, nor shall any
of the Predecessor Companies make any loans, advances or capital contributions
to, or investments in, any Person without the prior written consent of a
majority or more of the Operating Committee.
(g) Payments; Amortization of Debt. From and after the date hereof,
each of the Predecessor Companies shall pay its current liabilities as they
become due and amortize its Debt in the ordinary course of business in
accordance with the contractual agreements evidencing such Debt, and, except in
accordance with contractual obligations existing on the date hereof that are
contained in written agreements in effect on the date hereof which have been
disclosed in the Disclosure Letter submitted by such party to the other parties
pursuant to this Agreement, none of the Predecessor Companies shall make, or
agree to make, except in the ordinary course of business, consistent with past
practices, any payments to any Person on account of Debt or otherwise without
the prior written consent of a majority or more of the Operating Committee or as
may be otherwise permitted by this Agreement (it being understood and agreed
that the purchase by Precision Tune from time to time of area subfranchise
rights or area development rights from its area subfranchisors or master
licensees shall not be deemed to be a violation of the foregoing covenant);
(h) No New Bids or Proposals. Except as may be approved in advance by
the Board of Directors of the Holding Company, none of the Predecessor Companies
shall make or submit any bid, proposal or commitment to provide services or to
purchase or distribute any products (in response to a request for proposal or
otherwise) otherwise than in the ordinary course of business consistent with its
past practices;
(i) No Dividends or Distributions. Except as provided for in Section
2.3, 5.17 and 5.18 of this Agreement, none of the Predecessor Companies shall
declare or distribute or pay any dividend or make any other distribution of cash
or any other asset to any stockholder, shareholder or member;
(j) No Sales of Assets Except in Ordinary Course. Except as provided
in Schedule 5.5(j), none of the Predecessor Companies shall sell or agree to
sell any assets, rights or properties otherwise than in the ordinary course of
business, or create, or suffer to exist, any Encumbrance on any of its assets,
rights and properties other than Encumbrances existing as of the date of this
Agreement;
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(k) No New Material Contracts Except in Ordinary Course. Except in the
ordinary course of business, none of the Predecessor Companies shall make any
capital expenditures exceeding $10,000 individually or enter into or become a
party to any arrangement or contract of a type that would require the
expenditure of more than $50,000 in any 12 month period or which would otherwise
be required to be disclosed by such party in its Disclosure Letter without the
prior written consent of a majority or more of the Operating Committee; and
(l) No Changes to Compensation Arrangements. Except as required by law
or contractual obligations existing on the date hereof that are contained in
written agreements in effect on the date hereof which have been disclosed in the
Disclosure Letter submitted by such party to the other parties pursuant to this
Agreement, none of the Predecessor Companies shall (i) increase in any manner
the compensation (other than increases in the ordinary course of business and
consistent with past practice) of, or enter into any new bonus or incentive
agreement or arrangement with, any of its Employees, officers or directors, (ii)
pay or agree to pay any pension, retirement allowance or similar employee
benefit to any Employee, officer, or director, (iii) enter into any new
employment, severance, consulting or other compensation agreement with any
existing Employee, officer, or director; (iv) commit itself to any additional
pension, profit-sharing, deferred compensation, group insurance, severance pay,
retirement or other employee benefit plan, fund or similar arrangement or amend
or commit itself to amend any of such plans, funds or similar arrangements in
existence on the date hereof.
SECTION 5.6 COVENANTS BINDING ONLY UPON KBG.
From and after the date hereof through and including the Closing, KBG
hereby covenants and agrees that it shall not sell, license, transfer, assign,
pledge or otherwise create any Encumbrance upon the Proprietary Car Wash
Computer Software except as contemplated by Section 3.2.4 of this Agreement.
SECTION 5.7 CONSENTS.
From and after the date hereof, each of the Predecessor Companies shall use
their reasonable best efforts to (i) obtain all consents, waivers and
authorizations and make all filings with and give all notices that may be
necessary or reasonably required to consummate the transactions contemplated
hereby, and (ii) cause each of the conditions precedent to the obligations of
each of the other parties to this Agreement to be satisfied.
SECTION 5.8 PUBLIC STATEMENTS.
From and after the date hereof until the earlier of the Closing or the
termination of this Agreement, none of the Predecessor Companies shall disclose
to any Person other than its shareholders or members the terms of this
Agreement, or release any information concerning any of the transactions
contemplated hereby, that is intended for or is reasonably likely to result in
public dissemination thereof without the prior written consent of a majority or
more of the Operating Committee.
SECTION 5.9 UPDATE OF DISCLOSURE.
From and after the date hereof through and including the earlier of the
Closing or the termination of this Agreement, each of the Predecessor Companies
shall promptly notify the other parties hereto of the occurrence of any material
facts or circumstances that would have required disclosure pursuant to the
representations and warranties made by such parties pursuant to the terms of
this Agreement if such facts or circumstances had been known to them prior to
the execution of this Agreement and of any other matters that would cause any
representation or warranty to be untrue, incorrect or misleading.
SECTION 5.10 EMPLOYEE BENEFIT CONTRIBUTIONS.
On or prior to the Closing Date, each of the Predecessor Companies shall
make, and shall cause each of its Affiliates to make, all contributions, and
shall pay all premiums, or shall cause each of its ERISA Affiliates to pay all
premiums, with respect to liabilities arising under any Benefit Arrangement or
Employee Benefit Plan provided to its current or former Employees, with respect
to liabilities or obligations which have accrued on or prior to the Closing Date
or which will accrue following the Closing Date in respect of periods prior to
and through the Closing Date.
SECTION 5.11 LOCK-UP; NO SHOPPING, SOLICITATIONS OR COMPETING NEGOTIATIONS.
Each of the parties to this Agreement hereby agrees that, from and after
the date hereof through and including the Closing or the earlier termination of
this Agreement, none of them shall encourage, solicit, entertain or hold any
negotiations or other discussions with any other Person relating to the possible
acquisition of all or any part of their respective businesses, whether pursuant
to a sale of assets, merger, consolidation, share exchange, tender offer or
otherwise.
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SECTION 5.12 AUDITS.
Promptly upon the execution of this Agreement, if and to the extent they
have not already done so, each of the Predecessor Companies shall assist Ernst
and Young, LLP with audits of their respective financial statements at such
dates and for such periods as the Holding Company reasonably determines it must
include in the registration statements the Holding Company files with the
Commission in the manner contemplated by this Agreement), and shall make their
respective books and records, financial statements, employees, officers and
facilities open to such auditors at reasonable hours upon reasonable advance
notice and to otherwise cooperate, and cause their respective certified public
accountants and other outside auditors to cooperate, with such auditors in
conducting such audits. Each of the Predecessor Companies also shall provide the
Holding Company with any unaudited financial statements for any periods the
Holding Company reasonably determines it must include in the registration
statements the Holding Company files with the Commission in the manner
contemplated by this Agreement. Each of the Predecessor Companies shall also
promptly provide to the Holding Company consents from Ernst & Young LLP to the
inclusion of their audit reports in filings with the Commission, "comfort
letters" and such other assurances from Ernst & Young LLP and other independent
accountants of such Predecessor Company that may reasonably be requested by the
Holding Company or any underwriter involved in the public offering of the
Holding Company's securities. All of the financial statements provided to the
Holding Company pursuant to this Section 5.12 shall be prepared in accordance
with GAAP (and Regulation S-X of the Commission) consistently applied.
SECTION 5.13 ACQUISITION BY MIRACLE INDUSTRIES OF MINORITY INTERESTS IN
HYDRO-SPRAY.
Promptly following the execution and delivery of this Agreement by each of
the parties hereto, Miracle Industries shall form a subsidiary corporation under
the laws of the State of Ohio solely for the purpose of acquiring the minority
membership interests in Hydro-Spray which are held currently by Xxxxxx Xxxxxx
and Xxxx Xxxxxxx, respectively, and shall cause such subsidiary corporation to
acquire such minority membership interests on or prior to the Closing Date (but
prior to the Closing) for an aggregate purchase price, including debts and
obligations, if any, assumed by Miracle Industries or such subsidiary
corporation in such transaction of not more than $300,000. In lieu of payment of
cash to such Hydro-Spray members for their membership interests in Hydro-Spray,
Miracle Industries may acquire such membership interests in consideration of the
issuance to such members of shares of common stock of Miracle Industries in
which case the exchange ratio set forth in Section 3.1.4(b) shall be reduced so
that the aggregate number of Combination Shares to be issued to shareholders of
Miracle Industries remains at $749,250. The acquisition agreement relating to
the acquisition of such minority interests shall be in a form approved by the
Holding Company, and, at a minimum, shall contain representations and warranties
and indemnities from the sellers of such interests which are customary for
transactions of this sort and shall impose covenants upon the sellers of such
interests which will obligate them not to compete with Miracle Industries or any
of its presently existing or hereafter created Affiliates (including the parties
to this Agreement) in the business of manufacturing and selling car wash
equipment.
SECTION 5.14 OPTION TO PURCHASE PROPERTY BY PREMA PROPERTY MEMBERS.
At the Closing Prema Properties shall execute and deliver to a partnership
to be comprised of the members of Prema Properties an Option Agreement pursuant
to which such partnership shall have the option to purchase the properties
described in Schedule 5.14 from Prema Properties on the following terms: (i) the
option shall be exercisable during the one year period commencing on the second
anniversary of the Closing Date; (ii) the option purchase price of each such
property shall be the fair market value of such property on the date of exercise
of the option which price shall be paid to Prema Properties in cash at the
closing of the transfer of such property; (iii) the closing on the sale of each
such property shall occur within 90 days of the later of the exercise of the
option or the determination of the purchase price therefor; (iv) all appraisal,
deed preparation, recording costs and transfer and documentary or similar taxes
shall be equally borne by the parties; (iv) all real estate taxes shall be
apportioned as of the date of the closing on the transfer of such property; and
(vii) all other terms of the transfer of such property shall be the customary
terms of transfer of commercial properties in the locale of such property. In
addition, the Option Agreement shall provide that upon the transfer of any such
property pursuant to the Option Agreement, Prema Properties or any assignee that
is an Affiliate of the Holding Company shall lease such property pursuant to a
Lease Agreement that contains the following terms: (i) the annual rent
throughout the initial and all renewal terms (including rent escalation factors)
shall be the fair rental value of the property; (ii) annual rent shall be paid
in monthly installments in advance; (iii) the annual rent shall be triple net to
the landlord; (iv) the Lease Agreement shall be for an initial term of ten years
and the tenant shall have options to renew for two successive renewal terms of
ten years each; and (v) all other terms of the lease of such property shall be
the customary terms of lease of commercial properties in the locale of such
property.
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SECTION 5.15 OPTION TO PURCHASE PROPERTY BY LUBE VENTURES STOCKHOLDERS.
At the Closing Lube Ventures shall execute and deliver to a partnership to
be comprised of the stockholders of Lube Ventures an Option Agreement pursuant
to which such partnership shall have the option to purchase the properties
described in Schedule 5.15 from Lube Ventures on the following terms: (i) the
option shall be exercisable during the one year period commencing on the second
anniversary of the Closing Date; (ii) the option purchase price of each such
property shall be the fair market value of such property on the date of exercise
of the option which price shall be paid to Lube Ventures in cash at the closing
of the transfer of such property; (iii) the closing on the sale of each such
property shall occur within 90 days of the later of the exercise of the option
or the determination of the purchase price therefor; (iv) all appraisal, deed
preparation, recording costs and transfer and documentary or similar taxes shall
be equally borne by the parties; (v) all real estate taxes shall be apportioned
as of the date of the closing on the transfer of such property; and (vi) all
other terms of the transfer of such property shall be the customary terms of
transfer of commercial properties in the locale of such property. In addition,
the Option Agreement shall provide that upon the transfer of any such property
pursuant to the Option Agreement, Lube Ventures or any assignee that is an
Affiliate of the Holding Company shall lease such property pursuant to a Lease
Agreement that contains the following terms: (i) the annual rent throughout the
initial and all renewal terms (including rent escalation factors) shall be the
fair rental value of the property; (ii) annual rent shall be paid in monthly
installments in advance; (iii) the annual rent shall be triple net to the
landlord; (iv) the Lease Agreement shall be for an initial term of ten years and
the tenant shall have options to renew for two successive renewal terms of ten
years each; and (v) all other terms of the lease of such property shall be the
customary terms of lease of commercial properties in the locale of such
property.
SECTION 5.16 OPTION TO PURCHASE PROPERTY BY MIRACLE PARTNERS STOCKHOLDERS.
At the Closing Miracle Partners shall execute and deliver to a partnership
to be comprised of the stockholders of Miracle Partners an Option Agreement
pursuant to which such partnership shall have the option to purchase the
properties described in Schedule 5.16 from Miracle Partners on the following
terms: (i) the option shall be exercisable during the one year period commencing
on the second anniversary of the Closing Date; (ii) the option purchase price of
each such property shall be the fair market value of such property on the date
of exercise of the option which price shall be paid to Miracle Partners in cash
at the closing of the transfer of such property; (iii) the closing on the sale
of each such property shall occur within 90 days of the later of the exercise of
the option or the determination of the purchase price therefor; (iv) all
appraisal, deed preparation, recording costs and transfer and documentary or
similar taxes shall be equally borne by the parties; (iv) all real estate taxes
shall be apportioned as of the date of the closing on the transfer of such
property; and (vii) all other terms of the transfer of such property shall be
the customary terms of transfer of commercial properties in the locale of such
property. In addition, the Option Agreement shall provide that upon the transfer
of any such property pursuant to the Option Agreement, Miracle Partners or any
assignee that is an Affiliate of the Holding Company shall lease such property
pursuant to a Lease Agreement that contains the following terms: (i) the annual
rent throughout the initial and all renewal terms (including rent escalation
factors) shall be the fair rental value of the property; (ii) annual rent shall
be paid in monthly installments in advance; (iii) the annual rent shall be
triple net to the landlord; (iv) the Lease Agreement shall be for an initial
term of ten years and the tenant shall have options to renew for two successive
renewal terms of ten years each; and (v) all other terms of the lease of such
property shall be the customary terms of lease of commercial properties in the
locale of such property.
SECTION 5.17 DISTRIBUTIONS OF UNRELATED ASSETS.
5.17.1 Distribution by Rocky Mountain I. Each of the parties hereto
acknowledges and agrees that, prior to the Closing, Rocky Mountain I shall have
the right to distribute to the holders of its capital stock cash received by
Rocky Mountain I pursuant to the repayment of the principal amount (discounted
due to early repayment) of the Promissory Note payable to the order of Rocky
Mountain I in the original principal amount of $195,000 that it received in
connection with the sale of its car wash located at 00000 Xxxx Xxxxxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxx in July 1995.
5.17.2 Distribution by Miracle Partners. Each of the parties hereto
acknowledges and agrees that, prior to the Closing, Miracle Partners shall have
the right to distribute to the holders of its capital stock the real property
owned by it and known as Xxx 000, Xxxxxxxx Xxxx, Xxxxxxxx, Xxxx.
5.17.3 Distribution by Lube Ventures. Each of the parties hereto
acknowledges and agrees that, prior to the Closing, Lube Ventures shall have the
right to distribute to the holders of its capital stock the approximately 5
acres of real property owned by it and known as 0000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxx that is not used by Lube Ventures.
5.17.4 Distribution by Miracle Industries. Each of the parties hereto
acknowledges and agrees that, prior to the Closing, Miracle Industries shall
have the right to distribute to the holders of its capital stock the following
parcels of real property
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owned by it: two houses and a vacant lot in Crestline, Ohio, a vacant lot in
Delaware, Ohio and the Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxx car wash.
5.17.5 Distribution by Prema Properties. Each of the parties hereto
acknowledges and agrees that, prior to the Closing, Prema Properties shall have
the right to distribute to the holders of its Membership Interests the following
parcels of real property owned by it: the car wash located on Main Street in
Xxxxxx, Ohio and the shopping center and vacant land adjacent to the car wash in
Bellville, Ohio.
5.17.6 Conditions to Distributions. The parties agree that each
distribution permitted by this Section 5.17 shall be without cost to the
Predecessor Company (or Affiliate of the Predecessor Company) making such
distribution. In addition, with respect to the distributions of real property
contemplated by Section 5.17.2, 5.17.3, 5.17.4 and 5.17.5, each such
distribution shall be made subject to any Debt that is collateralized by such
real property and the distributing Predecessor Company (or Affiliate of a
Predecessor Company) shall be released from any liability (whether absolute or
contingent) with respect to such Debt unless such Debt is included in Schedule
19.1.
SECTION 5.18 CASH DISTRIBUTIONS BY SUBCHAPTER S CORPORATIONS AND LIMITED
LIABILITY COMPANIES.
Notwithstanding the provisions of Section 5.5, Miracle Industries, Lube
Ventures, Miracle Partners, Rocky Mountain I, Rocky Mountain II, Xxxxxxx Car
Wash and Prema Properties shall each be permitted to distribute on or before the
Closing Date to each of their respective stockholders and members cash in an
amount reasonably estimated to equal to the highest combined federal, state and
local income tax obligations of any their respective stockholders or members
which have or will arise solely by reason of being a stockholder or member
thereof during the tax period which will end on the Closing Date (it being
understood and agreed that calculation of such distribution shall not take into
account the tax effect, if any, of any the transactions contemplated by Sections
5.14, 5.15, 5.16 or 5.17 of this Agreement).
SECTION 5.19 NEGOTIATIONS WITH RESPECT TO ANCILLARY AGREEMENTS AND DOCUMENTS.
Promptly following the execution and delivery of this Agreement, the Ohio
Group and Miracle Partners shall cause the representatives of each of the Real
Estate Partnerships to enter into good faith negotiations with the Holding
Company concerning the form of the Option Agreements and the Lease Agreements
and to thereafter negotiate in good faith with respect to the form of the Option
Agreements and the Lease Agreements to be executed at the Closing shall have
been finalized on or before September 30, 1997. Following the execution and
delivery of this Agreement, the Holding Company and each of the Predecessor
Companies shall enter into good faith negotiations with respect to the forms of
opinions of counsel to be executed and delivered at the Closing, the terms of
the various letters of transmittal to be used by the Holding Company to make the
Exchange Offers and the terms of the various other documents, agreements and
instruments to be executed and delivered by each of the parties pursuant to the
terms of this Agreement, such that the forms of all such documents shall have
been finalized on or before September 30, 1997. Once the forms of each of the
documents referred to in this Section 5.19 shall have been finalized, each of
the parties shall certify their agreement with respect to the terms and forms
thereof by delivering written notice of their acceptance of the terms and forms
thereof to each of the other parties to this Agreement. Upon receipt by the
Holding Company of written notice from each of the Predecessor Companies that
the form a particular document has been accepted by each of them, the form of
such document shall be appended to this Agreement as an Exhibit hereto and shall
become a part of this Agreement without the need for further act or deed by any
of the parties. The failure of any of the parties to satisfy its obligations
under this Section 5.19 shall be deemed to be a material and willful breach of
this Agreement and shall entitle the other parties to exercise the rights and
remedies provided for in Section 21.1.1, in addition to such other rights and
remedies available to them pursuant to the terms of this Agreement.
SECTION 5.20 ENVIRONMENTAL DUE DILIGENCE.
5.20.1 Conduct of Due Diligence. From and after the date hereof, each of
the members of the Ohio Group and the Rocky Mountain Group shall permit
representatives of the Holding Company, and of environmental consulting firms
engaged by the Holding Company, to enter upon their respective properties from
time to time at reasonable hours upon reasonable advance notice in order to
evaluate the environmental condition of each such property and the operations of
the businesses of the members of the Ohio Group and the Rocky Mountain Group
thereon, and shall assist the Holding Company and its representatives in
conducting such evaluations.
5.20.2 Results of Due Diligence. As soon as reasonably practicable
following the receipt of the environmental evaluations referred to in Section
5.20.2, the Holding Company shall determine, in its sole but reasonable
discretion, the acceptability of the environmental condition of the properties
of each of the Predecessor Companies. Following such determination, the
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Holding Company shall provide notice to each of the Predecessor Companies of its
determination with respect to the environmental condition of the properties of
such Predecessor Company (it being understood that the Holding Company shall be
entitled to be unsatisfied with the environmental condition of the properties of
any Predecessor Company in the event that it shall determine that a reasonable
purchaser of the business of such Predecessor Company would determine not to
proceed with the purchase thereof or to reduce the consideration payable to the
Selling Stockholders or Selling Members thereof materially based on the
environmental condition of the properties of such Predecessor Company). If the
Holding Company shall be unsatisfied with the environmental condition of the
properties of such Predecessor Company, the Holding Company and such Predecessor
Company shall enter into good faith negotiations to agree on (i) a manner in
which such Predecessor Company can proceed to remedy, at its sole cost and
expense, any such environmental condition in a manner reasonably satisfactory to
the Holding Company such that each such environmental condition shall be
remedied on or before the Closing Date or that the financial costs of such
remediation shall otherwise be provided for by the Selling Stockholders or
Selling Members of such Predecessor Company or (ii) an appropriate reduction in
the number of Combination Shares to be issued by the Holding Company to the
Selling Stockholders or Selling Members of such Predecessor Company.
SECTION 5.21 ACTIONS BY AFFILIATES.
5.21.1 Agreements Not to Compete. Each Predecessor Company shall cause each
natural Person who as of the Closing Date is a holder of 10% or more of the
common stock or membership interests of such Predecessor Company (other than any
such Person who is subject to another agreement not to compete with the Holding
Company) to enter into an Agreement Not to Compete with the Holding Company as
contemplated by Section 4.1.7.
5.21.2 AFFILIATE AGREEMENTS.
Each Predecessor Company shall cause each Person who is an "Affiliate" as
defined in the Securities Act of such Predecessor Company to enter into an
affiliates agreement with the Holding Company acknowledging that such Person is
subject to the resale restrictions of Rule 145 promulgated under the Securities
Act.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF WE JAC
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, WE JAC hereby makes the
following representations and warranties to the other parties to this Agreement
and to the Holding Company:
SECTION 6.1 ORGANIZATION AND GOOD STANDING.
6.1.1 WE JAC. WE JAC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full corporate
power and authority to own, operate and lease its properties, and to conduct its
business as it is now being conducted, and is qualified to transact business as
a foreign corporation in each jurisdiction in which the operation of its
business or the ownership of its properties requires such qualification.
6.1.2 Subsidiaries of WE JAC. Precision Tune is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia, and has full corporate power and authority to own,
operate and lease its properties, and to conduct its business as it is now being
conducted, and is qualified to transact business as a foreign corporation in
each jurisdiction in which the operation of its business or the ownership of its
properties requires such qualification. National 60 Minute Tune is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington, and has full corporate power and authority to own, operate
and lease its properties, and to conduct its business as it is now being
conducted, and is qualified to transact business as a foreign corporation in
each jurisdiction in which the operation of its business or the ownership of its
properties requires such qualification. PTW is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington,
and has full corporate power and authority to own, operate and lease its
properties, and to conduct its business as it is now being conducted, and is
qualified to transact business as a foreign corporation in each jurisdiction in
which the operation of its business or the ownership of its properties requires
such qualification.
SECTION 6.2 CAPITALIZATION OF WE JAC AND SUBSIDIARIES.
6.2.1 Authorized Capital; Outstanding Shares.
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(a) The authorized capital stock of WE JAC consists solely of
2,600,000 shares of a single class of common stock, $0.01 par value, of which
1,333,625 shares have been issued and are outstanding as of the date of this
Agreement. Each of the shares of the capital stock of WE JAC issued and
outstanding as of the date hereof has been duly authorized and validly issued
and is fully paid and non-assessable. None of the shares of the issued and
outstanding capital stock of WE JAC has been issued in violation of shareholder
preemptive rights. Except as disclosed in the WE JAC Disclosure Letter, WE JAC
has no issued or outstanding equity securities, debt securities or other
instruments which are convertible into or exchangeable for at any time equity
securities of WE JAC.
(b) The authorized capital stock of Precision Tune consists solely of
1,000 shares of a single class of common stock, $0.01 par value, of which 1,000
shares have been issued and are outstanding as of the date of this Agreement.
Each of the shares of the capital stock of Precision Tune issued and outstanding
as of the date hereof has been duly authorized and validly issued and is fully
paid and non-assessable. None of the shares of the issued and outstanding
capital stock of Precision Tune has been issued in violation of shareholder
preemptive rights. Precision Tune has no issued or outstanding equity
securities, debt securities or other instruments which are convertible into or
exchangeable for at any time equity securities of Precision Tune.
(c) The authorized capital stock of National 60 Minute Tune consists
solely of 50,000 shares of a single class of common stock, $1.00 par value, of
which 500 shares have been issued and are outstanding as of the date of this
Agreement. Each of the shares of the capital stock of National 60 Minute Tune
issued and outstanding as of the date hereof has been duly authorized and
validly issued and is fully paid and non-assessable. None of the shares of the
issued and outstanding capital stock of National 60 Minute Tune has been issued
in violation of shareholder preemptive rights. National 60 Minute Tune has no
issued or outstanding equity securities, debt securities or other instruments
which are convertible into or exchangeable for at any time equity securities of
National 60 Minute Tune.
(d) The authorized capital stock of PTW consists solely of 1,000,000
shares of a single class of common stock, $1.00 par value, of which 1,000 shares
have been issued and are outstanding as of the date of this Agreement. Each of
the shares of the capital stock of PTW issued and outstanding as of the date
hereof has been duly authorized and validly issued and is fully paid and
non-assessable. None of the shares of the issued and outstanding capital stock
of PTW has been issued in violation of shareholder preemptive rights. PTW has no
issued or outstanding equity securities, debt securities or other instruments
which are convertible into or exchangeable for at any time into equity
securities of PTW.
6.2.2 No Obligations to Issue or Redeem Shares.
(a) Except as disclosed in the WE JAC Disclosure Letter, WE JAC is not
subject to any commitment or obligation which would require the issuance or sale
of shares of its capital stock at any time under options, subscriptions,
warrants, rights, calls, preemptive rights, convertible obligations or any other
fixed or contingent obligations or which would provide the holder thereof with
the right to acquire any equity securities of WE JAC. Except as disclosed in the
WE JAC Disclosure Letter, WE JAC has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
(b) Precision Tune is not subject to any commitment or obligation
which would require the issuance or sale of shares of its capital stock at any
time under options, subscriptions, warrants, rights, calls, preemptive rights,
convertible obligations or any other fixed or contingent obligations or which
would provide the holder thereof with the right to acquire any equity securities
of Precision Tune. Precision Tune has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
(c) National 60 Minute Tune is not subject to any commitment or
obligation which would require the issuance or sale of shares of its capital
stock at any time under options, subscriptions, warrants, rights, calls,
preemptive rights, convertible obligations or any other fixed or contingent
obligations or which would provide the holder thereof with the right to acquire
any equity securities of National 60 Minute Tune. National 60 Minute Tune has no
obligation (contingent or other) to purchase, redeem or otherwise acquire any of
its equity securities or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
(d) PTW is not subject to any commitment or obligation which would
require the issuance or sale of shares of its capital stock at any time under
options, subscriptions, warrants, rights, calls, preemptive rights, convertible
obligations or any other fixed or contingent obligations or which would provide
the holder thereof with the right to acquire any equity securities of PTW. PTW
has no obligation (contingent or other) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof.
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6.2.3 Ownership of Shares. As of the date hereof the WE JAC Disclosure
Letter contains a true, complete and accurate list of each of the record and
beneficial owners of the shares of the capital stock of WE JAC, together with
the name and address of each such holder. There are no agreements, pledges,
powers of attorney, assignments or similar agreements or arrangements either (i)
restricting the transferability of any of the shares of the capital stock of WE
JAC or (ii) which reasonably could be expected to prohibit or delay the
consummation of the transactions contemplated hereby.
SECTION 6.3 SUBSIDIARIES; INVESTMENTS.
Except for Precision Tune, WE JAC does not own any shares of capital stock
or equity securities of, or any interest in any other entity, and WE JAC has
good, valid and marketable title, free and clear of all Encumbrances, to all
shares of capital stock or equity securities of, or interests in, Precision
Tune. Precision Tune owns all of the issued and outstanding capital stock of
National 60 Minute Tune and PTW.
SECTION 6.4 EXECUTION AND EFFECT OF AGREEMENT.
WE JAC has the corporate power to enter into this Agreement and to perform
its obligations hereunder and, subject to the due authorization and approval of
its shareholders, to enter into and consummate the WE JAC Merger. This Agreement
has been duly executed and delivered by WE JAC and constitutes a legal, valid
and binding obligation of WE JAC, fully enforceable against WE JAC in accordance
with its terms; except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the exercise of judicial discretion in accordance with
general principles of equity.
SECTION 6.5 RESTRICTIONS.
The execution and delivery of this Agreement by WE JAC, the consummation of
the transactions contemplated hereby by WE JAC, and, subject to the due
authorization and approval of its shareholders, the performance of the
obligations of WE JAC hereunder, will not (a) violate any of the provisions of
the charter or by-laws of WE JAC, (b) violate or conflict with the provisions of
any Applicable Laws, (c) result in the creation of any Encumbrance upon any of
the assets, rights or properties of WE JAC, or (d) except as disclosed in the WE
JAC Disclosure Letter, conflict with, violate any provisions of, result in a
breach of or give rise to a right of termination, modification or cancellation
of, constitute a default of, or accelerate the performance required by, with or
without the passage of time or the giving of notice or both, the terms of any
material agreement, indenture, mortgage, deed of trust, security or pledge
agreement, lease, contract, note, bond, license, permit, authorization or other
instrument to which WE JAC or any of its Subsidiaries is a party or to which any
of any of the assets of WE JAC or any of its Subsidiaries are subject.
SECTION 6.6 CONSENTS.
Except as disclosed in the WE JAC Disclosure Letter and as may be required
by any Applicable Laws relating to franchising, no filing with, or consent,
waiver, approval or authorization of, or notice to, any governmental authority
or any third party is required to be made or obtained by WE JAC or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
any document or instrument contemplated hereby, the consummation of any of the
transactions contemplated hereby or the performance of any of their respective
obligations hereunder or thereunder.
SECTION 6.7 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of the audited
consolidated balance sheets and related statements of income, cash flows and
changes in stockholders' equity of WE JAC as at June 30, 1995, 1996 and 1997 and
for the year periods then- ended (collectively, the "WE JAC Financial
Statements"). All of the WE JAC Financial Statements have been prepared in
accordance with GAAP. All of the WE JAC Financial Statements have been prepared
in a manner consistent with each other and the books and records of WE JAC and
its Subsidiaries, and fairly present in all material respects the financial
condition and results of operations of WE JAC and its Subsidiaries at the dates
and for the periods indicated therein. The regular books of account of WE JAC
and its Subsidiaries fairly and accurately reflect all material transactions
involving WE JAC and its Subsidiaries, are true, correct and complete and have
been prepared in accordance with GAAP and on a basis consistent with the
Financial Statements.
SECTION 6.8 DEBT.
The WE JAC Disclosure Letter contains a true, complete and accurate listing
as of the date hereof the original principal amount of all of the Debt of WE
JAC, the remaining principal balance thereof, the interest rate(s) payable by WE
JAC in
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respect thereof, if any, and the date(s) of maturity thereof. Except as
disclosed in the WE JAC Disclosure Letter, all of the Debt of WE JAC may be
prepaid at any time, without premium, prepayment penalties, termination fees or
other fees or charges.
SECTION 6.9 GUARANTEES.
The WE JAC Disclosure Letter contains a complete list of all Guarantees
provided by WE JAC or any of its Subsidiaries for the benefit of any other party
and of all Guarantees provided by any other party for the benefit of WE JAC or
any of its Subsidiaries or any party doing business with WE JAC or any of its
Subsidiaries.
SECTION 6.10 NO UNDISCLOSED LIABILITIES.
Neither WE JAC nor any of its Subsidiaries have any material liabilities or
obligations of any nature whatsoever (whether known or unknown, due or to become
due, absolute, accrued, contingent or otherwise, and whether or not determined
or determinable), except for (i) liabilities or obligations set forth in the WE
JAC Disclosure Letter, (ii) liabilities or obligations to the extent expressly
reflected on or reserved against in the June 30, 1997 balance sheet included
among the WE JAC Financial Statements or disclosed in the notes thereto, (iii)
liabilities or obligations of a type reflected on the June 30, 1997 balance
sheet and incurred in the ordinary course of business and consistent with past
practices since June 30, 1997, or (iv) liabilities or obligations arising under
the terms of the Material Contracts of WE JAC. Except as otherwise contemplated
or permitted by this Agreement, no dividends declared on any capital stock of WE
JAC are unpaid.
SECTION 6.11 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the
management of WE JAC, threatened, by or before any court, any Governmental
Authority or arbitrator, against WE JAC or any of its Subsidiaries that
reasonably could be expected to prevent the consummation of any of the
transactions contemplated hereby. Except as disclosed in the WE JAC Disclosure
Letter, there is no material suit, claim, action at law or in equity, proceeding
or governmental investigation or audit pending, or to the knowledge of
management of WE JAC, threatened, by or before any arbitrator, court, or other
Governmental Authority, against WE JAC or any of its Subsidiaries or involving
any of the former or present employees, agents, businesses, properties, rights
or assets of WE JAC or any of its Subsidiaries, nor, to the knowledge of
management of WE JAC, is there any basis for the assertion of any of the
foregoing. Except as disclosed in the WE JAC Disclosure Letter, there are no
judgments, orders, injunctions, decrees, stipulations or awards rendered by any
court, Governmental Authority or arbitrator currently binding or effective
against WE JAC or any of its Subsidiaries or any of their respective former or
present Employees, agents, properties or assets.
SECTION 6.12 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The WE JAC Disclosure Letter sets forth a complete list of all real
property owned by or leased to WE JAC or any of its Subsidiaries, and, with
respect to all properties leased by WE JAC, a description of the term of such
lease and the monthly rental thereunder. Neither WE JAC nor any of its
Subsidiaries is in default (and will not be in default with the passage of time
or the receipt of notice or both) and has not received notice of default, under
any lease of real property. All real property leased to WE JAC or any of its
Subsidiaries is available for immediate use in the operation of its business and
for the purpose for which such property currently is being utilized. Subject in
the case of leased property to the terms and conditions of the respective
leases, WE JAC or one or more of its Subsidiaries has full legal and practical
access to all such real property.
SECTION 6.13 INTELLECTUAL PROPERTY.
The WE JAC Disclosure Letter sets forth a complete list of (i) all
Intellectual Property owned, used or licensed by WE JAC or any of its
Subsidiaries, together with the identity of the owner thereof, and (ii) all
license agreements pursuant to which any Intellectual Property is licensed to or
by WE JAC or any of its Subsidiaries. WE JAC and its Subsidiaries own their
respective Intellectual Property free and clear of any and all Encumbrances, or,
in the case of licensed Intellectual Property, has valid, binding and
enforceable rights to use such Intellectual Property. WE JAC and each of its
Subsidiaries has duly and timely filed all renewals, continuations and other
filings necessary to maintain its Intellectual Property or registrations
thereof. Except as disclosed in the WE JAC Disclosure Letter, neither WE JAC nor
any of its Subsidiaries (i) has received any notice or claim to the effect that
the use of any Intellectual Property infringes upon, conflicts with or
misappropriates the rights of any other party or that any of the Intellectual
Property is not valid or enforceable, or (ii) has made any claim that any party
has violated or infringed upon its rights with respect to any Intellectual
Property.
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SECTION 6.14 MATERIAL CONTRACTS.
6.14.1 List of Material Contracts. The WE JAC Disclosure Letter sets forth
as of the date hereof a list of all material written, and a description of all
oral, commitments, agreements or contracts to which WE JAC or any of its
Subsidiaries is a party or by which WE JAC or any Subsidiary is obligated, other
than agreements pursuant to which Precision Tune or National 60 Minute Tune has
granted any franchise or similar rights with respect to the Precision Tune
System or any license or similar rights with respect to any of the Precision
Tune Marks, including, but not limited to, all commitments, agreements or
contracts embodying or evidencing the following transactions or arrangements:
(i) agreements for the employment of, or independent contractor arrangements
with, any officer or other individual employee of WE JAC or any of its
Subsidiaries; (ii) any consulting agreement, agency agreement and any other
service agreement that will continue in force after the Closing Date with
respect to the employment or retention by WE JAC or any of its Subsidiaries of
consultants, agents, legal counsel, accountants or anyone else who is not an
Employee; (iii) any single contract, purchase order or commitment providing for
expenditures by WE JAC or any of its Subsidiaries after the date hereof of more
than $25,000 or which has been entered into by WE JAC or any of its Subsidiaries
otherwise than in the ordinary course of business; (iv) agreements between WE
JAC or any of its Subsidiaries and suppliers to WE JAC or any of its
Subsidiaries pursuant to which either WE JAC or any of its Subsidiaries is
obligated to purchase or to sell or distribute the products of any other party
other than current purchase orders entered into in the ordinary course of
business consistent with past practices; (v) any contract containing covenants
limiting the freedom of WE JAC or any of its Subsidiaries or any officer,
director, or employee of WE JAC or any of its Subsidiaries to engage in any line
or type of business or with any person in any geographic area; (vi) any
commitment or arrangement by WE JAC or any of its Subsidiaries to participate in
a strategic alliance, partnership, joint venture, limited liability company or
other cooperative undertaking with any other Person; (vii) any commitments by WE
JAC or any of its Subsidiaries for capital expenditures involving more than
$25,000 individually or $50,000 in the aggregate; and (viii) any other contract,
commitment, agreement, understanding or arrangement that the management of WE
XXX xxxxx to be material to the business of WE JAC or any of its Subsidiaries.
6.14.2 No Breaches or Defaults. Except as disclosed in the WE JAC
Disclosure Letter, WE JAC and each of its Subsidiaries is in full compliance
with each, and is not in default under any, Material Contract to which it is a
party, and no event has occurred that, with notice or lapse of time or both,
would constitute such a default thereunder. Neither WE JAC nor any of its
Subsidiaries has waived any rights under or with respect to any of the Material
Contracts to which it is a party. The management of WE JAC has no knowledge, has
not received any notice to the effect, that any party with whom WE JAC or any of
its Subsidiaries has contractual arrangements under the Material Contracts, is
in default under any such contractual arrangements or that any event has
occurred that, with notice or lapse of time or both, would constitute such a
default thereunder. Each of the Material Contracts constitutes a legal, valid
and binding obligation of each of the parties thereto and is enforceable against
each of the parties thereto in accordance with its respective terms; except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
exercise of judicial discretion in accordance with general principles of equity.
6.14.3 Franchise Agreements. The WE JAC Disclosure Letter contains a
complete list as of the date hereof of (i) all of the current franchisees of
Precision Tune to whom Precision Tune has granted any franchise or similar
rights with respect to the Precision Tune System or any license or similar
rights with respect to any of the Precision Tune Marks and (ii) all area
development, area franchise, area subfranchisor, master license or similar
agreements that cover the development or franchising of Precision Tune
franchises within any area or country or the delegation of duties by Precision
Tune with respect to its obligations as a franchisor or otherwise (collectively,
the "Precision Tune Franchise Agreements"). Each of the Precision Tune Franchise
Agreements is a legal, valid and binding obligation of Precision Tune and is
enforceable against Precision Tune in accordance with its respective terms.
Precision Tune is in full compliance with the terms of each of the Precision
Tune Franchise Agreements and no event has occurred that, with or without notice
or lapse of time or both, constitutes or will constitute a default by Precision
Tune thereunder or a breach by Precision Tune thereof. Except as disclosed in
the WE JAC Disclosure Letter, Precision Tune has not waived any rights under or
with respect to any of the Precision Tune Franchise Agreements. Except as
disclosed in the WE JAC Disclosure Letter, to the knowledge of management of WE
JAC, as of the date hereof none of the franchisees or licensees that are parties
to any of the Precision Tune Franchise Agreements is in default thereunder and
no event has occurred that, with or without notice or lapse of time or both,
constitutes or will constitute a default thereunder or a breach thereof by such
franchisees or licensees.
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SECTION 6.15 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The WE JAC Disclosure Letter sets forth a
true, complete and correct list of all Employee Benefit Plans and all Benefit
Arrangements to which WE JAC or any of its Subsidiaries or ERISA Affiliates is a
party or to which WE JAC or any of its Subsidiaries or ERISA Affiliates is
obligated to contribute. None of the Employee Benefit Plans to which WE JAC or
any ERISA Affiliate of WE JAC is a party, which WE JAC or any ERISA Affiliate of
WE JAC sponsors or maintains or to which WE JAC or any ERISA Affiliate of WE JAC
contributes is subject to the requirements of Section 302 of ERISA or Section
412 of the Code.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the WE JAC Disclosure Letter, each Employee Benefit Plan and Benefit Arrangement
to which WE JAC or any of its Subsidiaries or ERISA Affiliates is a party or to
which WE JAC or any of its Subsidiaries or ERISA Affiliates is obligated to
contribute has been operated or maintained in compliance in all material
respects with all Applicable Laws, including, without limitation, ERISA and the
Code, and has been maintained in material compliance with its terms and in
material compliance with the terms of any applicable collective bargaining
agreement. Except as disclosed in the WE JAC Disclosure Letter, with respect to
any Employee Benefit Plan that is intended to qualify under Section 401 of the
Code, a favorable determination letter as to qualification under Section 401 of
the Code that considered the Tax Reform Act of 1986 has been issued and any
amendments required for continued qualification under Section 401 of the Code
have been timely adopted and nothing has occurred subsequent to the date of such
determination letter that could adversely affect the qualified status of any
such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which WE JAC or any of its Subsidiaries or ERISA Affiliates is a
party or to which WE JAC or any of its Subsidiaries or ERISA Affiliates is
obligated to contribute, under ERISA or the Code, for all periods of time prior
to the date hereof and that are attributable to Employees of WE JAC and its
Subsidiaries or ERISA Affiliates have been paid or otherwise adequately accrued
for or reserved against in the WE JAC Financial Statements, as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the WE
JAC Disclosure Letter, neither WE JAC nor any of its Subsidiaries is liable for
any arrearage of wages, any accrued or vested vacation pay or any tax or penalty
for failure to comply with any Applicable Law relating to employment or labor
above the level accrued for or reserved against on the June 30, 1997 balance
sheet included in the WE JAC Financial Statements, and there is no controversy
pending, threatened or in prospect between WE JAC or any of its Subsidiaries and
any of their respective Employees nor is the management of WE JAC aware of any
basis for any such controversy. There is no unfair labor practice charge or
complaint currently pending against WE JAC or any of its Subsidiaries with
respect to or relating to any of their respective Employees before the National
Labor Relations Board or any other agency having jurisdiction over such matters
and no charges or complaints are currently pending against WE JAC or any of its
Subsidiaries before the Equal Employment Opportunity Commission or any state or
local agency having responsibility for the prevention of unlawful employment
practices. There are no actions, suits or claims pending, including proceedings
before the IRS, the DOL or the PBGC, with respect to any Employee Benefit Plan,
Benefit Arrangement or any administrator or fiduciary thereof, other than
benefit claims arising in the normal course of operation of such Employee
Benefit Plans or Benefit Arrangements, and, to the knowledge of the management
of WE JAC, no Employee Benefit Plan or Benefit Arrangement is under audit or
investigation by any Governmental Authority.
(e) Severance Obligations. Except as disclosed in the WE JAC
Disclosure Letter, all current employees of WE JAC or any of its Subsidiaries
may be terminated at will, without notice and without incurring any severance or
other liability or obligation to the employee in connection with the
termination. Except to the extent provided by the terms of the Employee Benefit
Plans and Benefit Arrangements disclosed in the WE JAC Disclosure Letter,
neither the execution, delivery or performance of this Agreement nor the
consummation of the Closing will (i) increase any benefits otherwise payable
under any Employee Benefit Plan or Benefit Arrangement, (ii) result in the
acceleration of the time of payment or vesting of any such benefits, or (iii)
give rise to an obligation with respect to the payment of any severance pay. No
"parachute payment" (within the meaning of Section 280G of the Code), "change in
control" or severance payment has been made or will be required to be made by WE
JAC or any ERISA Affiliate of WE JAC to any Employee in connection with the
execution, delivery or performance of this Agreement or as a result of the
consummation of the Closing.
(f) Compliance with Laws on Employment Practices. WE JAC and each of
its Subsidiaries has complied in all material respects with all Applicable laws
relating to employment and employment practices, terms and conditions of
employment, wages and hours, and to the knowledge of the management of WE JAC,
is not engaged in any unfair labor practice with respect to any of the current
employees of WE JAC or any of its Subsidiaries; and to the knowledge of WE
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JAC, none of the persons performing services for WE JAC or any of its
Subsidiaries or ERISA Affiliates have been improperly classified as independent
contractors or as being exempt from payment of wages or overtime.
(g) Collective Bargaining Agreements. Except as disclosed in the WE
JAC Disclosure Letter, none of the employees of WE JAC or any of its
Subsidiaries are subject to any collective bargaining agreement nor is WE JAC or
any of its Subsidiaries required under any agreement to recognize or bargain
with any labor organization or union on behalf of its employees.
(h) No Multi-Employer Plans. Neither WE JAC nor any of its
Subsidiaries or ERISA Affiliates has contributed to, or had the obligation to
contribute to, any Multiemployer Plan within the five-year period ending on the
date of this Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by WE JAC or any of its
Subsidiaries or ERISA Affiliates relating to, or change in employee
participation or coverage under, any Employee Benefit Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Benefit Plan or Benefit Arrangement above the level of the expense
incurred in respect thereof for the fiscal year of WE JAC ended June 30, 1997.
(j) No Unfunded Liabilities. Neither WE JAC nor any ERISA Affiliate of
WE JAC has any current or projected liability for any unfunded post-retirement
medical or life insurance benefits in connection with any Employee of WE JAC or
ERISA Affiliate of WE JAC.
(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by WE JAC or any ERISA Affiliate of WE JAC, which
could subject any such Employee Benefit Plan, WE JAC, any ERISA Affiliate of WE
JAC, or the Holding Company directly or indirectly (through an indemnification
agreement or otherwise), to any liability for or as a result of a breach of
fiduciary duty, a "prohibited transaction" within the meaning of Section 406 of
ERISA or Section 4975 of the Code, or a civil penalty under Section 502 of ERISA
or a Tax under Section 4971 of the Code. Neither WE JAC nor any of its ERISA
Affiliates have incurred a "withdrawal" or "partial withdrawal," as defined in
Sections 4203 and 4205 of ERISA, from, or failed to timely make contributions to
any Multiemployer Plan which has resulted in any unpaid liability of WE JAC or
any of its ERISA Affiliates.
(l) Welfare Benefit Plans. (i) Except as disclosed in the WE JAC
Disclosure Letter, none of the Employee Benefit Plans that are "employee welfare
benefit plans" as defined in ERISA Section 3(1) provides for continuing benefits
or coverage for any participant or beneficiary of a participant after such
participant's termination of employment, except to the extent required by law;
provided that any disclosure regarding this clause (i) shall set forth (A) the
number of individuals currently receiving such continuing benefits or coverage,
(B) the limit on liability with respect to such coverage, (C) the terms and
conditions of such coverage, and (D) the maximum number of current employees or
independent contractors who could become eligible for such continuing benefits
or coverage; (ii) there has been no violation of Code Section 4980B or ERISA
Sections 601-609 with respect to any such plan that could result in any material
liability; (iii) no such plans are "multiple employer welfare arrangements"
within the meaning of ERISA Section 3(40); (iv) with respect to any such plans
that are self-insured, no claims have been made pursuant to any such plan that
have not yet been paid (other than claims which have not yet been paid but are
in the normal course of processing) and no individual has incurred injury,
sickness or other medical condition with respect to which claims may be made
pursuant to any such plan where the liability to the employer could in the
aggregate with respect to each such individual exceed $50,000 per year; (v)
neither WE JAC nor any of its ERISA Affiliates maintains or has any obligation
to contribute to any "voluntary employees' beneficiary association" within the
meaning of Code Section 501(c)(9) or other welfare benefit fund as defined at
Section 419(e) of the Code (such disclosure to include the amount of any such
funding); (vi) no such plan is intended to satisfy Code Section 125; (vii) no
amounts are required in connection with any such plan to be included in income
under Code Section 105(h) (under official regulations thereof to date); and
(viii) neither WE JAC nor any of its ERISA Affiliates maintains a nonconforming
group health plan as defined at Section 5000(c) of the Code.
SECTION 6.16 TAX MATTERS.
(a) Tax Returns and Payment of Taxes. WE JAC and each of its
Subsidiaries has timely filed or will timely file all federal, state, local, and
other Tax Returns required to be filed by it under Applicable Laws, including
estimated Tax returns and reports and consolidated federal Income Tax Returns
and state, local or foreign Income Tax Returns filed on a consolidated or
combined basis, and WE JAC and each of its Subsidiaries has paid all required
Income Taxes and other Taxes
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(including any additions to taxes, penalties and interest related thereto) due
and payable on or before the date hereof (and will duly and timely pay all such
amounts required to be paid between the date hereof and the Closing Date). Each
of WE JAC and its Subsidiaries has paid, withheld, or will pay any and all Taxes
in respect of the conduct of its business or the ownership of its property and
in respect of any transaction for all periods (or portions thereof) through the
close of business on the Closing Date. WE JAC and each of its Subsidiaries have
collected all sales, use and value added Taxes required to be collected, and has
remitted, or will remit on a timely basis, such amounts to the appropriate
Government Authorities and have furnished properly completed exemption
certificates for all exempt transactions.
(b) Tax Reserves. The amount of the liability of WE JAC and of each of
its Subsidiaries for unpaid Taxes for all periods ending on or before the date
of this Agreement does not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) as of the
date of this Agreement, and the amount of the liability of WE JAC and of each of
its Subsidiaries for unpaid Taxes for all periods ending on or before the
Closing Date will not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) as such
accruals shall be reflected on the consolidated balance sheet of WE JAC and its
Subsidiaries as of the Closing Date.
(c) Audits; No Deficiencies Asserted. Except as set forth in the WE
JAC Disclosure Letter, none of the Tax Returns of WE JAC or of any of its
Subsidiaries have ever been audited by any Tax Authority, nor is any such audit
in process, pending or threatened (either in writing or verbally, formally or
informally), and all deficiencies asserted against WE JAC or any of its
Subsidiaries as a result of IRS examinations have been paid or finally settled
and no issue has been raised by any IRS examination that, by application of the
same principles, is likely to result in a proposed deficiency for any other
period not so examined. Except as set forth in the WE JAC Disclosure Letter, no
material deficiencies with respect to Taxes, additions to Tax, interest, or
penalties have been proposed or asserted against and communicated to WE JAC or
any of its Subsidiaries, except those that have been paid in full and for those
matters that would not result in liability being imposed against WE JAC or any
of its Subsidiaries.
(d) No Waivers of Limitations. Except as set forth in the WE JAC
Disclosure Letter, there are no agreements, waivers of statutes of limitations,
or other arrangements providing for extensions of time in respect of the
assessment or collection of any unpaid Tax against WE JAC or any of its
Subsidiaries. WE JAC and each of its Subsidiaries have disclosed on its federal
Income Tax Returns all positions taken therein that could, if not so disclosed,
give rise to a substantial understatement penalty within the meaning of Section
6662 of the Code.
(e) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of WE JAC or of any of is Subsidiaries with respect to
Taxes, other than liens for Taxes not yet due and payable or for Taxes that WE
JAC or one or more of its Subsidiaries are contesting in good faith through
appropriate proceedings and for which appropriate reserves have been established
on the WE JAC Financial Statements.
(f) Special Tax Elections or Benefits. Neither WE JAC nor any of is
Subsidiaries is a party to any safe harbor lease within the meaning of Section
168(f)(8) of the Code. No election or consent under Section 341(f) of the Code
has been made or shall be made on or prior to the Closing Date by or on behalf
of any of WE JAC or any of its Subsidiaries.
(g) Disqualified Leasebacks. Neither WE JAC nor any of its
Subsidiaries is a party to a "disqualified leaseback or long-term agreement"
described in Section 467(b)(4) of the Code.
(h) Deferrals of Income. No income or gain of WE JAC or any of its
Subsidiaries has been deferred pursuant to Treasury Regulation (section xxxx)
1.1502-13 or 1.1502-14, or Temporary Treasury Regulation (section xxxx)
1.1502-13T or 1.1502-14T.
(i) Tax Sharing and Similar Agreements. Except as disclosed in the WE
JAC Disclosure Letter, neither WE JAC nor any of its Subsidiaries is a party to
or bound by any Tax sharing, Tax indemnity or Tax allocation agreement or other
similar arrangement with any Person other than a Constituent Company of the WE
JAC Group.
(j) No Non-Deductible Compensation Payments. Neither WE JAC nor any of
its Subsidiaries has made any payments, and are not obligated to make any
payments, that would not be deductible under Section 280G of the Code or is a
party to any agreement that under certain circumstances could obligate it to
make any such payments.
SECTION 6.17 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by WE JAC or
any of its Subsidiaries and any other real property presently or formerly owned
by, used by or leased to or by WE JAC or any of its Subsidiaries (collectively,
the "WE JAC Property"), the existing and prior uses of such WE JAC Property and
all operations of the businesses of WE JAC and of each of its Subsidiaries
comply and have at all times complied with all Environmental Laws and neither WE
JAC nor any of
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its Subsidiaries is in violation or has violated, in connection with the
ownership, use, maintenance or operation of such property or the conduct of its
business, any Environmental Law.
(b) WE JAC and each of its Subsidiaries have all necessary permits,
registrations, approvals and licenses required by any Governmental Authority or
Environmental Law.
(c) There has been no spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any kind on, beneath or above such WE
JAC Property or into the environment surrounding such WE JAC Property of any
Hazardous Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such WE JAC
Property. No asbestos-containing materials, underground improvements (including,
but not limited to the treatment or storage tanks, sumps, or water, gas or oil
xxxxx) or polychlorinated biphenyls (PCBs) transformers, capacitors, ballasts,
or other equipment which contain dielectric fluid containing PCBs at levels in
excess of fifty parts per million (50 PPM) are or have ever been located on such
WE JAC Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of WE JAC (or any predecessor in interest) in connection with (i) any
actual or alleged failure to comply with any requirement of any Environmental
Law; (ii) the ownership, use, maintenance or operation of the Property by any
person; (iii).the alleged violation of any Environmental Law; or (iv) the
suspected presence of any Hazardous Material thereon.
(f) Neither WE JAC nor any of its Subsidiaries has ever had the
capacity to exercise control/manage and has never exercised control or
management over any matter relating to its franchisees' manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
SECTION 6.18 COMPLIANCE WITH LAWS.
WE JAC and each of its Subsidiaries has at all times conducted its business
in material compliance with all (and has not received any notice of any claimed
violation of any) Applicable Laws. Precision Tune has complied in all material
respects with all of the rules and regulations of the Federal Trade Commission
of the United States relating to the offer and sale of franchises.
SECTION 6.19 LICENSES AND PERMITS.
WE JAC and each of its Subsidiaries possess all licenses, permits, and
other governmental consents, certificates, approvals, or other authorizations
(the "Permits") necessary for the operation of their respective businesses. WE
JAC and each of its Subsidiaries has complied with the terms and conditions of
all Permits in all material respects and all such Permits are in full force and
effect, and there has occurred no event nor is any event, action, investigation
or proceeding pending or, to the knowledge of management of WE JAC, threatened,
which could cause or permit revocation or suspension of or otherwise adversely
affect the maintenance of any Permits. The transactions contemplated by this
Agreement will not lead to the revocation, cancellation, termination or
suspension of any Permits.
SECTION 6.20 INSURANCE.
WE JAC and each of its Subsidiaries has regularly maintained all policies
of commercial liability, products liability, fire, casualty, worker's
compensation, life and other forms of insurance on an "occurrence" rather than a
"claims made" basis in amounts and types required by law and generally carried
by reasonably prudent, similarly situated businesses. Neither WE JAC nor any of
its Subsidiaries is in default with respect to any provision contained in any
insurance policy, nor has WE JAC or any of its Subsidiaries failed to give any
notice or present any claim thereunder in due and timely fashion and no
cancellation, non-renewal, reduction of coverage or arrearage in premiums has
been threatened or occurred with respect to any policy, nor is the management of
WE JAC aware of any grounds therefor.
SECTION 6.21 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the WE JAC Disclosure Letter or as otherwise
permitted by this Agreement, since June 30, 1997, neither WE JAC nor any of its
Subsidiaries has (i) mortgaged, pledged or subjected to any Encumbrance any of
its assets; (ii) canceled or compromised any claim of or debts owed to it; (iii)
sold, licensed, leased, exchanged or transferred any of its assets except in the
ordinary course of business; (iv) entered into any material transaction other
than in the ordinary course of
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business; (v) experienced any material change in the relationship or course of
dealing with any supplier, franchisee, customer or creditor; (vi) suffered any
material destruction, loss or damage to any of its assets; (vii) made any
management decisions involving any material change in its policies with regard
to pricing, sales, purchasing or other business, financial, accounting
(including reserves and the amounts thereof) or tax policies or practices;
(viii) declared, set aside or paid any dividends on or made any distributions in
respect of any outstanding shares of capital stock or made any other
distributions or payments to any of the shareholders of WE JAC; (ix) submitted
any bid, proposal, quote or commitment to any party in response to a request for
proposal or otherwise; (x) engaged in any merger or consolidation with, or
agreed to merge or consolidate with, or purchased or agreed to purchase, all or
substantially all of the assets of, or otherwise acquire, any other party; (xi)
entered into any strategic alliance, partnership, joint venture or similar
arrangement with any other party; (xii) incurred or agreed to incur any Debt or
prepaid or made any prepayments in respect of Debt; (xiii) issued or agreed to
issue to any party, any shares of stock or other securities; (xiv) redeemed,
purchased or agreed to redeem or purchase any of its outstanding shares of
capital stock or other securities; (xv) increased the rate of compensation
payable or to become payable to any of its officers, directors, employees or
agents over the rate being paid to them as of June 30, 1997 or agreed to do so
otherwise than in accordance with contractual agreements with such parties;
(xvi) made or agreed to make any charitable contributions or incurred or agreed
to incur any non-business expenses; or (xvii) charged off any bad debts or
increased its bad debt reserve except in the manner consistent with its past
practices.
SECTION 6.22 TITLE TO ASSETS.
Except as described in the WE JAC Disclosure Letter, WE JAC and each of its
Subsidiaries has good and marketable title to its assets and properties, free
and clear of restrictions on or conditions to transfer or assignment, and free
and clear of all Encumbrances.
SECTION 6.23 CORPORATE RECORDS.
The minute books of WE JAC and each of its Subsidiaries accurately reflect
all minutes of proceedings of and actions taken by the directors of WE JAC and
its Subsidiaries, respectively, and each committee of the Board of Directors of
WE JAC or any of its Subsidiaries and all records of meetings of and actions
taken by the stockholders of WE JAC, that are required by applicable laws to be
recorded in or reflected in the corporate records thereof.
SECTION 6.24 BROKER AND FINDER FEES.
WE JAC has not engaged any broker or finder in connection with the
transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company, WE JAC or any of its Subsidiaries by any broker, finder or intermediary
in connection with such transaction.
SECTION 6.25 ADEQUATE DISCLOSURE.
No representation or warranty made by WE JAC pursuant to this Agreement, or
any statement contained in any Exhibit or Schedule to this Agreement, or any
certificate or document furnished or to be furnished by WE JAC or any of its
Subsidiaries pursuant to the terms of this Agreement in connection with the
transactions contemplated hereby, contains any untrue or misleading statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
SECTION 6.26 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the WE JAC Disclosure Letter, and except as
expressly contemplated or permitted by this Agreement, since June 30, 1997, WE
JAC and each of its Subsidiaries has conducted its business in the ordinary
course and consistent with past practice, and neither WE JAC nor any of its
Subsidiaries has suffered any change that has had a Material Adverse Effect on
WE JAC and its Subsidiaries, taken as a whole. There are no conditions, facts,
developments or circumstances of an unusual or special nature that reasonably
could be expected to have a Material Adverse Effect upon WE JAC and its
Subsidiaries, taken as a whole, that have not been disclosed in writing by WE
JAC pursuant to the WE JAC Disclosure Letter.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF LUBE VENTURE
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, Lube Ventures hereby makes the
following representations and warranties to the other parties to this Agreement
and to the Holding Company:
SECTION 7.1 ORGANIZATION AND GOOD STANDING.
Lube Ventures is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has full corporate power
and authority to own, operate and lease its properties, and to conduct its
business as it is now being conducted, and is qualified to transact business as
a foreign corporation in each jurisdiction in which the operation of its
business or the ownership of its properties requires such qualification.
SECTION 7.2 CAPITALIZATION OF LUBE VENTURES.
The authorized capital stock of Lube Ventures consists solely of 3,000
shares of a single class of common stock, $-0- par value, of which 100 shares
have been issued and are outstanding as of the date of this Agreement. Each of
the shares of the capital stock of Lube Ventures issued and outstanding as of
the date hereof has been duly authorized and validly issued and is fully paid
and non-assessable. None of the shares of the issued and outstanding capital
stock of Lube Ventures has been issued in violation of shareholder preemptive
rights. Lube Ventures has no issued or outstanding equity securities, debt
securities or other instruments which are convertible into or exchangeable for
at any time into equity securities of Lube Ventures. Lube Ventures is not
subject to any commitment or obligation which would require the issuance or sale
of shares of its capital stock at any time under options, subscriptions,
warrants, rights, calls, preemptive rights, convertible obligations or any other
fixed or contingent obligations or which would provide the holder thereof with
the right to acquire any equity securities of Lube Ventures. Lube Ventures has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof.
SECTION 7.3 OWNERSHIP OF SHARES.
The Lube Ventures Disclosure Letter contains a true, complete and accurate
list of all of the record and beneficial owners of the shares of the capital
stock of Lube Ventures, together the name and address of each such holder.
Except as disclosed in the Lube Ventures Disclosure Letter, there are no
existing agreements, pledges, powers of attorney, assignments or similar
agreements or arrangements either (i) restricting the transferability of any of
the shares of the capital stock of Lube Ventures or (ii) which reasonably could
be expected to prohibit or delay the consummation of the transactions
contemplated hereby.
SECTION 7.4 SUBSIDIARIES; INVESTMENTS.
Lube Ventures does not own any shares of capital stock or equity securities
of, or any interest in any other Person or entity.
SECTION 7.5 EXECUTION AND EFFECT OF AGREEMENT.
Lube Ventures has the corporate power to enter into this Agreement and to
perform its obligations hereunder and, subject to the due authorization and
approval of its shareholders, to enter into and consummate the Lube Ventures
Merger. This Agreement has been duly executed and delivered by Lube Ventures and
constitutes a legal, valid and binding obligation of Lube Ventures, fully
enforceable against Lube Ventures in accordance with its terms; except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
exercise of judicial discretion in accordance with general principles of equity.
SECTION 7.6 RESTRICTIONS.
The execution and delivery of this Agreement by Lube Ventures, the
consummation of the transactions contemplated hereby by Lube Ventures, and,
subject to the due authorization and approval of its shareholders, the
performance of the obligations of Lube Ventures hereunder will not (a) violate
any of the provisions of the charter or by-laws of Lube Ventures, (b) violate or
conflict with the provisions of any Applicable Laws, (c) result in the creation
of any Encumbrance upon any of the assets, rights or properties of Lube
Ventures, or (d) except as disclosed in the Lube Ventures Disclosure Letter,
conflict with, violate any provisions of, result in a breach of or give rise to
a right of termination, modification or cancellation of,
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constitute a default of, or accelerate the performance required by, with or
without the passage of time or the giving of notice or both, the terms of any
material agreement, indenture, mortgage, deed of trust, security or pledge
agreement, lease, contract, note, bond, license, permit, authorization or other
instrument to which Lube Ventures is a party or to which any of any of the
assets of Lube Venture are subject.
SECTION 7.7 CONSENTS.
Except as disclosed in the Lube Ventures Disclosure Letter and as may be
required by Applicable Laws relating to franchising, no filing with, or consent,
waiver, approval or authorization of, or notice to, any governmental authority
or any third party is required to be made or obtained by Lube Ventures in
connection with the execution and delivery of this Agreement or any document or
instrument contemplated hereby, the consummation of any of the transactions
contemplated hereby or the performance of any of their respective obligations
hereunder or thereunder.
SECTION 7.8 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of the audited
financial statements of Lube Ventures as at December 31, 1994, 1995 and 1996,
and for the year periods then ended and the unaudited financial statements of
Lube Venturess as at June 30, 1997 and for the six month period then ended
(collectively, the "Lube Ventures Financial Statements"). All of the Lube
Ventures Financial Statements have been prepared in accordance with GAAP. All of
the Lube Ventures Financial Statements have been prepared in a manner consistent
with each other and the books and records of Lube Ventures, and fairly present
in all material respects the financial condition and results of operations of
Lube Ventures at the dates and for the periods indicated therein. The regular
books of account of Lube Ventures fairly and accurately reflect all material
transactions involving Lube Ventures, are true, correct and complete and have
been prepared in accordance with GAAP and on a basis consistent with the
Financial Statements. All of the accounts receivable of Lube Ventures reflected
on the Lube Ventures Financial Statements arose from bona fide, arms-length
transactions in the ordinary course of business for services performed or goods
sold by Lube Ventures, and are not subject to any counterclaim, deduction, right
of set off, set off or recoupment, and will be collectible in the ordinary
course of business in the aggregate face amounts thereof, subject to the
reserves therefore set forth on the Lube Ventures Financial Statements. All
inventories reflected on the books and records of Lube Venture and on the Lube
Ventures Financial Statements are of a quality and quantity which are good and
marketable, and are saleable in the ordinary course of business which shall
result in Lube Ventures realizing gross profits on such sales consistent with
the gross profits of Lube Ventures reflected in the Lube Venture Financial
Statements. The costs of all inventories reflected thereon have been valued in
accordance with GAAP.
SECTION 7.9 DEBT.
The Lube Ventures Disclosure Letter contains a true, complete and accurate
listing of the original principal amount of all of the Debt of Lube Ventures,
the remaining principal balance thereof, the interest rate(s) payable by Lube
Ventures in respect thereof, if any, and the date(s) of maturity thereof. Except
as disclosed in the Lube Ventures Disclosure Letter, all of the Debt of Lube
Ventures may be prepaid at any time, without premium, prepayment penalties,
termination fees or other fees or charges.
SECTION 7.10 GUARANTEES.
The Lube Ventures Disclosure Letter contains a complete list of all
Guarantees provided by Lube Ventures for the benefit of any other party and of
all Guarantees provided by any other party for the benefit of Lube Ventures or
any party doing business with Lube Ventures.
SECTION 7.11 NO UNDISCLOSED LIABILITIES.
Lube Ventures does not have any material liabilities or obligations of any
nature whatsoever (whether known or unknown, due or to become due, absolute,
accrued, contingent or otherwise, and whether or not determined or
determinable), except for (i) liabilities or obligations set forth in the Lube
Ventures Disclosure Letter, (ii) liabilities or obligations to the extent
expressly reflected on or reserved against in the June 30, 1997 balance sheet
included among the Lube Ventures Financial Statements or disclosed in the notes
thereto, (iii) liabilities or obligations of a type reflected on the June 30,
1997 balance sheet and incurred in the ordinary course of business and
consistent with past practices since June 30, 1997, or (iv) liabilities or
obligations arising under the terms of the Material Contracts of Lube Ventures.
Except as otherwise contemplated or permitted by this Agreement no dividends
have been declared on any capital stock of Lube Ventures which are unpaid.
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SECTION 7.12 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the
management of Lube Ventures, threatened, by or before any court, any
Governmental Authority or arbitrator, against Lube Ventures that reasonably
could be expected to prevent the consummation of any of the transactions
contemplated hereby. Except as disclosed in the Lube Ventures Disclosure Letter,
there is no material suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or to the knowledge of management
of Lube Ventures, threatened, by or before any arbitrator, court, or other
Governmental Authority, against Lube Ventures or involving any of the former or
present employees, agents, businesses, properties, rights or assets of Lube
Venture, nor, to the knowledge of management of Lube Ventures, is there any
basis for the assertion of any of the foregoing. Except as disclosed in the Lube
Ventures Disclosure Letter, there are no judgments, orders, injunctions,
decrees, stipulations or awards rendered by any court, Governmental Authority or
arbitrator against Lube Ventures or any of their respective former or present
Employees, agents, properties or assets.
SECTION 7.13 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The Lube Ventures Disclosure Letter sets forth a complete list of all real
property owned by or leased to Lube Ventures, and, with respect to all
properties leased by Lube Venture, a description of the term of such lease and
the monthly rental thereunder. Lube Ventures is not in default (and will not be
in default with the passage of time or the receipt of notice or both) and has
not received notice of default, under any lease of real property. All real
property leased to Lube Venture is available for immediate use in the operation
of its business and for the purpose for which such property currently is being
utilized. Subject in the case of leased property to the terms and conditions of
the respective leases, Lube Ventures has full legal and practical access to all
such real property.
SECTION 7.14 INTELLECTUAL PROPERTY.
The Lube Ventures Disclosure Letter sets forth a complete list of (i) any
and all Intellectual Property owned, used or licensed by Lube Ventures, together
with the identity of the owner thereof, and (ii) all license agreements pursuant
to which any Intellectual Property is licensed to or by Lube Ventures. Lube
Ventures owns its Intellectual Property free and clear of any and all
Encumbrances, or, in the case of licensed Intellectual Property, has valid,
binding and enforceable rights to use such Intellectual Property. Lube Ventures
has duly and timely filed all renewals, continuations and other filings
necessary to maintain its Intellectual Property or registrations thereof. Except
as disclosed in the Lube Ventures Disclosure Letter, Lube Ventures (i) has not
received any notice or claim to the effect that the use of any Intellectual
Property infringes upon, conflicts with or misappropriates the rights of any
other party or that any of the Intellectual Property is not valid or
enforceable, and (ii) has not made any claim that any party has violated or
infringed upon its rights with respect to any Intellectual Property.
SECTION 7.15 MATERIAL CONTRACTS.
(a) List of Material Contracts. The Lube Venture Disclosure Letter
sets forth a list of all written, and a description of all oral, commitments,
agreements or contracts to which Lube Ventures is a party or by which Lube
Ventures is obligated, including, but not limited to, all commitments,
agreements or contracts embodying or evidencing the following transactions or
arrangements: (i) agreements for the employment of, or independent contractor
arrangements with, any officer or other individual Employee of Lube Ventures;
(ii) any consulting agreement, agency agreement and any other service agreement
that will continue in force after the Closing Date with respect to the
employment or retention by Lube Ventures of consultants, agents, legal counsel,
accountants or anyone else who is not an Employee; (iii) any single contract,
purchase order or commitment providing for expenditures by Lube Ventures after
the date hereof of more than $25,000 or which has been entered into by Lube
Ventures otherwise than in the ordinary course of business; (iv) agreements
between Lube Ventures and suppliers to Lube Ventures pursuant to which Lube
Ventures is obligated to purchase or to sell or distribute the products of any
other party other than current purchase orders entered into in the ordinary
course of business consistent with past practices; (v) any contract containing
covenants limiting the freedom of Lube Ventures or any officer, director, or
employee of Lube Venture to engage in any line or type of business or with any
person in any geographic area; (vi) any commitment or arrangement by Lube
Ventures to participate in a strategic alliance, partnership, joint venture,
limited liability company or other cooperative undertaking with any other
Person; (vii) any commitments by Lube Ventures for capital expenditures
involving more than $25,000 individually or $50,000 in the aggregate; and (viii)
any other contract, commitment, agreement, understanding or arrangement that the
management of Lube Venture deems to be material to the business of Lube
Ventures.
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(b) No Breaches or Defaults. Except as disclosed in the Lube Ventures
Disclosure Letter, Lube Ventures and is in full compliance with each, and is not
in default under any, Material Contract to which it is a party, and no event has
occurred that, with notice or lapse of time or both, would constitute such a
default thereunder. Neither Lube Ventures nor any of Subsidiaries has waived any
rights under or with respect to any of the Material Contracts to which it is a
party. The management of Lube Ventures has no knowledge, or received any notice
to the effect, that any party with whom Lube Ventures has contractual
arrangements under the Material Contracts, is in default under any such
contractual arrangements or that any event has occurred that, with notice or
lapse of time or both, would constitute such a default thereunder. Each of the
Material Contracts constitutes a legal, valid and binding obligation of each the
parties thereto and is enforceable against each of the parties thereto in
accordance with its respective terms; except as enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the exercise of judicial
discretion in accordance with general principles of equity.
(c) Franchise Agreements. The Lube Ventures Disclosure Letter contains
a complete list of all of the current franchisees of Lube Ventures to whom Lube
Ventures has granted to any franchise or similar rights with respect to the Lube
Depot System (collectively, the "Lube Depot Franchise Agreements"). Each of the
Lube Depot Franchise Agreements is a legal, valid and binding obligation of Lube
Ventures and is enforceable against Lube Ventures in accordance with its
respective terms. Lube Ventures is in full compliance with the terms of each of
the Lube Depot Franchise Agreements and no event has occurred that, with or
without notice or lapse of time or both, constitutes or will constitute a
default by Lube Ventures thereunder or a breach by Lube Ventures thereof. Except
as disclosed in the Lube Ventures Disclosure Letter, Lube Ventures has not
waived any rights under or with respect to any of the Lube Depot Franchise
Agreements. Except as disclosed in the Lube Ventures Disclosure Letter, to the
knowledge of management of Lube Ventures, none of the franchisees or licensees
that are parties to any of the Lube Depot Franchise Agreements is in default
thereunder and no event has occurred that, with or without notice or lapse of
time or both, constitutes or will constitute a default thereunder or a breach
thereof by such franchisees or licensees.
SECTION 7.16 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The Lube Ventures Disclosure Letter sets
forth a true, complete and correct list of all Employee Benefit Plans and all
Benefit Arrangements to which Lube Ventures or any of its ERISA Affiliates is a
party or to which Lube Ventures or any of its ERISA Affiliates is obligated to
contribute. None of the Employee Benefit Plans to which Lube Ventures or any
ERISA Affiliate of Lube Ventures is a party, which Lube Venture or any ERISA
Affiliate of Lube Ventures sponsors or maintains or to which Lube Ventures or
any ERISA Affiliate of Lube Ventures contributes is subject to the requirements
of Section 302 of ERISA or Section 412 of the Code and no liability under Title
IV of ERISA (whether to the PBGC or otherwise) has been incurred by Lube
Ventures or any of its ERISA Affiliates.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the Lube Ventures Disclosure Letter, each Employee Benefit Plan and Benefit
Arrangement to which Lube Ventures or any of its ERISA Affiliates is a party or
to which Lube Ventures or any of its ERISA Affiliates is obligated to contribute
has been operated or maintained in compliance in all material respects with all
Applicable Laws, including, without limitation, ERISA and the Code, and has been
maintained in material compliance with its terms and in material compliance with
the terms of any applicable collective bargaining agreement. Except as disclosed
in the Lube Ventures Disclosure Letter, with respect to any Employee Benefit
Plan that is intended to qualify under Section 401 of the Code, a favorable
determination letter as to qualification under Section 401 of the Code that
considered the Tax Reform Act of 1986 has been issued and any amendments
required for continued qualification under Section 401 of the Code have been
timely adopted and nothing has occurred subsequent to the date of such
determination letter that could adversely affect the qualified status of any
such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which Lube Ventures or any of its ERISA Affiliates is a party or
to which Lube Ventures or any of its ERISA Affiliates is obligated to
contribute, under ERISA or the Code, for all periods of time prior to the date
hereof and that are attributable to Employees of Lube Ventures have been paid or
otherwise adequately accrued against in the Lube Ventures Financial Statements,
as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the
Lube Ventures Disclosure Letter, Lube Ventures is not liable for any arrearage
of wages, any accrued or vested vacation pay or any tax or penalty for failure
to comply with any Applicable Law relating to employment or labor above the
level accrued for or reserved against on the June 30, 1997 balance sheet
included in the Lube Ventures Financial Statements, and there is no controversy
pending, threatened or in
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prospect between Lube Ventures and any of their respective Employees nor is
there any basis for any such controversy. There is no unfair labor practice
charge or complaint currently pending against Lube Ventures with respect to or
relating to any of their respective Employees before the National Labor
Relations Board or any other agency having jurisdiction over such matters and no
charges or complaints are currently pending against Lube Ventures before the
Equal Employment Opportunity Commission or any state or local agency having
responsibility for the prevention of unlawful employment practices. There are no
actions, suits or claims pending, including proceedings before the IRS, the DOL
or the PBGC, with respect to any Employee Benefit Plan, Benefit Arrangement or
any administrator or fiduciary thereof, other than benefit claims arising in the
normal course of operation of such Employee Benefit Plans or Benefit
Arrangements, and, to the knowledge of the management of Lube Ventures, no
Employee Benefit Plan or Benefit Arrangement is under audit or investigation by
any Governmental Authority.
(e) Severance Obligations. Except as disclosed in the Lube Ventures
Disclosure Letter, all current employees of Lube Ventures may be terminated at
will, without notice and without incurring any severance or other liability or
obligation to the employee in connection with the termination. Except to the
extent provided by the terms of the Employee Benefit Plans and Benefit
Arrangements disclosed in the Lube Ventures Disclosure Letter, neither the
execution, delivery or performance of this Agreement nor the consummation of the
Closing will (i) increase any benefits otherwise payable under any Employee
Benefit Plan or Benefit Arrangement, (ii) result in the acceleration of the time
of payment or vesting of any such benefits, or (iii) give rise to an obligation
with respect to the payment of any severance pay. No "parachute payment" (within
the meaning of Section 280G of the Code), "change in control" or severance
payment has been made or will be required to be made by Lube Ventures or any
ERISA Affiliate of Lube Ventures to any of its Employees in connection with the
execution, delivery or performance of this Agreement or as a result of the
consummation of the Closing.
(f) Compliance with Laws on Employment Practices. Lube Ventures has
complied in all material respects with all Applicable laws relating to
employment and employment practices, terms and conditions of employment, wages
and hours, and to the knowledge of the management of Lube Ventures, is not
engaged in any unfair labor practice with respect to any of the current
employees of Lube Ventures; and to the best knowledge of Lube Ventures, none of
the persons performing services for Lube Venture or any of its ERISA Affiliates
has been improperly classified as independent contractors or as exempt from
payment of wages or overtime.
(g) Collective Bargaining Agreements. Except as disclosed in the Lube
Ventures Disclosure Letter), none of the employees of Lube Venture are subject
to any collective bargaining agreement nor is Lube Ventures required under any
agreement to recognize or bargain with any labor organization or union on behalf
of its employees.
(h) No Multi-Employer Plans. Neither Lube Venture nor any of its ERISA
Affiliates has contributed to, or had the obligation to contribute to, any
Multiemployer Plan within the five-year period ending on the date of this
Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by Lube Ventures or any
of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Benefit Plan or Benefit Arrangement that would
increase materially the expense of maintaining such Employee Benefit Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year of Lube Ventures ended December 31, 1996.
(j) No Unfunded Liabilities. Neither Lube Venture nor any ERISA
Affiliate of Lube Ventures has any current or projected liability for any
unfunded post-retirement medical or life insurance benefits in connection with
any Employee of Lube Ventures or ERISA Affiliate of Lube Ventures.
(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by Lube Ventures or any ERISA Affiliate of Lube
Ventures, which could subject any such Employee Benefit Plan, Lube Ventures, any
ERISA Affiliate of Lube Ventures, or the Holding Company directly or indirectly
(through an indemnification agreement or otherwise), to any liability for or as
a result of a breach of fiduciary duty, a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code, or a civil penalty
under Section 502 of ERISA or a Tax under Section 4971 of the Code. Neither Lube
Venture nor any of its ERISA Affiliates have incurred a "withdrawal" or "partial
withdrawal," as defined in Sections 4203 and 4205 of ERISA, from, or failed to
timely make contributions, to any Multiemployer Plan which has resulted in any
unpaid liability of Lube Ventures or any of its ERISA Affiliates.
(l) Welfare Benefit Plans. (i) Except as disclosed in the Lube
Ventures Disclosure Letter, none of the Employee Benefit Plans that are
"employee welfare benefit plans" as defined in ERISA Section 3(1) provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except to the
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extent required by law; provided that any disclosure regarding this clause (i)
shall set forth (A) the number of individuals currently receiving such
continuing benefits or coverage, (B) the limit on liability with respect to such
coverage, (C) the terms and conditions of such coverage, and (D) the maximum
number of current employees or independent contractors who could become eligible
for such continuing benefits or coverage; (ii) there has been no violation of
Code Section 4980B or ERISA Sections 601-609 with respect to any such plan that
could result in any material liability; (iii) no such plans are "multiple
employer welfare arrangements" within the meaning of ERISA Section 3(40); (iv)
with respect to any such plans that are self-insured, no claims have been made
pursuant to any such plan that have not yet been paid (other than claims which
have not yet been paid but are in the normal course of processing) and no
individual has incurred injury, sickness or other medical condition with respect
to which claims may be made pursuant to any such plan where the liability to the
employer could in the aggregate with respect to each such individual exceed
$50,000 per year; (v) Neither Lube Ventures nor any of its ERISA Affiliates
maintains or has any obligation to contribute to any "voluntary employees'
beneficiary association" within the meaning of Code Section 501(c)(9) or other
welfare benefit fund as defined at Section 419(e) of the Code (such disclosure
to include the amount of any such funding); (vi) no such plan is intended to
satisfy Code Section 125; (vii) no amounts are required in connection with any
such plan to be included in income under Code Section 105(h) (under official
regulations thereof to date); and (viii) neither Lube Ventures nor any of its
ERISA Affiliates maintains a nonconforming group health plan as defined at
Section 5000(c) of the Code.
SECTION 7.17 TAX MATTERS.
(a) Affiliated Groups. Lube Ventures is not a member of, and has never
been a member of, any "affiliated group" as that term is defined in Section
1054(a) of the Code.
(b) Tax Returns and Payment of Taxes. Lube Venture has timely filed or
will timely file all federal, state, local, and other Tax Returns required to be
filed by it under Applicable Laws with respect to all periods prior to the date
hereof, including estimated Tax Returns and reports, and has paid all required
Income Taxes and other Taxes (including any additions to taxes, penalties and
interest related thereto) due and payable on or before the date hereof. Lube
Ventures has paid, withheld, or accrued, or will accrue, on the Lube Ventures
Financial Statements in accordance with GAAP any and all Income Taxes and other
Taxes in respect of the conduct of its business or the ownership of its property
and in respect of any transactions for all periods (or portions thereof) through
the close of business on the Closing Date. Lube Ventures has withheld and paid
over all Taxes required to have been withheld and paid over, and complied with
all information reporting and backup withholding requirements, including the
maintenance of required records with respect thereto, in connection with amounts
paid or owing to any Employee, creditor, independent contractor or other third
party. Lube Ventures has collected all sales, use and value added Taxes required
to be collected, and has remitted, or will remit on a timely basis, such amounts
to the appropriate Government Authorities and have furnished properly completed
exemption certificates for all exempt transactions.
(c) Tax Reserves. The amount of Lube Ventures's liability for unpaid
Taxes for all periods ending on or before the date of this Agreement does not,
in the aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) as of the date of this Agreement, and
the amount of Lube Ventures 's liability for unpaid Taxes for all periods ending
on or before the Closing Date shall not, in the aggregate, exceed the amount of
the current liability accruals for Taxes (excluding reserves for deferred Taxes)
as such accruals shall be reflected on the balance sheet of Lube Ventures as of
the Closing Date.
(d) Audits; No Deficiencies Asserted Against Company. The Tax Returns
of Lube Ventures have never been audited by any Tax Authority, nor is any such
audit in process, pending or threatened (either in writing or verbally, formally
or informally). Except as disclosed in the Lube Venture Disclosure Letter, no
deficiencies have been asserted (or are expected to be asserted) against Lube
Ventures as a result of IRS (or state or local Tax Authority) examinations and
no issue has been raised by any IRS (or state or local Tax Authority)
examination that, by application of the same principles, might result in a
proposed deficiency for any other period not so examined.
(e) No Waivers of Limitations. Except as disclosed in the Lube
Ventures Disclosure Letter, there are no agreements, waivers of statutes of
limitations, or other arrangements providing for extensions of time in respect
of the assessment or collection of any unpaid Taxes against Lube Ventures. Lube
Ventures has disclosed on its federal Income Tax Returns all positions taken
therein that could, if not so disclosed, give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(f) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of Lube Ventures with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that Lube Venture is contesting
in good faith
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through appropriate proceedings and for which appropriate reserves have been
established on the Lube Ventures Financial Statements.
(g) Tax Elections and Special Tax Status. Lube Venture is not a party
to any safe harbor lease within the meaning of Section 168(f)(8) of the Code. No
election or consent under Section 341(f) of the Code has been made or shall be
made on or prior to the Closing Date by or on behalf of Lube Ventures. Lube
Ventures is a "small business corporation" which has elected to be subject to
federal income taxation under Subchapter S of the Code and has had such status
for purposes of federal income taxation and state income taxation in all states
in which its income is subject to taxation at all times since its formation.
(h) Disqualified Leasebacks. Lube Ventures is not a party to a
"disqualified leaseback or long-term agreement" described in Section 467(b)(4)
of the Code.
(i) Deferrals of Income. No income or gain of Lube Ventures has been
deferred pursuant to Treasury Regulation (section xxxx) 1.1502-13 or 1.1502-14,
or Temporary Treasury Regulation (section xxxx) 1.1502-13T or 1.1502-14T.
(j) Tax Sharing and Similar Arrangements. Lube Venture is not a party
to or bound by any Tax sharing, Tax indemnity, Tax allocation or other similar
arrangement.
(k) No Non-Deductible Compensation Payments. Lube Ventures has not
made any payments, nor is it obligated to make any payments, that would not be
deductible under Section 280G of the Code nor is it a party to any agreement
that under certain circumstances could obligate it to make any such payments.
SECTION 7.18 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by Lube
Ventures and any other real property presently or formerly owned by, used by or
leased to or by Lube Ventures (collectively, the "Lube Ventures Property"), the
existing and prior uses of such Lube Ventures Property and all operations of the
businesses of Lube Ventures comply and have at all times complied with all
Environmental Laws and Lube Ventures is not in violation of nor has it violated,
in connection with the ownership, use, maintenance or operation of such property
or the conduct of its business, any Environmental Law.
(b) Lube Ventures has all necessary permits, registrations, approvals
and licenses required by any Governmental Authority or Environmental Law.
(c) There has been no spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any kind on, beneath or above such
Property or into the environment surrounding such Lube Ventures Property of any
Hazardous Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such Lube
Ventures Property. No asbestos-containing materials, underground improvements
(including, but not limited to the treatment or storage tanks, sumps, or water,
gas or oil xxxxx) or polychlorinated biphenyls (PCBs) transformers, capacitors,
ballasts, or other equipment which contain dielectric fluid containing PCBs at
levels in excess of fifty parts per million (50 PPM) are or have ever been
located on such Lube Ventures Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of Lube Ventures (or any predecessor in interest) in connection with
(i) any actual or alleged failure to comply with any requirement of any
Environmental Law; (ii) the ownership, use, maintenance or operation of the
Property by any person; (iii).the alleged violation of any Environmental Law; or
(iv) the suspected presence of any Hazardous Material thereon.
(f) Lube Ventures has never had the capacity to exercise
control/manage and has never exercised control or management over any matter
relating to its franchisees' manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous Material.
SECTION 7.19 COMPLIANCE WITH LAWS.
Lube Ventures has at all times conducted its business in material
compliance with all (and has not received any notice of any claimed violation of
any) Applicable Laws, and has registered each of the franchises granted under
the Lube Depot Franchise Agreements with each jurisdiction in which the sale of
such franchises requires such registration. Lube Ventures
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has complied in all material respects with all of the rules and regulations of
the Federal Trade Commission of the United States relating to the offer and sale
of franchises.
SECTION 7.20 LICENSES AND PERMITS.
Lube Ventures possess all licenses, permits, and other governmental
consents, certificates, approvals, or other authorizations (the "Permits")
necessary for the operation of the business of Lube Ventures. Lube Ventures has
complied with the terms and conditions of all Permits in all material respects
and all such Permits are in full force and effect, and there has occurred no
event nor is any event, action, investigation or proceeding pending or, to the
knowledge of management of Lube Ventures, threatened, which could cause or
permit revocation or suspension of or otherwise adversely affect the maintenance
of any Permits. The transactions contemplated by this Agreement will not lead to
the revocation, cancellation, termination or suspension of any Permits.
SECTION 7.21 INSURANCE.
Lube Ventures has regularly maintained all policies of commercial
liability, products liability, fire, casualty, worker's compensation, life and
other forms of insurance on an "occurrence" rather than a "claims made" basis in
amounts and types required by law and generally carried by reasonably prudent,
similarly situated businesses. Lube Ventures is not in default under any
provision contained in any insurance policy maintained by Lube Venture
currently, nor has Lube Ventures failed to give any notice or present any claim
thereunder in due and timely fashion and no cancellation, non-renewal, reduction
of coverage or arrearage in premiums has been threatened or occurred with
respect to any policy, nor is the management of Lube Ventures aware of any
grounds therefor.
SECTION 7.22 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the Lube Ventures Disclosure Letter or otherwise
permitted by this Agreement, since June 30, 1997, Lube Ventures has not (i)
mortgaged, pledged or subjected to any Encumbrance any of its assets; (ii)
canceled or compromised any claim of or debts owed to it; (iii) sold, licensed,
leased, exchanged or transferred any of its assets except in the ordinary course
of business; (iv) entered into any material transaction other than in the
ordinary course of business; (v) experienced any material change in the
relationship or course of dealing with any supplier, franchisee, customer or
creditor; (vi) suffered any material destruction, loss or damage to any of its
assets; (vii) made any management decisions involving any material change in its
policies with regard to pricing, sales, purchasing or other business, financial,
accounting (including reserves and the amounts thereof) or tax policies or
practices; (viii) declared, set aside or paid any dividends on or made any
distributions in respect of any outstanding shares of capital stock or made any
other distributions or payments to any of its shareholders; (ix) submitted any
bid, proposal, quote or commitment to any party in response to a request for
proposal or otherwise; (x) engaged in any merger or consolidation with, or
agreed to merge or consolidate with, or purchased or agreed to purchase, all or
substantially all of the assets of, or otherwise acquire, any other party; (xi)
entered into any strategic alliance, partnership, joint venture or similar
arrangement with any other party; (xii) incurred or agreed to incur any Debt or
prepaid or made any prepayments in respect of Debt; (xiii) issued or agreed to
issue to any party, any shares of stock or other securities; (xiv) redeemed,
purchased or agreed to redeem or purchase any of its outstanding shares of
capital stock or other securities; (xv) increased the rate of compensation
payable or to become payable to any of its officers, directors, employees or
agents over the rate being paid to them as of June 30, 1997 or agreed to do so
otherwise than in accordance with contractual agreements with such parties;
(xvi) made or agreed to make any charitable contributions or incurred or agreed
to incur any non-business expenses; or (xvii) charged off any bad debts or
increased its bad debt reserve except in the manner consistent with its past
practices.
SECTION 7.23 TITLE TO ASSETS.
Except as described in the Lube Ventures Disclosure Letter, Lube Ventures
has good and marketable title to its assets and properties, free and clear of
restrictions on or conditions to transfer or assignment, and free and clear of
all Encumbrances.
SECTION 7.24 CORPORATE RECORDS.
The minute books of Lube Ventures accurately reflect all minutes of
proceedings of and actions taken by the directors of Lube Ventures, and by each
committee of the Board of Directors of Lube Ventures and all records of meetings
of and actions taken by the stockholders of Lube Ventures, that are required by
applicable laws to be recorded in or reflected in the corporate records thereof.
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SECTION 7.25 BROKER AND FINDER FEES.
Lube Ventures has not engaged any broker or finder in connection with the
transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company or Lube Ventures by any broker, finder or intermediary in connection
with such transaction.
SECTION 7.26 ADEQUATE DISCLOSURE.
No representation or warranty made by Lube Ventures pursuant to this
Agreement, or any statement contained in any Exhibit or Schedule to this
Agreement, or any certificate or document furnished or to be furnished by Lube
Venture pursuant to the terms of this Agreement in connection with the
transactions contemplated hereby, contains any untrue or misleading statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
SECTION 7.27 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the Lube Ventures Disclosure Letter, and except as
expressly contemplated or permitted by this Agreement, since June 30, 1997, Lube
Ventures has conducted its business in the ordinary course and consistent with
past practice, and neither Lube Ventures has not suffered any change that has
had a Material Adverse Effect on Lube Ventures. There are no conditions, facts,
developments or circumstances of an unusual or special nature that reasonably
could be expected to have a Material Adverse Effect upon Lube Ventures that have
not been disclosed in writing by Lube Ventures pursuant to the Lube Ventures
Disclosure Letter.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF MIRACLE INDUSTRIES
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, Miracle Industries hereby
makes the following representations and warranties to the other parties to this
Agreement:
SECTION 8.1 ORGANIZATION AND GOOD STANDING.
8.1.1 Miracle Industries. Miracle Industries is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio, and has full corporate power and authority to own, operate and lease its
properties, and to conduct its business as it is now being conducted, and is
qualified to transact business as a foreign corporation in each jurisdiction in
which the operation of its business or the ownership of its properties requires
such qualification.
8.1.2 Hydro-Spray. Hydro-Spray is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Iowa, and has full corporate power and authority to own, operate and lease its
properties, and to conduct its business as it is now being conducted, and is
qualified to transact business as a foreign limited liability company in each
jurisdiction in which the operation of its business or the ownership of its
properties requires such qualification.
8.1.3 Indy Ventures. Indy Ventures is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Indiana, and has full corporate power and authority to own, operate and lease
its properties, and to conduct its business as it is now being conducted, and is
qualified to transact business as a foreign limited liability company in each
jurisdiction in which the operation of its business or the ownership of its
properties requires such qualification.
SECTION 8.2 CAPITALIZATION OF MIRACLE INDUSTRIES.
8.2.1 Authorized Capital Stock; Outstanding Shares. The authorized capital
stock of Miracle Industries consists solely of 100,000 shares of a single class
of common stock, $-0- par value, of which 34,943 shares have been issued and are
outstanding as of the date of this Agreement. Each of the shares of the capital
stock of Miracle Industries issued and outstanding as of the date hereof has
been duly authorized and validly issued and is fully paid and non-assessable.
None of the shares of the issued and outstanding capital stock of Miracle
Industries has been issued in violation of shareholder preemptive rights.
Miracle Industries has no issued or outstanding equity securities, debt
securities or other instruments which are convertible into or exchangeable for
at any time into equity securities of Miracle Industries.
8.2.2 No Obligations to Issue or Redeem Shares.
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(a) Miracle Industries is not subject to any commitment or obligation
which would require the issuance or sale by Miracle Industries of shares of its
capital stock at any time under options, subscriptions, warrants, rights, calls,
preemptive rights, convertible obligations or any other fixed or contingent
obligations or which would provide the holder thereof with the right to acquire
any equity securities of Miracle Industries. Miracle Industries has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof.
(b) Hydro-Spray is not subject to any commitment or obligation which
would require the issuance or sale by Hydro-Spray of any equity interest at any
time under options, subscriptions, warrants, rights, calls, preemptive rights,
convertible obligations or any other fixed or contingent obligations or which
would provide the holder thereof with the right to acquire any equity securities
of Hydro-Spray. Hydro-Spray has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
(c) Indy Ventures is not subject to any commitment or obligation which
would require the issuance or sale by Indy Ventures of any equity interest at
any time under options, subscriptions, warrants, rights, calls, preemptive
rights, convertible obligations or any other fixed or contingent obligations or
which would provide the holder thereof with the right to acquire any equity
securities of Hydro-Spray. Hydro-Spray has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interest therein or to pay any dividend or make any other distribution in
respect thereof.
SECTION 8.3 OWNERSHIP OF SHARES.
The Miracle Industries Disclosure Letter contains a true, complete and
accurate list of all of the record and beneficial owners of the shares of the
capital stock of Miracle Industries, together the name and address of each such
holder. Except as disclosed in the Miracle Industries Disclosure Letter, there
are no existing agreements, pledges, powers of attorney, assignments or similar
agreements or arrangements either (i) restricting the transferability of any of
the shares of the capital stock of Miracle Industries or (ii) which reasonably
could be expected to prohibit or delay the consummation of the transactions
contemplated hereby.
SECTION 8.4 SUBSIDIARIES; INVESTMENTS.
Miracle Industries owns a 90% Membership Interest in Hydro-Spray and a 50%
Membership Interest in Indy Ventures. Xxxxxx Xxxxxx and Xxxx Xxxxxxx each own 5%
Membership Interests in Hydro-Spray. Xxxxxx X. Xxxxxxxx and Xxxxx Xxxxxx each
own 25% Membership Interests in Indy Ventures. Except for the foregoing Persons,
no other Person owns any legal or beneficial Membership Interest in either
Hydro-Spray or Indy Ventures. Miracle Industries has good, valid and marketable
title, free and clear of all Encumbrances, to its Membership Interests in
Hydro-Spray and Indy Ventures. Except for its interests in Hydro-Spray and Indy
Ventures, Miracle Industries does not own any shares of capital stock or equity
securities of, or any interest in any other Person or entity. There are no
agreements, pledges, powers of attorney, assignments or similar agreement or
arrangements either (i) restricting the transferability of the membership
interests of Miracle Industries in Hydro-Spray or Indy Ventures or (ii) relating
to the membership interests of Miracle Industries in Hydro-Spray or Indy
Ventures which reasonably could be expected to prohibit or delay any of the
transactions contemplated hereby.
SECTION 8.5 EXECUTION AND EFFECT OF AGREEMENT.
Miracle Industries has the corporate power to enter into this Agreement and
to perform its obligations hereunder and, subject to the due authorization and
approval of its shareholders, to enter into and consummate the Miracle
Industries Merger. Subject only to the approval of its Board of Directors, this
Agreement has been duly executed and delivered by Miracle Industries and
constitutes a legal, valid and binding obligation of Miracle Industries, fully
enforceable against Miracle Industries in accordance with its terms; except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
exercise of judicial discretion in accordance with general principles of equity.
SECTION 8.6 RESTRICTIONS.
The execution and delivery of this Agreement by Miracle Industries, the
consummation of the transactions contemplated hereby by Miracle Industries, and,
subject to the due authorization and approval of its shareholders, the
performance of the obligations of Miracle Industries hereunder will not (a)
violate any of the provisions of the charter or by-laws of Miracle
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Industries, or the operating agreement of Hydro-Spray or Indy Ventures,
respectively, (b) violate or conflict with the provisions of any Applicable
Laws, (c) result in the creation of any Encumbrance upon any of the assets,
rights or properties of Miracle Industries or Hydro-Spray or Indy Ventures, or
(d) except as disclosed in the Miracle Industries Disclosure Letter, conflict
with, violate any provisions of, result in a breach of or give rise to a right
of termination, modification or cancellation of, constitute a default of, or
accelerate the performance required by, with or without the passage of time or
the giving of notice or both, the terms of any material agreement, indenture,
mortgage, deed of trust, security or pledge agreement, lease, contract, note,
bond, license, permit, authorization or other instrument to which Miracle
Industries or Hydro-Spray or Indy Ventures is a party or to which any of any of
the assets of Miracle Industries or Hydro-Spray or Indy Ventures are subject.
SECTION 8.7 CONSENTS.
Except as disclosed in the Miracle Industries Disclosure Letter, no filing
with, or consent, waiver, approval or authorization of, or notice to, any
governmental authority or any third party is required to be made or obtained by
Miracle Industries or Hydro-Spray or Indy Venture in connection with the
execution and delivery of this Agreement or any document or instrument
contemplated hereby, the consummation of any of the transactions contemplated
hereby or the performance of any of their respective obligations hereunder or
thereunder.
SECTION 8.8 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of (i) the audited
consolidated balance sheets and related statements of income, cash flows and
changes in stockholders' equity of Miracle Industries and its Subsidiaries as at
December 31, 1994, 1995 and 1996 and for the year periods then ended and the
unaudited financial statements of such entities as at June 30, 1997 and for the
six month period then ended, and (ii) the unaudited balance sheets and related
statements of income, cash flows and changes in members' equity of each of
Hydro-Spray and Indy Ventures as at December 31, 1994, 1995 and 1996 and for the
year periods then-ended to the extent applicable (collectively, the "Miracle
Industries Financial Statements"). All of the Miracle Industries Financial
Statements have been prepared in accordance with GAAP in a manner consistent
with each other and the books and records of Miracle Industries and its
Subsidiaries, and fairly present in all material respects the financial
condition and results of operations of Miracle Industries and its Subsidiaries
at the dates and for the periods indicated therein. The regular books of account
of Miracle Industries and its Subsidiaries fairly and accurately reflect all
material transactions involving Miracle Industries and its Subsidiaries, are
true, correct and complete and have been prepared in accordance with GAAP and on
a basis consistent with the Financial Statements. All of the accounts receivable
of Hydro-Spray reflected on the books and records of Hydro-Spray arose from bona
fide, arms-length transactions in the ordinary course of business, goods sold by
Hydro-Spray and are not subject to any counterclaim, deduction, right of set
off, set off or recoupment, and will be collectible in the ordinary course of
business in the aggregate face amounts thereof subject to the reserves set forth
on the Miracle Industries Financial Statements. All of the inventories reflected
on the books and records of Hydro-Spray are of a quality and quantity which are
good and marketable, and are saleable in the ordinary course of business at
prices which will result in Hydro-Spray realizing gross profits on such sales
consistent with the gross profits of Hydro-Spray reflected in the Miracle
Industries Financial Statements. The cost of all inventories reflected on the
books and records of Hydro-Spray have been valued in accordance with GAAP.
SECTION 8.9 DEBT.
The Miracle Industries Disclosure Letter contains a true, complete and
accurate listing of the original principal amount of all of the Debt of Miracle
Industries, Hydro-Spray and Indy Ventures, the remaining principal balance
thereof, the interest rate(s) payable in respect thereof, if any, and the
date(s) of maturity thereof. Except as disclosed in the Miracle Industries
Disclosure Letter, all of the Debt of each of Miracle Industries, Hydro-Spray
and Indy Ventures may be prepaid at any time, without premium, prepayment
penalties, termination fees or other fees or charges.
SECTION 8.10 GUARANTEES.
The Miracle Industries Disclosure Letter contains a complete list of all
Guarantees provided by Miracle Industries or Hydro-Spray or Indy Ventures for
the benefit of any other party and of all Guarantees provided by any other party
for the benefit of Miracle Industries or Hydro-Spray or Indy Ventures or any
party doing business with Miracle Industries or Hydro-Spray or Indy Ventures.
SECTION 8.11 NO UNDISCLOSED LIABILITIES.
Neither Miracle Industries nor Hydro-Spray or Indy Ventures has any
material liabilities or obligations of any nature whatsoever (whether known or
unknown, due or to become due, absolute, accrued, contingent or otherwise, and
whether or
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not determined or determinable), except for (i) liabilities or obligations set
forth in the Miracle Industries Disclosure Letter, (ii) liabilities or
obligations to the extent expressly reflected on or reserved against in the June
30, 1997 balance sheet included among the Miracle Industries Financial
Statements or disclosed in the notes thereto, (iii) liabilities or obligations
of a type reflected on the June 30, 1997 balance sheet and incurred in the
ordinary course of business and consistent with past practices since June 30,
1997, or (iv) liabilities or obligations arising under the terms of the Material
Contracts of Miracle Industries. Except as otherwise contemplated or permitted
by this Agreement no dividends have been declared on any capital stock of
Miracle Industries which are unpaid.
SECTION 8.12 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the
management of Miracle Industries, threatened, by or before any court, any
Governmental Authority or arbitrator, against Miracle Industries or Hydro-Spray
or Indy Ventures that reasonably could be expected to prevent the consummation
of any of the transactions contemplated hereby. Except as disclosed in the
Miracle Industries Disclosure Letter, there is no material suit, claim, action
at law or in equity, proceeding or governmental investigation or audit pending,
or to the knowledge of management of Miracle Industries, threatened, by or
before any arbitrator, court, or other Governmental Authority, against Miracle
Industries or Hydro-Spray or Indy Ventures or involving any of the former or
present employees, agents, businesses, properties, rights or assets of Miracle
Industries or Hydro-Spray or Indy Ventures, nor, to the knowledge of management
of Miracle Industries, is there any basis for the assertion of any of the
foregoing. Except as disclosed in the Miracle Industries Disclosure Letter,
there are no judgments, orders, injunctions, decrees, stipulations or awards
rendered by any court, Governmental Authority or arbitrator against Miracle
Industries or Hydro-Spray or Indy Ventures or any of their respective former or
present Employees, agents, properties or assets.
SECTION 8.13 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The Miracle Industries Disclosure Letter sets forth a complete list of all
real property owned by or leased to Miracle Industries, and, with respect to all
properties leased by Miracle Industries, a description of the term of such lease
and the monthly rental thereunder. Neither Miracle Industries or Hydro-Spray or
Indy Ventures nor (any of its other Subsidiaries) is in default (and will not be
in default with the passage of time or the receipt of notice or both) and has
not received notice of default, under any lease of real property. All real
property leased to Miracle Industries or Hydro-Spray or Indy Ventures is
available for immediate use in the operation of its business and for the purpose
for which such property currently is being utilized. Subject in the case of
leased property to the terms and conditions of the respective leases, Miracle
Industries or Hydro-Spray or Indy Ventures has full legal and practical access
to all such real property.
SECTION 8.14 INTELLECTUAL PROPERTY.
The Miracle Industries Disclosure Letter sets forth a complete list of (i)
Intellectual Property owned, used or licensed by Miracle Industries or
Hydro-Spray or Indy Ventures, together with the identity of the owner thereof,
and (ii) all license agreements pursuant to which any Intellectual Property is
licensed to or by Miracle Industries or Hydro-Spray or Indy Ventures. Miracle
Industries and each of Hydro-Spray and Indy Ventures own their respective
Intellectual Property free and clear of any and all Encumbrances, or, in the
case of licensed Intellectual Property, has valid, binding and enforceable
rights to use such Intellectual Property. Miracle Industries and each of
Hydro-Spray and Indy Ventures have each duly and timely filed all renewals,
continuations and other filings necessary to maintain its Intellectual Property
or registrations thereof. Except as disclosed in the Miracle Industries
Disclosure Letter, neither Miracle Industries nor Hydro-Spray or Indy Ventures
(i) has received any notice or claim to the effect that the use of any
Intellectual Property infringes upon, conflicts with or misappropriates the
rights of any other party or that any of the Intellectual Property is not valid
or enforceable, or (ii) has made any claim that any party has violated or
infringed upon its rights with respect to any Intellectual Property.
SECTION 8.15 MATERIAL CONTRACTS.
(a) List of Material Contracts. The Miracle Industries Disclosure
Letter sets forth a list of all written, and a description of all oral,
commitments, agreements or contracts to which Miracle Industries or Hydro-Spray
or Indy Ventures is a party or by which Miracle Industries or Hydro-Spray or
Indy Ventures is obligated, including, but not limited to, all commitments,
agreements or contracts embodying or evidencing the following transactions or
arrangements: (i) agreements for the employment of, or independent contractor
arrangements with, any officer or other individual employee of Miracle
Industries or Hydro-Spray or Indy Ventures; (ii) any consulting agreement,
agency agreement and any other service agreement that will continue in force
after the Closing Date with respect to the employment or retention by Miracle
Industries or Hydro-Spray or Indy Ventures of consultants, agents, legal
counsel, accountants or anyone else who is not an Employee; (iii) any single
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contract, purchase order or commitment providing for expenditures by Miracle
Industries or Hydro-Spray or Indy Ventures after the date hereof of more than
$25,000 or which has been entered into by Miracle Industries or Hydro-Spray or
Indy Ventures otherwise than in the ordinary course of business; (iv) agreements
between Miracle Industries or Hydro-Spray or Indy Ventures and suppliers to
Miracle Industries or Hydro-Spray or Indy Ventures pursuant to which either
Miracle Industries or Hydro-Spray or Indy Ventures is obligated to purchase or
to sell or distribute the products of any other party other than current
purchase orders entered into in the ordinary course of business consistent with
past practices; (v) any contract containing covenants limiting the freedom of
Miracle Industries or Hydro-Spray or Indy Ventures or any officer, director, or
employee of Miracle Industries or Hydro-Spray or Indy Ventures to engage in any
line or type of business or with any person in any geographic area; (vi) any
commitment or arrangement by Miracle Industries or Hydro-Spray or Indy Ventures
to participate in a strategic alliance, partnership, joint venture, limited
liability company or other cooperative undertaking with any other Person; (vii)
any commitments by Miracle Industries or Hydro-Spray or Indy Ventures for
capital expenditures involving more than $25,000 individually or $50,000 in the
aggregate; and (viii) any other contract, commitment, agreement, understanding
or arrangement that the management of Miracle Industries deems to be material to
the business of Miracle Industries or Hydro-Spray or Indy Ventures.
(b) No Breaches or Defaults. Except as disclosed in the Miracle
Industries Disclosure Letter, Miracle Industries and each of Hydro-Spray and
Indy Ventures is in full compliance with each, and is not in default under any,
Material Contract to which it is a party, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default thereunder.
Neither Miracle Industries nor Hydro-Spray or Indy Ventures has waived any
rights under or with respect to any of the Material Contracts to which it is a
party. The management of Miracle Industries has no knowledge, or received any
notice to the effect, that any party with whom Miracle Industries or Hydro-Spray
or Indy Ventures has contractual arrangements under the Material Contracts, is
in default under any such contractual arrangements or that any event has
occurred that, with notice or lapse of time or both, would constitute such a
default thereunder. Each of the Material Contracts constitutes a legal, valid
and binding obligation of each the parties thereto and is enforceable against
each of the parties thereto in accordance with its respective terms; except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
exercise of judicial discretion in accordance with general principles of equity.
SECTION 8.16 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The Miracle Industries Disclosure Letter
sets forth a true, complete and correct list of all Employee Benefit Plans and
all Benefit Arrangements to which Miracle Industries, Hydro-Spray, Indy Ventures
or any of their ERISA Affiliates is a party or to which Miracle Industries,
Hydro-Spray, Indy Ventures or any of their ERISA Affiliates is obligated to
contribute. None of the Employee Benefit Plans to which Miracle Industries,
Hydro- Spray, Indy Ventures or any of their ERISA Affiliates is a party, which
Miracle Industries, Hydro- Spray, Indy Ventures or any of their ERISA Affiliates
sponsors or maintains or to which Miracle Industries, Hydro-Spray, Indy Ventures
or any of their ERISA Affiliates contributes is subject to the requirements of
Section 302 of ERISA or Section 412 of the Code and no liability under Title IV
of ERISA (whether to the PBGC or otherwise) has been incurred by Miracle
Industries, Hydro-Spray, Indy Ventures or any of their ERISA Affiliates.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the Miracle Industries Disclosure Letter, each Employee Benefit Plan and Benefit
Arrangement to which Miracle Industries, Hydro-Spray, Indy Ventures or any of
their ERISA Affiliates is a party or to which Miracle Industries, Hydro-Spray,
Indy Ventures or any of their ERISA Affiliates is obligated to contribute has
been operated or maintained in compliance in all material respects with all
Applicable Laws, including, without limitation, ERISA and the Code, and has been
maintained in material compliance with its terms and in material compliance with
the terms of any applicable collective bargaining agreement. Except as disclosed
in the Miracle Industries Disclosure Letter, with respect to any Employee
Benefit Plan that is intended to qualify under Section 401 of the Code, a
favorable determination letter as to qualification under Section 401 of the Code
that considered the Tax Reform Act of 1986 has been issued and any amendments
required for continued qualification under Section 401 of the Code have been
timely adopted and nothing has occurred subsequent to the date of such
determination letter that could adversely affect the qualified status of any
such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which Miracle Industries, Hydro-Spray, Indy Ventures or any of
their ERISA Affiliates is a party or to which Miracle Industries, Hydro-Spray,
Indy Ventures or any of their ERISA Affiliates is obligated to contribute, under
ERISA or the Code, for all periods of time prior to the date hereof and that are
attributable to
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Employees of Miracle Industries, Hydro-Spray, Indy Ventures or any of their
ERISA Affiliates have been paid or otherwise adequately accrued against in the
Miracle Industries Financial Statements, as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the
Miracle Industries Disclosure Letter, neither Miracle Industries nor Hydro-Spray
or Indy Ventures is liable for any arrearage of wages, any accrued or vested
vacation pay or any tax or penalty for failure to comply with any Applicable Law
relating to employment or labor above the level accrued for or reserved against
on the June 30, 1997 balance sheet included in the Miracle Industries Financial
Statements, and there is no controversy pending, threatened or in prospect
between Miracle Industries or Hydro-Spray or Indy Ventures and any of their
respective Employees nor is there any basis for any such controversy. There is
no unfair labor practice charge or complaint currently pending against Miracle
Industries or Hydro-Spray or Indy Ventures with respect to or relating to any of
their respective Employees before the National Labor Relations Board or any
other agency having jurisdiction over such matters and no charges or complaints
are currently pending against Miracle Industries or Hydro-Spray or Indy Ventures
before the Equal Employment Opportunity Commission or any state or local agency
having responsibility for the prevention of unlawful employment practices. There
are no actions, suits or claims pending, including proceedings before the IRS,
the DOL or the PBGC, with respect to any Employee Benefit Plan, Benefit
Arrangement or any administrator or fiduciary thereof, other than benefit claims
arising in the normal course of operation of such Employee Benefit Plans or
Benefit Arrangements, and, to the knowledge of the management of Miracle
Industries, no Employee Benefit Plan or Benefit Arrangement is under audit or
investigation by any Governmental Authority.
(e) Severance Obligations. Except as disclosed in the Miracle
Industries Disclosure Letter, all current employees of Miracle Industries and of
each of Hydro-Spray and Indy Ventures may be terminated at will, without notice
and without incurring any severance or other liability or obligation to the
employee in connection with the termination. Except to the extent provided by
the terms of the Employee Benefit Plans and Benefit Arrangements disclosed in
the Miracle Industries Disclosure Letter, neither the execution, delivery or
performance of this Agreement nor the consummation of the Closing will (i)
increase any benefits otherwise payable under any Employee Benefit Plan or
Benefit Arrangement, (ii) result in the acceleration of the time of payment or
vesting of any such benefits, or (iii) give rise to an obligation with respect
to the payment of any severance pay. No "parachute payment" (within the meaning
of Section 280G of the Code), "change in control" or severance payment has been
made or will be required to be made by Miracle Industries or any ERISA Affiliate
of Miracle Industries to any Employee in connection with the execution, delivery
or performance of this Agreement or as a result of the consummation of the
Closing.
(f) Compliance with Laws on Employment Practices. Miracle Industries
and each of Hydro-Spray and Indy Ventures has complied in all material respects
with all Applicable laws relating to employment and employment practices, terms
and conditions of employment, wages and hours, and to the knowledge of the
management of Miracle Industries, is not engaged in any unfair labor practice
with respect to any of the current employees of Miracle Industries or
Hydro-Spray or Indy Ventures and to the best knowledge of Miracle Industries,
none of the persons performing services for Miracle Industries, Hydro-Spray,
Indy Ventures or any of their ERISA Affiliates have been improperly classified
as independent contractors or as exempt from payment of wages or overtime.
(g) Collective Bargaining Agreements. Except as disclosed in the
Miracle Industries Disclosure Letter), none of the employees of Miracle
Industries or Hydro-Spray or Indy Ventures are subject to any collective
bargaining agreement nor is Miracle Industries or Hydro-Spray or Indy Ventures
required under any agreement to recognize or bargain with any labor organization
or union on behalf of its employees.
(h) No Multi-Employer Plans. Nether Miracle Industries nor Hydro-Spray
nor Indy Ventures nor any of their ERISA Affiliates has contributed to, or had
the obligation to contribute to, any Multiemployer Plan within the five-year
period ending on the date of this Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by Miracle Industries,
Hydro-Spray, Indy Ventures or any of their ERISA Affiliates relating to, or
change in employee participation or coverage under, any Employee Benefit Plan or
Benefit Arrangement that would increase materially the expense of maintaining
such Employee Benefit Plan or Benefit Arrangement above the level of the expense
incurred in respect thereof for the fiscal year of Miracle Industries ended
December 31, 1996.
(j) No Unfunded Liabilities. Neither Miracle Industries nor
Hydro-Spray nor Indy Ventures nor any of their ERISA Affiliates have any current
or projected liability for any unfunded post-retirement medical or life
insurance benefits in connection with any Employee of Miracle Industries,
Hydro-Spray, Indy Ventures or any of their ERISA Affiliates.
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(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by Miracle Industries, Hydro-Spray, Indy Ventures
or any of their ERISA Affiliates, which could subject any such Employee Benefit
Plan, Miracle Industries, Hydro-Spray, Indy Ventures or any of their ERISA
Affiliates, or the Holding Company directly or indirectly (through an
indemnification agreement or otherwise), to any liability for or as a result of
a breach of fiduciary duty, a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, or a civil penalty under
Section 502 of ERISA or a Tax under Section 4971 of the Code. Neither Miracle
Industries nor any of its ERISA Affiliates have incurred a "withdrawal" or
"partial withdrawal," as defined in Sections 4203 and 4205 of ERISA, from, or
failed to timely make contributions to any Multiemployer Plan which has resulted
in any unpaid liability of Miracle Industries, Hydro-Spray, Indy Ventures or any
of their ERISA Affiliates.
(l) Welfare Benefit Plans. (i) Except as disclosed in the Miracle
Industries Disclosure Letter, none of the Employee Benefit Plans that are
"employee welfare benefit plans" as defined in ERISA Section 3(1) provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except to the
extent required by law; provided that any disclosure regarding this clause (i)
shall set forth (A) the number of individuals currently receiving such
continuing benefits or coverage, (B) the limit on liability with respect to such
coverage, (C) the terms and conditions of such coverage, and (D) the maximum
number of current employees or independent contractors who could become eligible
for such continuing benefits or coverage; (ii) there has been no violation of
Code Section 4980B or ERISA Sections 601-609 with respect to any such plan that
could result in any material liability; (iii) no such plans are "multiple
employer welfare arrangements" within the meaning of ERISA Section 3(40); (iv)
with respect to any such plans that are self-insured, no claims have been made
pursuant to any such plan that have not yet been paid (other than claims which
have not yet been paid but are in the normal course of processing) and no
individual has incurred injury, sickness or other medical condition with respect
to which claims may be made pursuant to any such plan where the liability to the
employer could in the aggregate with respect to each such individual exceed
$50,000 per year; (v) neither Miracle Industries nor Hydro-Spray nor Indy
Ventures nor any of their ERISA Affiliates maintains or has any obligation to
contribute to any "voluntary employees' beneficiary association" within the
meaning of Code Section 501(c)(9) or other welfare benefit fund as defined at
Section 419(e) of the Code (such disclosure to include the amount of any such
funding); (vi) no such plan is intended to satisfy Code Section 125; (vii) no
amounts are required in connection with any such plan to be included in income
under Code Section 105(h) (under official regulations thereof to date); and
(viii) neither Miracle Industries nor Hydro-Spray nor Indy Ventures nor any of
their ERISA Affiliates maintains a nonconforming group health plan as defined at
Section 5000(c) of the Code.
SECTION 8.17 TAX MATTERS.
(a) Tax Returns and Payment of Taxes. Miracle Industries and each of
Hydro-Spray and Indy Ventures has timely filed or will timely file all federal,
state, local, and other Tax Returns required to be filed by it under Applicable
Laws, including estimated Tax returns and reports and consolidated federal
Income Tax Returns and state, local or foreign Income Tax Returns filed on a
consolidated or combined basis, and Miracle Industries and each of Hydro-Spray
and Indy Ventures has paid all required Income Taxes and other Taxes (including
any additions to taxes, penalties and interest related thereto) due and payable
on or before the date hereof (and will duly and timely pay all such amounts
required to be paid between the date hereof and the Closing Date). Each of
Miracle Industries and Hydro-Spray and Indy Ventures has paid, withheld, or will
pay any and all Taxes in respect of the conduct of its business or the ownership
of its property and in respect of any transaction for all periods (or portions
thereof) through the close of business on the Closing Date. Each of Miracle
Industries, Hydro-Spray and Indy Ventures has (i) withheld and paid over all
Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including the
maintenance of required records with respect thereto, in connection with amounts
paid or owing to any Employee, creditor, independent contractor or other third
party, and (ii) collected all sales, use and value added Taxes required to be
collected, and has remitted, or will remit on a timely basis, such amounts to
the appropriate Government Authorities and have furnished properly completed
exemption certificates for all exempt transactions.
(b) Tax Reserves. The amount of the liability, if any, of Miracle
Industries and of Hydro-Spray and Indy Ventures, respectively, for unpaid Taxes
for all periods ending on or before the date of this Agreement does not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) set forth on the Miracle Industries
Financial Statements as of the date of this Agreement, and the amount of their
respective liabilities Group's liability for unpaid Taxes for all periods ending
on or before the Closing Date shall not, in the aggregate, exceed the amount of
the
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current liability accruals for Taxes (excluding reserves for deferred Taxes) as
such accruals shall be reflected on the consolidated balance sheet of Miracle
Industries as of the Closing Date.
(c) Audits; No Deficiencies Asserted. Except as set forth in the
Miracle Industries Disclosure Letter, none of the Tax Returns of Miracle
Industries or of Hydro-Spray or Indy Ventures have ever been audited by any Tax
Authority, nor is any such audit in process, pending or threatened (either in
writing or verbally, formally or informally), and all deficiencies asserted
against Miracle Industries or Hydro-Spray or Indy Ventures or the Affiliated
Groups as a result of IRS examinations have been paid or finally settled and no
issue has been raised by any IRS examination that, by application of the same
principles, is likely to result in a proposed deficiency for any other period
not so examined. Except as set forth in the Miracle Industries Disclosure, no
material deficiencies with respect to Taxes, additions to Tax, interest, or
penalties have been proposed or asserted against and communicated to the
Affiliated Groups, any member of the Affiliated Groups, Miracle Industries or
Hydro-Spray or Indy Ventures, except those that have been paid in full and for
those matters that would not result in liability being imposed against Miracle
Industries or Hydro-Spray or Indy Ventures.
(d) No Waivers of Limitations. Except as set forth in the Miracle
Industries Disclosure Letter, there are no agreements, waivers of statutes of
limitations, or other arrangements providing for extensions of time in respect
of the assessment or collection of any unpaid Tax against the Affiliated Groups
or any member of the Affiliated Groups or Miracle Industries or Hydro-Spray or
Indy Ventures. Miracle Industries has disclosed on its federal Income Tax
Returns all positions taken therein that could, if not so disclosed, give rise
to a substantial understatement penalty within the meaning of Section 6662 of
the Code.
(e) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of Miracle Industries or of either Hydro-Spray or Indy
Ventures with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that such party is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been established
on the Miracle Industries Financial Statements.
(f) Tax Elections and Special Tax Status. Neither Miracle Industries
nor Hydro-Spray nor Indy Ventures is a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Code. No election or consent under Section
341(f) of the Code has been made or shall be made on or prior to the Closing
Date by or on behalf of Miracle Industries nor Hydro-Spray nor Indy Ventures.
(g) Special Tax Elections or Benefits. No election or consent under
Section 341(f) of the Code has been made or shall be made on or prior to the
Closing Date by or on behalf of any of Miracle Industries or Hydro-Spray or Indy
Ventures. No property of Miracle Industries or Hydro-Spray or Indy Ventures is
subject to a tax benefit transfer lease subject to the provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954. Miracle Industries is a
"small business corporation" which has elected to be subject to federal income
taxation under subchapter S of the Code and has such status for purposes of
federal income taxation and state income taxation in all states in which its
respective income is subject to taxation or has been subject to taxation at all
times since its formation. Each of Hydro-Spray and Indy Ventures is a
"partnership" for purposes of federal income taxation and state income taxation
in all states in which its respective income is subject to taxation and has had
the status of a "partnership" for purposes of federal income taxation and state
income taxation in all states in which its respective income is subject to
taxation or has been subject to taxation at all times since its formation.
(h) Disqualified Leasebacks. Neither Miracle Industries nor
Hydro-Spray or Indy Ventures is a party to a "disqualified leaseback or
long-term agreement" described in Section 467(b)(4) of the Code.
(i) Deferrals of Income. No income or gain of Miracle Industries or
Hydro-Spray or Indy Ventures has been deferred pursuant to Treasury Regulation
(section xxxx) 1.1502-13 or 1.1502-14, or Temporary Treasury Regulation
(section xxxx) 1.1502-13T or 1.1502-14T.
(j) Tax Sharing and Similar Agreements. Except as disclosed in the
Miracle Industries Disclosure Letter, neither Miracle Industries nor Hydro-Spray
or Indy Ventures is a party to or bound by any Tax sharing, Tax indemnity or Tax
allocation agreement or other similar arrangement.
(k) No Non-Deductible Compensation Payments. Neither Miracle
Industries nor Hydro-Spray or Indy Ventures has made any payments, nor is
obligated to make any payments, that would not be deductible under Section 280G
of the Code, or a party to any agreement that under certain circumstances could
obligate it to make any payments.
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SECTION 8.18 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by each of
Miracle Industries, Hydro-Spray or Indy Ventures and any other real property
presently or formerly owned by, used by or leased to or by Miracle Industries,
Hydro-Spray or Indy Ventures (collectively, the "Miracle Industries Property"),
the existing and prior uses of such Property and all operations of the
businesses of Miracle Industries, Hydro-Spray or Indy Ventures comply and have
at all times complied with all Environmental Laws and neither Miracle
Industries, Hydro-Spray nor Indy Ventures is in violation of nor has it
violated, in connection with the ownership, use, maintenance or operation of
such property or the conduct of its business, any Environmental Law.
(b) Each of Miracle Industries, Hydro-Spray and Indy Ventures has all
necessary permits, registrations, approvals and licenses required by any
Governmental Authority or Environmental Law.
(c) There has been no spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any kind on, beneath or above such
Property or into the environment surrounding such Miracle Industries Property of
any Hazardous Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such Miracle
Industries Property. No asbestos-containing materials, underground improvements
(including, but not limited to the treatment or storage tanks, sumps, or water,
gas or oil xxxxx) or polychlorinated biphenyls (PCBs) transformers, capacitors,
ballasts, or other equipment which contain dielectric fluid containing PCBs at
levels in excess of fifty parts per million (50 PPM) are located on such Miracle
Industries Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of Miracle Industries, Hydro-Spray or Indy Ventures (or any predecessor
in interest) in connection with (i) any actual or alleged failure to comply with
any requirement of any Environmental Law; (ii) the ownership, use, maintenance
or operation of the Property by any person; (iii) the alleged violation of any
Environmental Law; or (iv) the suspected presence of any Hazardous Material
thereon.
SECTION 8.19 COMPLIANCE WITH LAWS.
Miracle Industries and each of Hydro-Spray and Indy Ventures has at all
times conducted its business in material compliance with all (and has not
received any notice of any claimed violation of any) Applicable Laws.
SECTION 8.20 LICENSES AND PERMITS.
Miracle Industries and each of Hydro-Spray and Indy Ventures possess all
licenses, permits, and other governmental consents, certificates, approvals, or
other authorizations (the "Permits") necessary for the operation of their
respective businesses. Miracle Industries and each of Hydro-Spray and Indy
Ventures has complied with the terms and conditions of all Permits in all
material respects and all such Permits are in full force and effect, and there
has occurred no event nor is any event, action, investigation or proceeding
pending or, to the knowledge of management of Miracle Industries, threatened,
which could cause or permit revocation or suspension of or otherwise adversely
affect the maintenance of any Permits. The transactions contemplated by this
Agreement will not lead to the revocation, cancellation, termination or
suspension of any Permits.
SECTION 8.21 INSURANCE.
Miracle Industries and each of Hydro-Spray and Indy Ventures has regularly
maintained all policies of commercial liability, products liability, fire,
casualty, worker's compensation, life and other forms of insurance on an
"occurrence" rather than a "claims made" basis in amounts and types required by
law and generally carried by reasonably prudent, similarly situated businesses.
Neither Miracle Industries nor Hydro-Spray or Indy Ventures is in default with
respect to any provision contained in any insurance policy, nor has Miracle
Industries or Hydro-Spray or Indy Ventures failed to give any notice or present
any claim thereunder in due and timely fashion and no cancellation, non-renewal,
reduction of coverage or arrearage in premiums has been threatened or occurred
with respect to any policy, nor is the management of Miracle Industries aware of
any grounds therefor.
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SECTION 8.22 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the Miracle Industries Disclosure Letter or
otherwise permitted by this Agreement, since June 30, 1997, neither Miracle
Industries nor Hydro-Spray or Indy Ventures has (i) mortgaged, pledged or
subjected to any Encumbrance any of its assets; (ii) canceled or compromised any
claim of or debts owed to it; (iii) sold, licensed, leased, exchanged or
transferred any of its assets except in the ordinary course of business; (iv)
entered into any material transaction other than in the ordinary course of
business; (v) experienced any material change in the relationship or course of
dealing with any supplier, customer or creditor; (vi) suffered any material
destruction, loss or damage to any of its assets; (vii) made any management
decisions involving any material change in its policies with regard to pricing,
sales, purchasing or other business, financial, accounting (including reserves
and the amounts thereof) or tax policies or practices; (viii) declared, set
aside or paid any dividends on or made any distributions in respect of any
outstanding shares of capital stock or made any other distributions or payments
to any of the Selling Stockholders; (ix) submitted any bid, proposal, quote or
commitment to any party in response to a request for proposal or otherwise; (x)
engaged in any merger or consolidation with, or agreed to merge or consolidate
with, or purchased or agreed to purchase, all or substantially all of the assets
of, or otherwise acquire, any other party; (xi) entered into any strategic
alliance, partnership, joint venture or similar arrangement with any other
party; (xii) incurred or agreed to incur any Debt or prepaid or made any
prepayments in respect of Debt; (xiii) issued or agreed to issue to any party,
any shares of stock or other securities; (xiv) redeemed, purchased or agreed to
redeem or purchase any of its outstanding shares of capital stock or other
securities; (xv) increased the rate of compensation payable or to become payable
to any of its officers, directors, employees or agents over the rate being paid
to them as of June 30, 1996 or agreed to do so otherwise than in accordance with
contractual agreements with such parties; (xvi) made or agreed to make any
charitable contributions or incurred or agreed to incur any non-business
expenses; or (xvii) charged off any bad debts or increased its bad debt reserve
except in the manner consistent with its past practices.
SECTION 8.23 TITLE TO ASSETS.
Except as described in the Miracle Industries Disclosure Letter, Miracle
Industries and each of Hydro-Spray and Indy Ventures has good and marketable
title to its respective assets and properties, free and clear of restrictions on
or conditions to transfer or assignment, and free and clear of all Encumbrances.
SECTION 8.24 CORPORATE RECORDS.
The minute books of Miracle Industries accurately reflect all minutes of
proceedings of and actions taken by the directors of Miracle Industries and each
committee of the Board of Directors of Miracle Industries, and all records of
meetings of and actions taken by the stockholders of Miracle Industries, that
are required by applicable laws to be recorded in or reflected in the corporate
records thereof.
SECTION 8.25 BROKER AND FINDER FEES.
Miracle Industries has not engaged any broker or finder in connection with
the transactions contemplated by this Agreement, and no action by Miracle
Industries will cause or support any claim to be asserted against the Holding
Company, Miracle Industries or any of its Subsidiaries by any broker, finder or
intermediary in connection with such transaction.
SECTION 8.26 ADEQUATE DISCLOSURE.
No representation or warranty made by Miracle Industries pursuant to this
Agreement, or any statement contained in any Exhibit or Schedule to this
Agreement, or any certificate or document furnished or to be furnished by
Miracle Industries or any of its Subsidiaries pursuant to the terms of this
Agreement in connection with the transactions contemplated hereby, contains any
untrue or misleading statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
SECTION 8.27 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the Miracle Industries Disclosure Letter, and except
as expressly permitted or contemplated by this Agreement, since June 30, 1997,
Miracle Industries and each of Hydro-Spray and Indy Ventures has conducted its
business in the ordinary course and consistent with past practice, and neither
Miracle Industries nor Hydro-Spray or Indy Ventures has suffered any change that
has had a Material Adverse Effect. There are no conditions, facts, developments
or circumstances of an unusual or special nature that reasonably could be
expected to have a Material Adverse Effect upon Miracle Industries or
Hydro-Spray or Indy Ventures that have not been disclosed in writing by Miracle
Industries pursuant to the Miracle Industries Disclosure Letter.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF ROCKY MOUNTAIN I
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, Rocky Mountain I hereby makes
the following representations and warranties to the other parties to this
Agreement and to the Holding Company:
SECTION 9.1 ORGANIZATION AND GOOD STANDING.
Rocky Mountain I is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado, and has full corporate
power and authority to own, operate and lease its properties, and to conduct its
business as it is now being conducted, and is qualified to transact business as
a foreign corporation in each jurisdiction in which the operation of its
business or the ownership of its properties requires such qualification.
SECTION 9.2 CAPITALIZATION OF ROCKY MOUNTAIN I.
The authorized capital stock of Rocky Mountain I consists solely of 6,000
shares of a single class of common stock, $100.00 par value, of which 5,197.5
shares have been issued and are outstanding as of the date of this Agreement.
Each of the shares of the capital stock of Rocky Mountain I issued and
outstanding as of the date hereof has been duly authorized and validly issued
and is fully paid and non-assessable. None of the shares of the issued and
outstanding capital stock of Rocky Mountain I has been issued in violation of
shareholder preemptive rights. Rocky Mountain I has no issued or outstanding
equity securities, debt securities or other instruments which are convertible
into or exchangeable for at any time into equity securities of Rocky Mountain I.
Rocky Mountain I is not subject to any commitment or obligation which would
require the issuance or sale of shares of its capital stock at any time under
options, subscriptions, warrants, rights, calls, preemptive rights, convertible
obligations or any other fixed or contingent obligations or which would provide
the holder thereof with the right to acquire any equity securities of Rocky
Mountain I. Rocky Mountain I has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
SECTION 9.3 OWNERSHIP OF SHARES.
The Rocky Mountain I Disclosure Letter contains a true, complete and
accurate list of each of the record and beneficial owners of the shares of the
capital stock of Rocky Mountain I, together with the name and address of each
such holder. There are no agreements, pledges, powers of attorney, assignments
or similar agreements or arrangements either (i) restricting the transferability
of any of the shares of the capital stock of Rocky Mountain I or (ii) which
reasonably could be expected to prohibit or delay the consummation of the
transactions contemplated hereby.
SECTION 9.4 SUBSIDIARIES; INVESTMENTS.
Rocky Mountain I does not own any shares of capital stock or equity
securities of, or any interest in any other entity.
SECTION 9.5 EXECUTION AND EFFECT OF AGREEMENT.
Rocky Mountain I has the corporate power to enter into this Agreement and
to perform its obligations hereunder and, subject to the due authorization and
approval of its shareholders, to enter into and consummate the Rocky Mountain I
Merger. Subject only to the approval of its Board of Directors, this Agreement
has been duly executed and delivered by Rocky Mountain I and constitutes a
legal, valid and binding obligation of Rocky Mountain I, fully enforceable
against Rocky Mountain I in accordance with its terms; except as enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws of general application relating
to or affecting enforcement of creditors' rights and the exercise of judicial
discretion in accordance with general principles of equity.
SECTION 9.6 RESTRICTIONS.
The execution and delivery of this Agreement by Rocky Mountain I, the
consummation of the transactions contemplated hereby by Rocky Mountain I, and,
subject to the due authorization and approval of its shareholders, the
performance of the obligations of Rocky Mountain I hereunder will not (a)
violate any of the provisions of the charter or by-laws of Rocky Mountain I, (b)
violate or conflict with the provisions of any Applicable Laws, (c) result in
the creation of any Encumbrance upon any of the assets, rights or properties of
Rocky Mountain I, or (d) except as disclosed in the Rocky Mountain I Disclosure
Letter, conflict with, violate any provisions of, result in a breach of or give
rise to a right of termination, modification or cancellation of, constitute a
default of, or accelerate the performance required by, with or without the
passage of time or the
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giving of notice or both, the terms of any material agreement, indenture,
mortgage, deed of trust, security or pledge agreement, lease, contract, note,
bond, license, permit, authorization or other instrument to which Rocky Mountain
I is a party or to which any of any of the assets of Rocky Mountain I are
subject.
SECTION 9.7 CONSENTS.
Except as disclosed in the Rocky Mountain I Disclosure Letter, no filing
with, or consent, waiver, approval or authorization of, or notice to, any
Governmental Authority or any third party is required to be made or obtained by
Rocky Mountain I in connection with the execution and delivery of this Agreement
or any document or instrument contemplated hereby, the consummation of any of
the transactions contemplated hereby or the performance of any of their
respective obligations hereunder or thereunder.
SECTION 9.8 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of the audited
balance sheets and related statements of income, cash flows and changes in
stockholders' equity of Rocky Mountain I as at December 31, 1994, 1995 and 1996
and for the year periods then-ended and the unaudited financial statements of
Rocky Mountain I as at June 30, 1997 and for the six month period then ended
(collectively, the "Rocky Mountain I Financial Statements"). All of the Rocky
Mountain I Financial Statements have been prepared in accordance with an accrual
method of accounting consistently applied, in a manner consistent with each
other and the books and records of Rocky Mountain I, and fairly present in all
material respects the financial condition and results of operations of Rocky
Mountain I at the dates and for the periods indicated therein. The regular books
of account of Rocky Mountain I fairly and accurately reflect all material
transactions involving Rocky Mountain I, are true, correct and complete and have
been prepared in accordance with an actual method of accounting, consistently
applied, and on a basis consistent with the Financial Statements.
SECTION 9.9 DEBT.
The Rocky Mountain I Disclosure Letter contains a true, complete and
accurate listing of the original principal amount of all of the outstanding Debt
of Rocky Mountain I, the remaining principal balance thereof, the interest
rate(s) payable by Rocky Mountain I in respect thereof, if any, and the date(s)
of maturity thereof. Except as disclosed in the Rocky Mountain I Disclosure
Letter, all of the Debt of Rocky Mountain I may be prepaid at any time, without
premium, prepayment penalties, termination fees or other fees or charges.
SECTION 9.10 GUARANTEES.
The Rocky Mountain I Disclosure Letter contains a complete list of all
Guarantees provided by Rocky Mountain I for the benefit of any other party and
of all Guarantees provided by any other party for the benefit of Rocky Mountain
I or any party doing business with Rocky Mountain I.
SECTION 9.11 NO UNDISCLOSED LIABILITIES.
Rocky Mountain I does not have any material liabilities or obligations of
any nature whatsoever (whether known or unknown, due or to become due, absolute,
accrued, contingent or otherwise, and whether or not determined or
determinable), except for (i) liabilities or obligations set forth in the Rocky
Mountain I Disclosure Letter, (ii) liabilities or obligations to the extent
expressly reflected on or reserved against in the June 30, 1997 balance sheet
included among the Rocky Mountain I Financial Statements or disclosed in the
notes thereto, (iii) liabilities or obligations of a type reflected on the June
30, 1997 balance sheet and incurred in the ordinary course of business and
consistent with past practices since June 30, 1997, or (iv) liabilities or
obligations arising under the terms of the Material Contracts of Rocky Mountain
I. Except as otherwise contemplated or permitted by this Agreement no dividends
have been declared on any capital stock of Rocky Mountain I which are unpaid.
SECTION 9.12 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the
management of Rocky Mountain I, threatened, by or before any court, any
Governmental Authority or arbitrator, against Rocky Mountain I that reasonably
could be expected to prevent the consummation of any of the transactions
contemplated hereby. Except as disclosed in the Rocky Mountain I Disclosure
Letter, there is no material suit, claim, action at law or in equity, proceeding
or governmental investigation or audit pending, or to the knowledge of
management of Rocky Mountain I, threatened, by or before any arbitrator, court,
or other Governmental Authority, against Rocky Mountain I or involving any of
the former or present employees, agents, businesses, properties, rights or
assets of Rocky Mountain I, nor,
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to the knowledge of management of Rocky Mountain I, is there any basis for the
assertion of any of the foregoing. Except as disclosed in the Rocky Mountain I
Disclosure Letter, there are no judgments, orders, injunctions, decrees,
stipulations or awards rendered by any court, Governmental Authority or
arbitrator against Rocky Mountain I or any of their respective former or present
Employees, agents, properties or assets.
SECTION 9.13 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The Rocky Mountain I Disclosure Letter sets forth a complete list of all
real property owned by or leased to Rocky Mountain I, and, with respect to all
properties leased by Rocky Mountain I, a description of the term of such lease
and the monthly rental thereunder. Rocky Mountain I is not in default (and will
not be in default with the passage of time or the receipt of notice or both) and
has not received notice of default, under any lease of real property. All real
property leased to Rocky Mountain I is available for immediate use in the
operation of its business and for the purpose for which such property currently
is being utilized. Subject in the case of leased property to the terms and
conditions of the respective leases, Rocky Mountain I has full legal and
practical access to all such real property.
SECTION 9.14 INTELLECTUAL PROPERTY.
The Rocky Mountain I Disclosure Letter sets forth a complete list of (i)
all Intellectual Property owned, used or licensed by Rocky Mountain I, together
with the identity of the owner thereof, and (ii) all license agreements pursuant
to which any Intellectual Property is licensed to or by Rocky Mountain I. Rocky
Mountain I owns its Intellectual Property free and clear of any and all
Encumbrances, or, in the case of licensed Intellectual Property, has valid,
binding and enforceable rights to use such Intellectual Property. Rocky Mountain
I has duly and timely filed all renewals, continuations and other filings
necessary to maintain its Intellectual Property or registrations thereof. Except
as disclosed in the Rocky Mountain I Disclosure Letter, Rocky Mountain I (i) has
not received any notice or claim to the effect that the use of any Intellectual
Property infringes upon, conflicts with or misappropriates the rights of any
other party or that any of the Intellectual Property is not valid or
enforceable, and (ii) has not made any claim that any party has violated or
infringed upon its rights with respect to any Intellectual Property.
SECTION 9.15 MATERIAL CONTRACTS.
(a) List of Material Contracts. The Rocky Mountain I Disclosure Letter
sets forth a list of all material written, and a description of all oral,
commitments, agreements or contracts to which Rocky Mountain I is a party or by
which Rocky Mountain I is obligated, including, but not limited to, all
commitments, agreements or contracts embodying or evidencing the following
transactions or arrangements: (i) agreements for the employment of, or
independent contractor arrangements with, any officer or other individual
employee of Rocky Mountain I; (ii) any consulting agreement, agency agreement
and any other service agreement that will continue in force after the Closing
Date with respect to the employment or retention by Rocky Mountain I of
consultants, agents, legal counsel, accountants or anyone else who is not an
Employee; (iii) any single contract, purchase order or commitment providing for
expenditures by Rocky Mountain I after the date hereof of more than $25,000 or
which has been entered into by Rocky Mountain I otherwise than in the ordinary
course of business; (iv) agreements between Rocky Mountain I and suppliers to
Rocky Mountain I pursuant to which Rocky Mountain I is obligated to purchase or
to sell or distribute the products of any other party other than current
purchase orders entered into in the ordinary course of business consistent with
past practices; (v) any contract containing covenants limiting the freedom of
Rocky Mountain I or any officer, director, or employee of Rocky Mountain I to
engage in any line or type of business or with any person in any geographic
area; (vi) any commitment or arrangement by Rocky Mountain I to participate in a
strategic alliance, partnership, joint venture, limited liability company or
other cooperative undertaking with any other Person; (vii) any commitments by
Rocky Mountain I for capital expenditures involving more than $25,000
individually or $50,000 in the aggregate; and (viii) any other contract,
commitment, agreement, understanding or arrangement that the management of Rocky
Mountain I deems to be material to the business of Rocky Mountain I.
(b) No Breaches or Defaults. Except as disclosed in the Rocky Mountain
I Disclosure Letter, Rocky Mountain I is in full compliance with each, and is
not in default under any, Material Contract to which it is a party, and no event
has occurred that, with notice or lapse of time or both, would constitute such a
default thereunder. Rocky Mountain I has not waived any rights under or with
respect to any of the Material Contracts to which it is a party. The management
of Rocky Mountain I has no knowledge, or received any notice to the effect, that
any party with whom Rocky Mountain I has contractual arrangements under the
Material Contracts, is in default under any such contractual arrangements or
that any event has occurred that, with notice or lapse of time or both, would
constitute such a default thereunder. Each of the Material Contracts to which
Rocky Mountain I is a party constitutes a legal, valid and binding obligation of
each the parties thereto and is enforceable against each of the parties thereto
in accordance with its respective terms; except as enforceability thereof may be
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limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the exercise of judicial
discretion in accordance with general principles of equity.
SECTION 9.16 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The Rocky Mountain I Disclosure Letter
sets forth a true, complete and correct list of all Employee Benefit Plans and
all Benefit Arrangements to which Rocky Mountain I or any of its ERISA
Affiliates is a party or to which Rocky Mountain I or any of its ERISA
Affiliates is obligated to contribute. None of the Employee Benefit Plans to
which Rocky Mountain I or any ERISA Affiliate of Rocky Mountain I is a party,
which Rocky Mountain I or any ERISA Affiliate of Rocky Mountain I sponsors or
maintains or to which Rocky Mountain I or any ERISA Affiliate of Rocky Mountain
I contributes is subject to the requirements of Section 302 of ERISA or Section
412 of the Code and no liability under Title IV of ERISA (whether to the PBGC or
otherwise) has been incurred by Rocky Mountain I or any of its ERISA Affiliates.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the Rocky Mountain I Disclosure Letter, each Employee Benefit Plan and Benefit
Arrangement to which Rocky Mountain I or any of its ERISA Affiliates is a party
or to which Rocky Mountain I or any of its ERISA Affiliates is obligated to
contribute has been operated or maintained in compliance in all material
respects with all Applicable Laws, including, without limitation, ERISA and the
Code, and has been maintained in material compliance with its terms and in
material compliance with the terms of any applicable collective bargaining
agreement. Except as disclosed in the Rocky Mountain I Disclosure Letter, with
respect to any Employee Benefit Plan that is intended to qualify under Section
401 of the Code, a favorable determination letter as to qualification under
Section 401 of the Code that considered the Tax Reform Act of 1986 has been
issued and any amendments required for continued qualification under Section 401
of the Code have been timely adopted and nothing has occurred subsequent to the
date of such determination letter that could adversely affect the qualified
status of any such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which Rocky Mountain I of any of its ERISA Affiliates is a party
or to which Rocky Mountain I or any of its ERISA Affiliates is obligated to
contribute, under ERISA or the Code, for all periods of time prior to the date
hereof and that are attributable to Employees of Rocky Mountain I have been paid
or otherwise adequately accrued against in the Rocky Mountain I Financial
Statements, as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the
Rocky Mountain I Disclosure Letter, Rocky Mountain I is not liable for any
arrearage of wages, any accrued or vested vacation pay or any tax or penalty for
failure to comply with any Applicable Law relating to employment or labor above
the level accrued for or reserved against on the June 30, 1997 balance sheet
included in the Rocky Mountain I Financial Statements, and there is no
controversy pending, threatened or in prospect between Rocky Mountain I and any
of its Employees nor is there any basis for any such controversy. There is no
unfair labor practice charge or complaint currently pending against Rocky
Mountain I with respect to or relating to any of its Employees before the
National Labor Relations Board or any other agency having jurisdiction over such
matters and no charges or complaints are currently pending against Rocky
Mountain I before the Equal Employment Opportunity Commission or any state or
local agency having responsibility for the prevention of unlawful employment
practices. There are no actions, suits or claims pending, including proceedings
before the IRS, the DOL or the PBGC, with respect to any Employee Benefit Plan,
Benefit Arrangement or any administrator or fiduciary thereof, other than
benefit claims arising in the normal course of operation of such Employee
Benefit Plans or Benefit Arrangements, and, to the knowledge of the management
of Rocky Mountain I, no Employee Benefit Plan or Benefit Arrangement is under
audit or investigation by any Governmental Authority.
(e) Severance Obligations. Except as disclosed in the Rocky Mountain I
Disclosure Letter, all current employees of Rocky Mountain I may be terminated
at will, without notice and without incurring any severance or other liability
or obligation to the employee in connection with the termination. Except to the
extent provided by the terms of the Employee Benefit Plans and Benefit
Arrangements disclosed in the Rocky Mountain I Disclosure Letter, neither the
execution, delivery or performance of this Agreement nor the consummation of the
Closing will (i) increase any benefits otherwise payable under any Employee
Benefit Plan or Benefit Arrangement, (ii) result in the acceleration of the time
of payment or vesting of any such benefits, or (iii) give rise to an obligation
with respect to the payment of any severance pay. No "parachute payment" (within
the meaning of Section 280G of the Code), "change in control" or severance
payment has been made or will be required to be made by Rocky Mountain I or any
ERISA Affiliate of Rocky Mountain I to any Employee in connection with the
execution, delivery or performance of this Agreement or as a result of the
consummation of the Closing.
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(f) Compliance with Laws on Employment Practices. Rocky Mountain I has
complied in all material respects with all Applicable laws relating to
employment and employment practices, terms and conditions of employment, wages
and hours, and to the knowledge of the management of Rocky Mountain I, is not
engaged in any unfair labor practice with respect to any of the current
employees of Rocky Mountain I and to the best knowledge of Rocky Mountain I,
none of the persons performing services for Rocky Mountain I or any of its ERISA
Affiliates have been improperly classified as independent contractors or as
being exempt from the payment of wages or overtime.
(g) Collective Bargaining Agreements. Except as disclosed in the Rocky
Mountain I Disclosure Letter), none of the employees of Rocky Mountain I are
subject to any collective bargaining agreement nor is Rocky Mountain I required
under any agreement to recognize or bargain with any labor organization or union
on behalf of its employees.
(h) No Multi-Employer Plans. Neither Rocky Mountain I nor any of its
ERISA Affiliates has contributed to, or had the obligation to contribute to, any
Multiemployer Plan within the five-year period ending on the date of this
Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by Rocky Mountain I or
any of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Benefit Plan or Benefit Arrangement that would
increase materially the expense of maintaining such Employee Benefit Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year of Rocky Mountain I ended December 31, 1996.
(j) No Unfunded Liabilities. Neither Rocky Mountain I nor any ERISA
Affiliate of Rocky Mountain I has any current or projected liability for any
unfunded post-retirement medical or life insurance benefits in connection with
any Employee of Rocky Mountain I or ERISA Affiliate of Rocky Mountain I.
(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by Rocky Mountain I or any ERISA Affiliate of Rocky
Mountain I, which could subject any such Employee Benefit Plan, Rocky Mountain
I, any ERISA Affiliate of Rocky Mountain I, or the Holding Company directly or
indirectly (through an indemnification agreement or otherwise), to any liability
for or as a result of a breach of fiduciary duty, a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, or a
civil penalty under Section 502 of ERISA or a Tax under Section 4971 of the
Code. Neither Rocky Mountain I nor any of its ERISA Affiliates have incurred a
"withdrawal" or "partial withdrawal," as defined in Sections 4203 and 4205 of
ERISA, from, or failed to timely make contributions to any Multiemployer Plan
which has resulted in any unpaid liability of Rocky Mountain I or any of its
ERISA Affiliates.
(l) Welfare Benefit Plans. (i) Except as disclosed in the Rocky
Mountain I Disclosure Letter, none of the Employee Benefit Plans that are
"employee welfare benefit plans" as defined in ERISA Section 3(1) provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except to the
extent required by law; provided that any disclosure regarding this clause (i)
shall set forth (A) the number of individuals currently receiving such
continuing benefits or coverage, (B) the limit on liability with respect to such
coverage, (C) the terms and conditions of such coverage, and (D) the maximum
number of current employees or independent contractors who could become eligible
for such continuing benefits or coverage; (ii) there has been no violation of
Code Section 4980B or ERISA Sections 601-609 with respect to any such plan that
could result in any material liability; (iii) no such plans are "multiple
employer welfare arrangements" within the meaning of ERISA Section 3(40); (iv)
with respect to any such plans that are self-insured, no claims have been made
pursuant to any such plan that have not yet been paid (other than claims which
have not yet been paid but are in the normal course of processing) and no
individual has incurred injury, sickness or other medical condition with respect
to which claims may be made pursuant to any such plan where the liability to the
employer could in the aggregate with respect to each such individual exceed
$50,000 per year; (v) neither Rocky Mountain I nor any of its ERISA Affiliates
maintains or has any obligation to contribute to any "voluntary employees'
beneficiary association" within the meaning of Code Section 501(c)(9) or other
welfare benefit fund as defined at Section 419(e) of the Code (such disclosure
to include the amount of any such funding); (vi) no such plan is intended to
satisfy Code Section 125; (vii) no amounts are required in connection with any
such plan to be included in income under Code Section 105(h) (under official
regulations thereof to date); and (viii) neither Rocky Mountain I nor any of its
ERISA Affiliates maintains a nonconforming group health plan as defined at
Section 5000(c) of the Code.
SECTION 9.17 TAX MATTERS.
(a) Affiliated Groups. Rocky Mountain I is not a member of, and has
never been a member of, any "affiliated group" as that term is defined in
Section 1504(a) of the Code.
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(b) Tax Returns and Payment of Taxes. Rocky Mountain I has timely
filed or will timely file all federal, state, local, and other Tax Returns
required to be filed by it under Applicable Laws, including estimated Tax
Returns and reports, and has paid all required Income Taxes and other Taxes
(including any additions to taxes, penalties and interest related thereto) due
and payable on or before the date hereof. Rocky Mountain I has paid, withheld,
or accrued, or will accrue, on the Rocky Mountain I Financial Statements in
accordance with an accrual method of accounting consistently applied any and all
Income Taxes and other Taxes in respect of the conduct of its business or the
ownership of its property and in respect of any transactions for all periods (or
portions thereof) through the close of business on the Closing Date. Rocky
Mountain I has withheld and paid over all Taxes required to have been withheld
and paid over, and complied with all information reporting and backup
withholding requirements, including the maintenance of required records with
respect thereto, in connection with amounts paid or owing to any Employee,
creditor, independent contractor or other third party. Rocky Mountain I has
collected all sales, use and value added Taxes required to be collected, and has
remitted, or will remit on a timely basis, such amounts to the appropriate
Government Authorities and have furnished properly completed exemption
certificates for all exempt transactions.
(c) Tax Reserves. The amount of Rocky Mountain I's liability for
unpaid Taxes for all periods ending on or before the date of this Agreement does
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) as of the date of this Agreement,
and the amount of Rocky Mountain I's liability for unpaid Taxes for all periods
ending on or before the Closing Date shall not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals shall be reflected on the balance sheet of
Rocky Mountain I as of the Closing Date.
(d) Audits; No Deficiencies Asserted Against Company. The Tax Returns
of Rocky Mountain I have never been audited by any Tax Authority, nor is any
such audit in process, pending or threatened (either in writing or verbally,
formally or informally). Except as disclosed in the Rocky Mountain I Disclosure
Letter, no deficiencies have been asserted (or are expected to be asserted)
against Rocky Mountain I as a result of IRS (or state or local Tax Authority)
examinations and no issue has been raised by any IRS (or state or local Tax
Authority) examination that, by application of the same principles, might result
in a proposed deficiency for any other period not so examined.
(e) No Waivers of Limitations. Except as disclosed in the Rocky
Mountain I Disclosure Letter, there are no agreements, waivers of statutes of
limitations, or other arrangements providing for extensions of time in respect
of the assessment or collection of any unpaid Taxes against Rocky Mountain I.
Rocky Mountain I has disclosed on its federal Income Tax Returns all positions
taken therein that could, if not so disclosed, give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(f) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of Rocky Mountain I with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that Rocky Mountain I is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established on the Rocky Mountain I Financial
Statements.
(g) Tax Elections and Special Tax Status. Rocky Mountain I is not a
party to any safe harbor lease within the meaning of Section 168(f)(8) of the
Code. No election or consent under Section 341(f) of the Code has been made or
shall be made on or prior to the Closing Date by or on behalf of Rocky Mountain
I. Rocky Mountain I is a "small business corporation" which has elected to be
subject to federal income taxation under subchapter S of the Code and has such
status for purposes of federal income taxation and state income taxation in all
states in which its respective income is subject to taxation or has been subject
to taxation at all times since its formation.
(h) Disqualified Leasebacks. Rocky Mountain I is not a party to a
"disqualified leaseback or long-term agreement" described in Section 467(b)(4)
of the Code.
(i) Deferrals of Income. No income or gain of Rocky Mountain I has
been deferred pursuant to Treasury Regulation (section xxxx) 1.1502-13 or
1.1502-14, or Temporary Treasury Regulation (section xxxx) 1.1502-13T or
1.1502-14T.
(j) Tax Sharing and Similar Arrangements. Rocky Mountain II is not a
party to or bound by any Tax sharing, Tax indemnity, Tax allocation or other
similar arrangement.
(k) No Non-Deductible Compensation Payments. Rocky Mountain I has not
made any payments, nor is it obligated to make any payments, that would not be
deductible under Section 280G of the Code, nor is it a party to any agreement
that under certain circumstances could obligate it to make any such payments.
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SECTION 9.18 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by Rocky
Mountain I and any other real property presently or formerly owned by, used by
or leased to or by Rocky Mountain I (collectively, the "Rocky Mountain I
Property"), the existing and prior uses of such Property and all operations of
the businesses of Rocky Mountain I comply and have at all times complied with
all Environmental Laws and Rocky Mountain I is not in violation of nor has it
violated, in connection with the ownership, use, maintenance or operation of
such property or the conduct of its business, any Environmental Law.
(b) Rocky Mountain I has all necessary permits, registrations,
approvals and licenses required by any Governmental Authority or Environmental
Law.
(c) Except as disclosed in the Rocky Mountain I Disclosure Letter,
there has been no spill, discharge, leak, emission, injection, disposal, escape,
dumping or release of any kind on, beneath or above such Property or into the
environment surrounding such Rocky Mountain I Property of any Hazardous
Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such Rocky
Mountain I Property. No asbestos-containing materials, underground improvements
(including, but not limited to the treatment or storage tanks, sumps, or water,
gas or oil xxxxx) or polychlorinated biphenyls (PCBs) transformers, capacitors,
ballasts, or other equipment which contain dielectric fluid containing PCBs at
levels in excess of fifty parts per million (50 PPM) are located on such Rocky
Mountain I Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of Rocky Mountain I (or any predecessor in interest) in connection with
(i) any actual or alleged failure to comply with any requirement of any
Environmental Law; (ii) the ownership, use, maintenance or operation of the
Property by any person; (iii) the alleged violation of any Environmental Law; or
(iv) the suspected presence of any Hazardous Material thereon.
SECTION 9.19 COMPLIANCE WITH LAWS.
Rocky Mountain I has at all times conducted its business in material
compliance with all (and has not received any notice of any claimed violation of
any) Applicable Laws.
SECTION 9.20 LICENSES AND PERMITS.
Rocky Mountain I possess all licenses, permits, and other governmental
consents, certificates, approvals, or other authorizations (the "Permits")
necessary for the operation of the business of Rocky Mountain I. Rocky Mountain
I has complied with the terms and conditions of all Permits in all material
respects and all such Permits are in full force and effect, and there has
occurred no event nor is any event, action, investigation or proceeding pending
or, to the knowledge of management of Rocky Mountain I, threatened, which could
cause or permit revocation or suspension of or otherwise adversely affect the
maintenance of any Permits. The transactions contemplated by this Agreement will
not lead to the revocation, cancellation, termination or suspension of any
Permits.
SECTION 9.21 INSURANCE.
Rocky Mountain I has regularly maintained all policies of commercial
liability, products liability, fire, casualty, worker's compensation, life and
other forms of insurance on an "occurrence" rather than a "claims made" basis in
amounts and types required by law and generally carried by reasonably prudent,
similarly situated businesses. Rocky Mountain I is not in default under any
provision contained in any insurance policy maintained by Rocky Mountain I
currently, nor has Rocky Mountain I failed to give any notice or present any
claim thereunder in due and timely fashion and no cancellation, non-renewal,
reduction of coverage or arrearage in premiums has been threatened or occurred
with respect to any policy, nor is the management of Rocky Mountain I aware of
any grounds therefor.
SECTION 9.22 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the Rocky Mountain I Disclosure Letter or otherwise
permitted by this Agreement, since June 30, 1997, Rocky Mountain I has not (I)
mortgaged, pledged or subjected to any Encumbrance any of its assets; (ii)
canceled or compromised any claim of or debts owed to it; (iii) sold, licensed,
leased, exchanged or transferred any of its assets except in the ordinary course
of business; (iv) entered into any material transaction other than in the
ordinary course of business; (v) experienced any material change in the
relationship or course of dealing with any supplier, customer or creditor; (vi)
suffered any material destruction, loss or damage to any of its assets; (vii)
made any management decisions involving any
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material change in its policies with regard to pricing, sales, purchasing or
other business, financial, accounting (including reserves and the amounts
thereof) or tax policies or practices; (viii) declared, set aside or paid any
dividends on or made any distributions in respect of any outstanding shares of
capital stock or made any other distributions or payments to any of its
shareholders; (ix) submitted any bid, proposal, quote or commitment to any party
in response to a request for proposal or otherwise; (x) engaged in any merger or
consolidation with, or agreed to merge or consolidate with, or purchased or
agreed to purchase, all or substantially all of the assets of, or otherwise
acquire, any other party; (xi) entered into any strategic alliance, partnership,
joint venture or similar arrangement with any other party; (xii) incurred or
agreed to incur any Debt or prepaid or made any prepayments in respect of Debt;
(xiii) issued or agreed to issue to any party, any shares of stock or other
securities; (xiv) redeemed, purchased or agreed to redeem or purchase any of its
outstanding shares of capital stock or other securities; (xv) increased the rate
of compensation payable or to become payable to any of its officers, directors,
employees or agents over the rate being paid to them as of June 30, 1996 or
agreed to do so otherwise than in accordance with contractual agreements with
such parties; (xvi) made or agreed to make any charitable contributions or
incurred or agreed to incur any non-business expenses; or (xvii) charged off any
bad debts or increased its bad debt reserve except in the manner consistent with
its past practices.
SECTION 9.23 TITLE TO ASSETS.
Except as described in the Rocky Mountain I Disclosure Letter, Rocky
Mountain I has good and marketable title to its assets and properties, free and
clear of restrictions on or conditions to transfer or assignment, and free and
clear of all Encumbrances.
SECTION 9.24 CORPORATE RECORDS.
The minute books of Rocky Mountain I accurately reflect all minutes of
proceedings of and actions taken by the directors of Rocky Mountain I, and by
each committee of the Board of Directors of Rocky Mountain I, and all records of
meetings of and actions taken by the stockholders of Rocky Mountain I, that are
required by applicable laws to be recorded in or reflected in the corporate
records thereof.
SECTION 9.25 BROKER AND FINDER FEES.
Rocky Mountain I has not engaged any broker or finder in connection with
the transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company or Rocky Mountain I by any broker, finder or intermediary in connection
with such transaction.
SECTION 9.26 ADEQUATE DISCLOSURE.
No representation or warranty made by Rocky Mountain I pursuant to this
Agreement, or any statement contained in any Exhibit or Schedule to this
Agreement, or any certificate or document furnished or to be furnished by Rocky
Mountain I pursuant to the terms of this Agreement in connection with the
transactions contemplated hereby, contains any untrue or misleading statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
SECTION 9.27 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the Rocky Mountain I Disclosure Letter, and except
as expressly contemplated or permitted by this Agreement, since June 30, 1997,
Rocky Mountain I and has conducted its business in the ordinary course and
consistent with past practice, and Rocky Mountain I has not suffered any change
that has had a Material Adverse Effect on Rocky Mountain I. There are no
conditions, facts, developments or circumstances of an unusual or special nature
that reasonably could be expected to have a Material Adverse Effect upon Rocky
Mountain I that have not been disclosed in writing by Rocky Mountain I pursuant
to the Rocky Mountain I Disclosure Letter.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF ROCKY MOUNTAIN II
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, Rocky Mountain II hereby makes
the following representations and warranties to the other parties to this
Agreement and to the Holding Company.
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SECTION 10.1 ORGANIZATION AND GOOD STANDING.
Rocky Mountain II is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado, has full corporate power
and authority to own, operate and lease its properties, and to conduct its
business as it is now being conducted, and is qualified to transact business as
a foreign corporation in each jurisdiction in which the operation of its
business or the ownership of its properties requires such qualification.
SECTION 10.2 CAPITALIZATION OF ROCKY MOUNTAIN II.
The authorized capital stock of Rocky Mountain II consists solely of
500,000 shares of a single class of common stock, $1.00 par value, of which
14,538.88 shares have been issued and are outstanding as of the date of this
Agreement. Each of the shares of the capital stock of Rocky Mountain II issued
and outstanding as of the date hereof has been duly authorized and validly
issued and is fully paid and non-assessable. None of the shares of the issued
and outstanding capital stock of Rocky Mountain II has been issued in violation
of shareholder preemptive rights. Rocky Mountain II has no issued or outstanding
equity securities, debt securities or other instruments which are convertible
into or exchangeable for at any time into equity securities of Rocky Mountain
II. Rocky Mountain II is not subject to any commitment or obligation which would
require the issuance or sale of shares of its capital stock at any time under
options, subscriptions, warrants, rights, calls, preemptive rights, convertible
obligations or any other fixed or contingent obligations or which would provide
the holder thereof with the right to acquire any equity securities of Rocky
Mountain II except as provided in the Disclosure Letter dated of even date with
this Agreement submitted by Rocky Mountain II to each of the parties. Rocky
Mountain II has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof.
SECTION 10.3 OWNERSHIP OF SHARES.
The Rocky Mountain II Disclosure Letter contains a true, complete and
accurate list of each of the record and beneficial owners of the shares of the
capital stock of Rocky Mountain II, together with the name and address of each
such holder. There are no agreements, pledges, powers of attorney, assignments
or similar agreements or arrangements either (I) restricting the transferability
of any of the shares of the capital stock of Rocky Mountain II or (ii) which
reasonably could be expected to prohibit or delay the consummation of the
transactions contemplated hereby.
SECTION 10.4 SUBSIDIARIES; INVESTMENTS.
Rocky Mountain II does not own any shares of capital stock or equity
securities of, or any interest in any other entity.
SECTION 10.5 EXECUTION AND EFFECT OF AGREEMENT.
Rocky Mountain II has the corporate power to enter into this Agreement and
to perform its obligations hereunder and, subject to the due authorization and
approval of its shareholders, to enter into and consummate the Rocky Mountain II
Merger. Subject only to the approval of its Board of Directors, this Agreement
has been duly executed and delivered by Rocky Mountain II and constitutes a
legal, valid and binding obligation of Rocky Mountain II, fully enforceable
against Rocky Mountain II in accordance with its terms; except as enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws of general application relating
to or affecting enforcement of creditors' rights and the exercise of judicial
discretion in accordance with general principles of equity.
SECTION 10.6 RESTRICTIONS.
The execution and delivery of this Agreement by Rocky Mountain II, the
consummation of the transactions contemplated hereby by Rocky Mountain II, and,
subject to the due authorization and approval of its shareholders, the
performance of the obligations of Rocky Mountain II hereunder will not (a)
violate any of the provisions of the charter or by-laws of Rocky Mountain II,
(b) violate or conflict with the provisions of any Applicable Laws, (c) result
in the creation of any Encumbrance upon any of the assets, rights or properties
of Rocky Mountain II, or (d) except as disclosed in the Rocky Mountain II
Disclosure Letter, conflict with, violate any provisions of, result in a breach
of or give rise to a right of termination, modification or cancellation of,
constitute a default of, or accelerate the performance required by, with or
without the passage of time or the giving of notice or both, the terms of any
material agreement, indenture, mortgage, deed of trust, security or pledge
agreement, lease, contract, note, bond, license, permit, authorization or other
instrument to which Rocky Mountain II is a party or to which any of any of the
assets of Rocky Mountain II are subject.
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SECTION 10.7 CONSENTS.
Except as disclosed in the Rocky Mountain II Disclosure Letter, no filing
with, or consent, waiver, approval or authorization of, or notice to, any
governmental authority or any third party is required to be made or obtained by
Rocky Mountain II in connection with the execution and delivery of this
Agreement or any document or instrument contemplated hereby, the consummation of
any of the transactions contemplated hereby or the performance of any of their
respective obligations hereunder or thereunder.
SECTION 10.8 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of the audited
balance sheets and related statements of income, cash flows and changes in
stockholders' equity of Rocky Mountain II as at December 31, 1994, 1995 and 1996
and for the year periods then ended and the unaudited financial statements of
Rocky Mountain II as at June 30, 1997 and for the six month period then ended
(collectively, the "Rocky Mountain II Financial Statements"). All of the Rocky
Mountain II Financial Statements have been prepared in accordance with an
accrual method of accounting, consistently applied, in a manner consistent with
each other and the books and records of Rocky Mountain II, and fairly present in
all material respects the financial condition and results of operations of Rocky
Mountain II at the dates and for the periods indicated therein. The regular
books of account of Rocky Mountain II fairly and accurately reflect all material
transactions involving Rocky Mountain II, are true, correct and complete and
have been prepared in accordance with an accrual method of accounting,
consistently applied, and on a basis consistent with the Financial Statements.
SECTION 10.9 DEBT.
The Rocky Mountain II Disclosure Letter contains a true, complete and
accurate listing of the original principal amount of all of the outstanding Debt
of Rocky Mountain II, the remaining principal balance thereof, the interest
rate(s) payable by Rocky Mountain II in respect thereof, if any, and the date(s)
of maturity thereof. Except as disclosed in the Rocky Mountain II Disclosure
Letter, all of the Debt of Rocky Mountain II may be prepaid at any time, without
premium, prepayment penalties, termination fees or other fees or charges.
SECTION 10.10 GUARANTEES.
The Rocky Mountain II Disclosure Letter contains a complete list of all
Guarantees provided by Rocky Mountain II for the benefit of any other party and
of all Guarantees provided by any other party for the benefit of Rocky Mountain
II or any party doing business with Rocky Mountain II.
SECTION 10.11 NO UNDISCLOSED LIABILITIES.
Rocky Mountain II does not have any material liabilities or obligations of
any nature whatsoever (whether known or unknown, due or to become due, absolute,
accrued, contingent or otherwise, and whether or not determined or
determinable), except for (I) liabilities or obligations set forth in the Rocky
Mountain II Disclosure Letter, (ii) liabilities or obligations to the extent
expressly reflected on or reserved against in the June 30, 1997 balance sheet
included among the Rocky Mountain II Financial Statements or disclosed in the
notes thereto, (iii) liabilities or obligations of a type reflected on the June
30, 1997 balance sheet and incurred in the ordinary course of business and
consistent with past practices since June 30, 1997, or (iv) liabilities or
obligations arising under the terms of the Material Contracts of Rocky Mountain
II. Except as otherwise contemplated or permitted by this Agreement no dividends
have been declared on any capital stock of Rocky Mountain II which are unpaid.
SECTION 10.12 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the
management of Rocky Mountain II, threatened, by or before any court, any
Governmental Authority or arbitrator, against Rocky Mountain II that reasonably
could be expected to prevent the consummation of any of the transactions
contemplated hereby. Except as disclosed in the Rocky Mountain II Disclosure
Letter, there is no material suit, claim, action at law or in equity, proceeding
or governmental investigation or audit pending, or to the knowledge of
management of Rocky Mountain II, threatened, by or before any arbitrator, court,
or other Governmental Authority, against Rocky Mountain II or involving any of
the former or present employees, agents, businesses, properties, rights or
assets of Rocky Mountain II, nor, to the knowledge of management of Rocky
Mountain II, is there any basis for the assertion of any of the foregoing.
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Except as disclosed in the Rocky Mountain II Disclosure Letter, there are no
judgments, orders, injunctions, decrees, stipulations or awards rendered by any
court, Governmental Authority or arbitrator against Rocky Mountain II or any of
their respective former or present Employees, agents, properties or assets.
SECTION 10.13 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The Rocky Mountain II Disclosure Letter sets forth a complete list of all
real property owned by or leased to Rocky Mountain II, and, with respect to all
properties leased by Rocky Mountain II, a description of the term of such lease
and the monthly rental thereunder. Rocky Mountain II is not in default (and will
not be in default with the passage of time or the receipt of notice or both) and
has not received notice of default, under any lease of real property. All real
property leased to Rocky Mountain II is available for immediate use in the
operation of its business and for the purpose for which such property currently
is being utilized. Subject in the case of leased property to the terms and
conditions of the respective leases, Rocky Mountain II has full legal and
practical access to all such real property.
SECTION 10.14 INTELLECTUAL PROPERTY.
The Rocky Mountain II Disclosure Letter sets forth a complete list of (I)
all Intellectual Property owned, used or licensed by Rocky Mountain II, together
with the identity of the owner thereof, and (ii) all license agreements pursuant
to which any Intellectual Property is licensed to or by Rocky Mountain II. Rocky
Mountain II owns its Intellectual Property free and clear of any and all
Encumbrances, or, in the case of licensed Intellectual Property, has valid,
binding and enforceable rights to use such Intellectual Property. Rocky Mountain
II has duly and timely filed all renewals, continuations and other filings
necessary to maintain its Intellectual Property or registrations thereof. Except
as disclosed in the Rocky Mountain II Disclosure Letter, Rocky Mountain II (I)
has not received any notice or claim to the effect that the use of any
Intellectual Property infringes upon, conflicts with or misappropriates the
rights of any other party or that any of the Intellectual Property is not valid
or enforceable, and (ii) has not made any claim that any party has violated or
infringed upon its rights with respect to any Intellectual Property.
SECTION 10.15 MATERIAL CONTRACTS.
(a) List of Material Contracts. The Rocky Mountain II Disclosure
Letter sets forth a list of all material written, and a description of all oral,
commitments, agreements or contracts to which Rocky Mountain II is a party or by
which Rocky Mountain II is obligated, including, but not limited to, all
commitments, agreements or contracts embodying or evidencing the following
transactions or arrangements: (i) agreements for the employment of, or
independent contractor arrangements with, any officer or other individual
employee of Rocky Mountain II; (ii) any consulting agreement, agency agreement
and any other service agreement that will continue in force after the Closing
Date with respect to the employment or retention by Rocky Mountain II of
consultants, agents, legal counsel, accountants or anyone else who is not an
Employee; (iii) any single contract, purchase order or commitment providing for
expenditures by Rocky Mountain II after the date hereof of more than $25,000 or
which has been entered into by Rocky Mountain II otherwise than in the ordinary
course of business; (iv) agreements between Rocky Mountain II and suppliers to
Rocky Mountain II pursuant to which Rocky Mountain II is obligated to purchase
or to sell or distribute the products of any other party other than current
purchase orders entered into in the ordinary course of business consistent with
past practices; (v) any contract containing covenants limiting the freedom of
Rocky Mountain II or any officer, director, or employee of Rocky Mountain II to
engage in any line or type of business or with any person in any geographic
area; (vi) any commitment or arrangement by Rocky Mountain II to participate in
a strategic alliance, partnership, joint venture, limited liability company or
other cooperative undertaking with any other Person; (vii) any commitments by
Rocky Mountain II for capital expenditures involving more than $25,000
individually or $50,000 in the aggregate; and (viii) any other contract,
commitment, agreement, understanding or arrangement that the management of Rocky
Mountain II deems to be material to the business of Rocky Mountain II.
(b) No Breaches or Defaults. Except as disclosed in the Rocky Mountain
II Disclosure Letter, Rocky Mountain II and is in full compliance with each, and
is not in default under any, Material Contract to which it is a party, and no
event has occurred that, with notice or lapse of time or both, would constitute
such a default thereunder. Rocky Mountain II has not waived any rights under or
with respect to any of the Material Contracts to which it is a party. The
management of Rocky Mountain II has no knowledge, or received any notice to the
effect, that any party with whom Rocky Mountain II has contractual arrangements
under its Material Contracts, is in default under any such contractual
arrangements or that any event has occurred that, with notice or lapse of time
or both, would constitute such a default thereunder. Each of the Material
Contracts to which Rocky Mountain II is a party constitutes a legal, valid and
binding obligation of each the parties thereto and is enforceable against each
of the parties thereto in accordance with its respective terms; except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws of
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general application relating to or affecting enforcement of creditors' rights
and the exercise of judicial discretion in accordance with general principles of
equity.
SECTION 10.16 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The Rocky Mountain II Disclosure Letter
sets forth a true, complete and correct list of all Employee Benefit Plans and
all Benefit Arrangements to which Rocky Mountain II or any of its ERISA
Affiliates is a party or to which Rocky Mountain II or any of its ERISA
Affiliates is obligated to contribute. None of the Employee Benefit Plans to
which Rocky Mountain II or any ERISA Affiliate of Rocky Mountain II is a party,
which Rocky Mountain II or any ERISA Affiliate of Rocky Mountain II sponsors or
maintains or to which Rocky Mountain II or any ERISA Affiliate of Rocky Mountain
II contributes is subject to the requirements of Section 302 of ERISA or Section
412 of the Code and no liability under Title IV of ERISA (whether to the PBGC or
otherwise) has been incurred by Rocky Mountain II or any of its ERISA
Affiliates.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the Rocky Mountain II Disclosure Letter, each Employee Benefit Plan and Benefit
Arrangement to which Rocky Mountain II or any of its ERISA Affiliates is a party
or to which Rocky Mountain II or any of its ERISA Affiliates is obligated to
contribute has been operated or maintained in compliance in all material
respects with all Applicable Laws, including, without limitation, ERISA and the
Code, and has been maintained in material compliance with its terms and in
material compliance with the terms of any applicable collective bargaining
agreement. Except as disclosed in the Rocky Mountain II Disclosure Letter, with
respect to any Employee Benefit Plan that is intended to qualify under Section
401 of the Code, a favorable determination letter as to qualification under
Section 401 of the Code that considered the Tax Reform Act of 1986 has been
issued and any amendments required for continued qualification under Section 401
of the Code have been timely adopted and nothing has occurred subsequent to the
date of such determination letter that could adversely affect the qualified
status of any such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which Rocky Mountain II or any of its ERISA Affiliates is a party
or to which Rocky Mountain II or any of its ERISA Affiliates is obligated to
contribute, under ERISA or the Code, for all periods of time prior to the date
hereof and that are attributable to Employees of Rocky Mountain II have been
paid or otherwise adequately accrued against in the Rocky Mountain II Financial
Statements, as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the
Rocky Mountain II Disclosure Letter, Rocky Mountain II is not liable for any
arrearage of wages, any accrued or vested vacation pay or any tax or penalty for
failure to comply with any Applicable Law relating to employment or labor above
the level accrued for or reserved against on the June 30, 1997 balance sheet
included in the Rocky Mountain II Financial Statements, and there is no
controversy pending, threatened or in prospect between Rocky Mountain II and any
of its Employees nor is there any basis for any such controversy. There is no
unfair labor practice charge or complaint currently pending against Rocky
Mountain II with respect to or relating to any of its Employees before the
National Labor Relations Board or any other agency having jurisdiction over such
matters and no charges or complaints are currently pending against Rocky
Mountain II before the Equal Employment Opportunity Commission or any state or
local agency having responsibility for the prevention of unlawful employment
practices. There are no actions, suits or claims pending, including proceedings
before the IRS, the DOL or the PBGC, with respect to any Employee Benefit Plan,
Benefit Arrangement or any administrator or fiduciary thereof, other than
benefit claims arising in the normal course of operation of such Employee
Benefit Plans or Benefit Arrangements, and, to the knowledge of the management
of Rocky Mountain II, no Employee Benefit Plan or Benefit Arrangement is under
audit or investigation by any Governmental Authority.
(e) Severance Obligations. Except as disclosed in the Rocky Mountain
II Disclosure Letter, all current employees of Rocky Mountain II may be
terminated at will, without notice and without incurring any severance or other
liability or obligation to the employee in connection with the termination.
Except to the extent provided by the terms of the Employee Benefit Plans and
Benefit Arrangements disclosed in the Rocky Mountain II Disclosure Letter,
neither the execution, delivery or performance of this Agreement nor the
consummation of the Closing will (I) increase any benefits otherwise payable
under any Employee Benefit Plan or Benefit Arrangement, (ii) result in the
acceleration of the time of payment or vesting of any such benefits, or (iii)
give rise to an obligation with respect to the payment of any severance pay. No
"parachute payment" (within the meaning of Section 280G of the Code), "change in
control" or severance payment has been made or will be required to be made by
Rocky Mountain II or any ERISA Affiliate of Rocky Mountain II to any Employee in
connection with the execution, delivery or performance of this Agreement or as a
result of the consummation of the Closing.
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(f) Compliance with Laws on Employment Practices. Rocky Mountain II
has complied in all material respects with all Applicable laws relating to
employment and employment practices, terms and conditions of employment, wages
and hours, and to the knowledge of the management of Rocky Mountain II, is not
engaged in any unfair labor practice with respect to any of the current
employees of Rocky Mountain II and to the best knowledge of Rocky Mountain II,
none of the persons performing services for Rocky Mountain II or any of its
ERISA Affiliates have been improperly classified as independent contractors or
as being exempt from the payment of wages or overtime.
(g) Collective Bargaining Agreements. Except as disclosed in the Rocky
Mountain II Disclosure Letter), none of the employees of Rocky Mountain II are
subject to any collective bargaining agreement nor is Rocky Mountain II required
under any agreement to recognize or bargain with any labor organization or union
on behalf of its employees.
(h) No Multi-Employer Plans. Neither Rocky Mountain II nor any of its
ERISA Affiliates has contributed to, or had the obligation to contribute to, any
Multiemployer Plan within the five-year period ending on the date of this
Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by Rocky Mountain II or
any of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Benefit Plan or Benefit Arrangement that would
increase materially the expense of maintaining such Employee Benefit Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year of Rocky Mountain II ended June 30, 1996.
(j) No Unfunded Liabilities. Neither Rocky Mountain II nor any ERISA
Affiliate of Rocky Mountain II has any current or projected liability for any
unfunded post-retirement medical or life insurance benefits in connection with
any Employee of Rocky Mountain II or ERISA Affiliate of Rocky Mountain II.
(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by Rocky Mountain II or any ERISA Affiliate of
Rocky Mountain II, which could subject any such Employee Benefit Plan, Rocky
Mountain II, any ERISA Affiliate of Rocky Mountain II, or the Holding Company
directly or indirectly (through an indemnification agreement or otherwise), to
any liability for or as a result of a breach of fiduciary duty, a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, or a civil penalty under Section 502 of ERISA or a Tax under Section 4971
of the Code. Neither Rocky Mountain II nor any of its ERISA Affiliates have
incurred a "withdrawal" or "partial withdrawal," as defined in Sections 4203 and
4205 of ERISA, from, or failed to timely make contributions to any Multiemployer
Plan which has resulted in any unpaid liability of Rocky Mountain II or any of
its ERISA Affiliates.
(l) Welfare Benefit Plans. (i) Except as disclosed in the Rocky
Mountain II Disclosure Letter, none of the Employee Benefit Plans that are
"employee welfare benefit plans" as defined in ERISA Section 3(1) provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except to the
extent required by law; provided that any disclosure regarding this clause (I)
shall set forth (A) the number of individuals currently receiving such
continuing benefits or coverage, (B) the limit on liability with respect to such
coverage, (C) the terms and conditions of such coverage, and (D) the maximum
number of current employees or independent contractors who could become eligible
for such continuing benefits or coverage; (ii) there has been no violation of
Code Section 4980B or ERISA Sections 601-609 with respect to any such plan that
could result in any material liability; (iii) no such plans are "multiple
employer welfare arrangements" within the meaning of ERISA Section 3(40); (iv)
with respect to any such plans that are self-insured, no claims have been made
pursuant to any such plan that have not yet been paid (other than claims which
have not yet been paid but are in the normal course of processing) and no
individual has incurred injury, sickness or other medical condition with respect
to which claims may be made pursuant to any such plan where the liability to the
employer could in the aggregate with respect to each such individual exceed
$50,000 per year; (v) neither Rocky Mountain II nor any of its ERISA Affiliates
maintains or has any obligation to contribute to any "voluntary employees'
beneficiary association" within the meaning of Code Section 501(c)(9) or other
welfare benefit fund as defined at Section 419(e) of the Code (such disclosure
to include the amount of any such funding); (vi) no such plan is intended to
satisfy Code Section 125; (vii) no amounts are required in connection with any
such plan to be included in income under Code Section 105(h) (under official
regulations thereof to date); and (viii) neither Rocky Mountain II nor any of
its Affiliates maintains a nonconforming group health plan as defined at Section
5000(c) of the Code.
SECTION 10.17 TAX MATTERS.
(a) Affiliated Groups. Rocky Mountain II is not a member of, and has
never been a member of, any "affiliated group" as that term is defined in
Section 1504(a) of the Code.
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(b) Tax Returns and Payment of Taxes. Rocky Mountain II has timely
filed or will timely file all federal, state, local, and other Tax Returns
required to be filed by it under Applicable Laws, including estimated Tax
Returns and reports, and has paid all required Income Taxes and other Taxes
(including any additions to taxes, penalties and interest related thereto) due
and payable on or before the date hereof. Rocky Mountain II has paid, withheld,
or accrued, or will accrue, on the Rocky Mountain II Financial Statements in
accordance with an accrual method of accounting consistently applied any and all
Income Taxes and other Taxes in respect of the conduct of its business or the
ownership of its property and in respect of any transactions for all periods (or
portions thereof) through the close of business on the Closing Date. Rocky
Mountain II has withheld and paid over all Taxes required to have been withheld
and paid over, and complied with all information reporting and backup
withholding requirements, including the maintenance of required records with
respect thereto, in connection with amounts paid or owing to any Employee,
creditor, independent contractor or other third party. Rocky Mountain II has
collected all sales, use and value added Taxes required to be collected, and has
remitted, or will remit on a timely basis, such amounts to the appropriate
Government Authorities and have furnished properly completed exemption
certificates for all exempt transactions.
(c) Tax Reserves. The amount of Rocky Mountain II's liability for
unpaid Taxes for all periods ending on or before the date of this Agreement does
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) as of the date of this Agreement,
and the amount of Rocky Mountain II 's liability for unpaid Taxes for all
periods ending on or before the Closing Date shall not, in the aggregate, exceed
the amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals shall be reflected on the balance sheet of
Rocky Mountain II as of the Closing Date.
(d) Audits; No Deficiencies Asserted Against Company. The Tax Returns
of Rocky Mountain II have never been audited by any Tax Authority, nor is any
such audit in process, pending or threatened (either in writing or verbally,
formally or informally). Except as disclosed in the Rocky Mountain II Disclosure
Letter, no deficiencies have been asserted (or are expected to be asserted)
against Rocky Mountain II as a result of IRS (or state or local Tax Authority)
examinations and no issue has been raised by any IRS (or state or local Tax
Authority) examination that, by application of the same principles, might result
in a proposed deficiency for any other period not so examined.
(e) No Waivers of Limitations. Except as disclosed in the Rocky
Mountain II Disclosure Letter, there are no agreements, waivers of statutes of
limitations, or other arrangements providing for extensions of time in respect
of the assessment or collection of any unpaid Taxes against Rocky Mountain II.
Rocky Mountain II has disclosed on its federal Income Tax Returns all positions
taken therein that could, if not so disclosed, give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(f) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of Rocky Mountain II with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes that Rocky Mountain II is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established on the Rocky Mountain II Financial
Statements.
(g) Tax Elections and Special Tax Status. Rocky Mountain II is not a
party to any safe harbor lease within the meaning of Section 168(f)(8) of the
Code. No election or consent under Section 341(f) of the Code has been made or
shall be made on or prior to the Closing Date by or on behalf of Rocky Mountain
II. Rocky Mountain II is a "small business corporation" which has elected to be
subject to federal income taxation under subchapter S of the Code and has such
status for purposes of federal income taxation and state income taxation in all
states in which its respective income is subject to taxation or has been subject
to taxation at all times since its formation.
(h) Disqualified Leasebacks. Rocky Mountain II is not a party to a
"disqualified leaseback or long-term agreement" described in Section 467(b)(4)
of the Code.
(i) Deferrals of Income. No income or gain of Rocky Mountain II has
been deferred pursuant to Treasury Regulation (section xxxx) 1.1502-13 or
1.1502-14, or Temporary Treasury Regulation (section xxxx) 1.1502-13T or
1.1502-14T.
(j) Tax Sharing and Similar Arrangements. Rocky Mountain II is not a
party to or bound by any Tax sharing, Tax indemnity, Tax allocation or other
similar arrangement.
(k) No Non-Deductible Compensation Payments. Rocky Mountain I has not
made any payments, nor is it obligated to make any payments, that would not be
deductible under Section 280G of the Code, nor is it a party to any agreement
that under certain circumstances could obligate it to make any such payments.
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SECTION 10.18 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by Rocky
Mountain II and any other real property presently or formerly owned by, used by
or leased to or by Rocky Mountain II (collectively, the "Rocky Mountain II
Property"), the existing and prior uses of such Property and all operations of
the businesses of Rocky Mountain II comply and have at all times complied with
all Environmental Laws and Rocky Mountain II is not in violation of nor has it
violated, in connection with the ownership, use, maintenance or operation of
such property or the conduct of its business, any Environmental Law.
(b) Rocky Mountain II has all necessary permits, registrations,
approvals and licenses required by any Governmental Authority or Environmental
Law.
(c) Except as disclosed in the Rocky Mountain II Disclosure Letter,
there has been no spill, discharge, leak, emission, injection, disposal, escape,
dumping or release of any kind on, beneath or above such Property or into the
environment surrounding such Rocky Mountain II Property of any Hazardous
Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such Rocky
Mountain II Ventures Property. No asbestos-containing materials, underground
improvements (including, but not limited to the treatment or storage tanks,
sumps, or water, gas or oil xxxxx) or polychlorinated biphenyls (PCBs)
transformers, capacitors, ballasts, or other equipment which contain dielectric
fluid containing PCBs at levels in excess of fifty parts per million (50 PPM)
are located on such Rocky Mountain II Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of Rocky Mountain II (or any predecessor in interest) in connection
with (I) any actual or alleged failure to comply with any requirement of any
Environmental Law; (ii) the ownership, use, maintenance or operation of the
Property by any person; (iii) the alleged violation of any Environmental Law; or
(iv) the suspected presence of any Hazardous Material thereon.
SECTION 10.19 COMPLIANCE WITH LAWS.
Rocky Mountain II has at all times conducted its business in material
compliance with all (and has not received any notice of any claimed violation of
any) Applicable Laws.
SECTION 10.20 LICENSES AND PERMITS.
Rocky Mountain II possess all licenses, permits, and other governmental
consents, certificates, approvals, or other authorizations (the "Permits")
necessary for the operation of the business of Rocky Mountain II. Rocky Mountain
II has complied with the terms and conditions of all Permits in all material
respects and all such Permits are in full force and effect, and there has
occurred no event nor is any event, action, investigation or proceeding pending
or, to the knowledge of management of Rocky Mountain II, threatened, which could
cause or permit revocation or suspension of or otherwise adversely affect the
maintenance of any Permits. The transactions contemplated by this Agreement will
not lead to the revocation, cancellation, termination or suspension of any
Permits.
SECTION 10.21 INSURANCE.
Rocky Mountain II has regularly maintained all policies of commercial
liability, products liability, fire, casualty, worker's compensation, life and
other forms of insurance on an "occurrence" rather than a "claims made" basis in
amounts and types required by law and generally carried by reasonably prudent,
similarly situated businesses. Rocky Mountain II is not in default under any
provision contained in any insurance policy maintained by Rocky Mountain II
currently, nor has Rocky Mountain II failed to give any notice or present any
claim thereunder in due and timely fashion and no cancellation, non-renewal,
reduction of coverage or arrearage in premiums has been threatened or occurred
with respect to any policy, nor is the management of Rocky Mountain II aware of
any grounds therefor.
SECTION 10.22 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the Rocky Mountain II Disclosure Letter or otherwise
permitted by this Agreement, since June 30, 1997, Rocky Mountain II has not (i)
mortgaged, pledged or subjected to any Encumbrance any of its assets; (ii)
canceled or compromised any claim of or debts owed to it; (iii) sold, licensed,
leased, exchanged or transferred any of its assets except in the ordinary course
of business; (iv) entered into any material transaction other than in the
ordinary course of business; (v) experienced any material change in the
relationship or course of dealing with any supplier, customer or creditor; (vi)
suffered any material destruction, loss or damage to any of its assets; (vii)
made any management decisions involving any
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material change in its policies with regard to pricing, sales, purchasing or
other business, financial, accounting (including reserves and the amounts
thereof) or tax policies or practices; (viii) declared, set aside or paid any
dividends on or made any distributions in respect of any outstanding shares of
capital stock or made any other distributions or payments to any of its
shareholders; (ix) submitted any bid, proposal, quote or commitment to any party
in response to a request for proposal or otherwise; (x) engaged in any merger or
consolidation with, or agreed to merge or consolidate with, or purchased or
agreed to purchase, all or substantially all of the assets of, or otherwise
acquire, any other party; (xi) entered into any strategic alliance, partnership,
joint venture or similar arrangement with any other party; (xii) incurred or
agreed to incur any Debt or prepaid or made any prepayments in respect of Debt;
(xiii) issued or agreed to issue to any party, any shares of stock or other
securities; (xiv) redeemed, purchased or agreed to redeem or purchase any of its
outstanding shares of capital stock or other securities; (xv) increased the rate
of compensation payable or to become payable to any of its officers, directors,
employees or agents over the rate being paid to them as of June 30, 1996 or
agreed to do so otherwise than in accordance with contractual agreements with
such parties; (xvi) made or agreed to make any charitable contributions or
incurred or agreed to incur any non-business expenses; or (xvii) charged off any
bad debts or increased its bad debt reserve except in the manner consistent with
its past practices.
SECTION 10.23 TITLE TO ASSETS.
Except as described in the Rocky Mountain II Disclosure Letter, Rocky
Mountain II has good and marketable title to its assets and properties, free and
clear of restrictions on or conditions to transfer or assignment, and free and
clear of all Encumbrances.
SECTION 10.24 CORPORATE RECORDS.
The minute books of Rocky Mountain II accurately reflect all minutes of
proceedings of and actions taken by the directors of Rocky Mountain II, and by
each committee of the Board of Directors of Rocky Mountain II, and all records
of meetings of and actions taken by the stockholders of Rocky Mountain II, that
are required by applicable laws to be recorded in or reflected in the corporate
records thereof.
SECTION 10.25 BROKER AND FINDER FEES.
Rocky Mountain II has not engaged any broker or finder in connection with
the transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company or Rocky Mountain II by any broker, finder or intermediary in connection
with such transaction.
SECTION 10.26 ADEQUATE DISCLOSURE.
No representation or warranty made by Rocky Mountain II pursuant to this
Agreement, or any statement contained in any Exhibit or Schedule to this
Agreement, or any certificate or document furnished or to be furnished by Rocky
Mountain II pursuant to the terms of this Agreement in connection with the
transactions contemplated hereby, contains any untrue or misleading statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
SECTION 10.27 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the Rocky Mountain II Disclosure Letter, and except
as expressly contemplated or permitted by this Agreement, since June 30, 1997,
Rocky Mountain II has conducted its business in the ordinary course and
consistent with past practice, and Rocky Mountain II has not suffered any change
that has had a Material Adverse Effect on Rocky Mountain II. There are no
conditions, facts, developments or circumstances of an unusual or special nature
that reasonably could be expected to have a Material Adverse Effect upon Rocky
Mountain II that have not been disclosed in writing by Rocky Mountain II
pursuant to the Rocky Mountain II Disclosure Letter.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF PREMA PROPERTIES
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, Prema Properties hereby makes
the following representations and warranties to the other parties to this
Agreement and to the Holding Company:
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SECTION 11.1 ORGANIZATION AND GOOD STANDING.
Prema Properties is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Ohio, and has full
corporate power and authority to own, operate and lease its properties, and to
conduct its business as it is now being conducted, and is qualified to transact
business as a foreign limited liability company in each jurisdiction in which
the operation of its business or the ownership of its properties requires such
qualification.
SECTION 11.2 CAPITALIZATION OF PREMA PROPERTIES.
The Prema Properties Members hold, in the aggregate, all of the membership
or equity interests in Prema Properties. Prema Properties has no issued or
outstanding equity securities, debt securities or other instruments which are
convertible into or exchangeable for at any time into equity securities of Prema
Properties. Prema Properties is not subject to any commitment or obligation
which would require the issuance or sale of any equity interest at any time
under options, subscriptions, warrants, rights, calls, preemptive rights,
convertible obligations or any other fixed or contingent obligations or which
would provide the holder thereof with the right to acquire any equity securities
of Prema Properties. Prema Properties has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interest therein or to pay any dividend or make any other distribution in
respect thereof. There are no agreements, pledges, powers of attorney, consents,
assignments or other similar agreements or arrangements either (I) restricting
the transferability of the Membership Interests of Prema Properties or (ii)
relating to the Membership Interests of Prema Properties which reasonably may be
likely to prevent or delay the consummation of the transactions contemplated
hereby.
SECTION 11.3 SUBSIDIARIES; INVESTMENTS.
Prema Properties does not own any shares of capital stock or equity
securities of, or any interest in any other entity.
SECTION 11.4 EXECUTION AND EFFECT OF AGREEMENT.
Prema Properties has the power to enter into this Agreement and to perform
its obligations hereunder. This Agreement has been duly executed and delivered
by Prema Properties and constitutes a legal, valid and binding obligation of
Prema Properties, fully enforceable against Prema Properties and each of the
Prema Properties Members in accordance with its terms; except as enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws of general application relating
to or affecting enforcement of creditors' rights and the exercise of judicial
discretion in accordance with general principles of equity.
SECTION 11.5 RESTRICTIONS.
The execution and delivery of this Agreement by Prema Properties, the
consummation of the transactions contemplated hereby by Prema Properties and the
Prema Properties Members, and the performance of their respective obligations
hereunder will not (a) violate any of the provisions of the operating agreement
or articles of organization of Prema Properties, (b) violate or conflict with
the provisions of any Applicable Laws, (c) result in the creation of any
Encumbrance upon any of the assets, rights or properties of Prema Properties, or
(d) except as disclosed in the Prema Properties Disclosure Letter, conflict
with, violate any provisions of, result in a breach of or give rise to a right
of termination, modification or cancellation of, constitute a default of, or
accelerate the performance required by, with or without the passage of time or
the giving of notice or both, the terms of any material agreement, indenture,
mortgage, deed of trust, security or pledge agreement, lease, contract, note,
bond, license, permit, authorization or other instrument to which Prema
Properties or any of the Prema Properties Members is a party or to which Prema
Properties or any of the Prema Properties Members or any of their respective
assets or properties are subject.
SECTION 11.6 CONSENTS.
Except as disclosed in the Prema Properties Disclosure Letter, no filing
with, or consent, waiver, approval or authorization of, or notice to, any
governmental authority or any third party is required to be made or obtained by
Prema Properties or the Prema Properties Members in connection with the
execution and delivery of this Agreement or any document or instrument
contemplated hereby, the consummation of any of the transactions contemplated
hereby or the performance of any of their respective obligations hereunder or
thereunder.
SECTION 11.7 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of the audited
balance sheets and related statements of income, cash flows and changes in
Member equity of Prema Properties as at December 31, 1994, 1995 and 1996 and for
the year
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periods then ended and the unaudited financial statements of Prema Properties as
at June 30, 1997 and for the six month period then ended (collectively, the
"Prema Properties Financial Statements"). All of the Prema Properties Financial
Statements have been prepared in accordance with GAAP in a manner consistent
with each other and the books and records of Prema Properties, and fairly
present in all material respects the financial condition and results of
operations of Prema Properties at the dates and for the periods indicated
therein. The regular books of account of Prema Properties fairly and accurately
reflect all material transactions involving Prema Properties, are true, correct
and complete and have been prepared in accordance with GAAP and on a basis
consistent with the Financial Statements.
SECTION 11.8 DEBT.
The Prema Properties Disclosure Letter contains a true, complete and
accurate listing of the original principal amount of all of the Debt of Prema
Properties, the remaining principal balance thereof, the interest rate(s)
payable by Prema Properties in respect thereof, if any, and the date(s) of
maturity thereof. Except as disclosed in the Prema Properties Disclosure Letter,
all of the Debt of Prema Properties may be prepaid at any time, without premium,
prepayment penalties, termination fees or other fees or charges.
SECTION 11.9 GUARANTEES.
The Prema Properties Disclosure Letter contains a complete list of all
Guarantees provided by Prema Properties for the benefit of any other party and
of all Guarantees provided by any other party for the benefit of Prema
Properties or any party doing business with Prema Properties.
SECTION 11.10 NO UNDISCLOSED LIABILITIES.
Prema Properties does not have any material liabilities or obligations of
any nature whatsoever (whether known or unknown, due or to become due, absolute,
accrued, contingent or otherwise, and whether or not determined or
determinable), except for (I) liabilities or obligations set forth in the Prema
Properties Disclosure Letter, (ii) liabilities or obligations to the extent
expressly reflected on or reserved against in the June 30, 1997 balance sheet
included among the Prema Properties Financial Statements or disclosed in the
notes thereto, (iii) liabilities or obligations of a type reflected on the June
30, 1997 balance sheet and incurred in the ordinary course of business and
consistent with past practices since June 30, 1997, or (iv) liabilities or
obligations arising under the terms of the Material Contracts of Prema
Properties. Except as otherwise contemplated or permitted by this Agreement no
dividends or distributions have been declared on any Membership Interests of
Prema Properties which are unpaid.
SECTION 11.11 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the Prema
Properties Members, threatened, by or before any court, any Governmental
Authority or arbitrator, against Prema Properties or any of the Prema Properties
Members that reasonably could be expected to prevent or delay the consummation
of any of the transactions contemplated hereby. Except as disclosed in the Prema
Properties Disclosure Letter, there is no material suit, claim, action at law or
in equity, proceeding or governmental investigation or audit pending, or to the
knowledge of Prema Properties Members, threatened, by or before any arbitrator,
court, or other Governmental Authority, against Prema Properties or involving
any of the former or present employees, agents, businesses, properties, rights
or assets of Prema Properties, nor, to the knowledge of Prema Properties
Members, is there any basis for the assertion of any of the foregoing. Except as
disclosed in the Prema Properties Disclosure Letter, there are no judgments,
orders, injunctions, decrees, stipulations or awards rendered by any court,
Governmental Authority or arbitrator against Prema Properties or any of their
respective former or present Employees, agents, properties or assets.
SECTION 11.12 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The Prema Properties Disclosure Letter sets forth a complete list of all
real property owned by or leased to Prema Properties, and, with respect to all
properties leased by Prema Properties, a description of the term of such lease
and the monthly rental thereunder. Prema Properties is not in default (and will
not be in default with the passage of time or the receipt of notice or both) and
has not received notice of default, under any lease of real property. All real
property leased to Prema Properties is available for immediate use in the
operation of its business and for the purpose for which such property currently
is being utilized. Subject in the case of leased property to the terms and
conditions of the respective leases, Prema Properties has full legal and
practical access to all such real property.
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SECTION 11.13 INTELLECTUAL PROPERTY.
The Prema Properties Disclosure Letter sets forth a complete list of (I)
all Intellectual Property owned, used or licensed by Prema Properties, together
with the identity of the owner thereof, and (ii) all license agreements pursuant
to which any Intellectual Property is licensed to or by Prema Properties. Prema
Properties owns its Intellectual Property free and clear of any and all
Encumbrances, or, in the case of licensed Intellectual Property, has valid,
binding and enforceable rights to use such Intellectual Property. Prema
Properties has duly and timely filed all renewals, continuations and other
filings necessary to maintain its Intellectual Property or registrations
thereof. Except as disclosed in the Prema Properties Disclosure Letter, Prema
Properties (I) has not received any notice or claim to the effect that the use
of any Intellectual Property infringes upon, conflicts with or misappropriates
the rights of any other party or that any of the Intellectual Property is not
valid or enforceable, and (ii) has not made any claim that any party has
violated or infringed upon its rights with respect to any Intellectual Property.
SECTION 11.14 MATERIAL CONTRACTS.
(a) List of Material Contracts. The Prema Properties Disclosure Letter
sets forth a list of all material written, and a description of all oral,
commitments, agreements or contracts to which Prema Properties is a party or by
which Prema Properties is obligated, including, but not limited to, all
commitments, agreements or contracts embodying or evidencing the following
transactions or arrangements: (I) agreements for the employment of, or
independent contractor arrangements with, any officer or other individual
employee of Prema Properties ; (ii) any consulting agreement, agency agreement
and any other service agreement that will continue in force after the Closing
Date with respect to the employment or retention by Prema Properties of
consultants, agents, legal counsel, accountants or anyone else who is not an
Employee; (iii) any single contract, purchase order or commitment providing for
expenditures by Prema Properties after the date hereof of more than $25,000 or
which has been entered into by Prema Properties otherwise than in the ordinary
course of business; (iv) agreements between Prema Properties and suppliers to
Prema Properties pursuant to which Prema Properties is obligated to purchase or
to sell or distribute the products of any other party other than current
purchase orders entered into in the ordinary course of business consistent with
past practices; (v) any contract containing covenants limiting the freedom of
Prema Properties or any officer, director, or employee of Prema Properties to
engage in any line or type of business or with any person in any geographic
area; (vi) any commitment or arrangement by Prema Properties to participate in a
strategic alliance, partnership, joint venture, limited liability company or
other cooperative undertaking with any other Person; (vii) any commitments by
Prema Properties for capital expenditures involving more than $25,000
individually or $50,000 in the aggregate; and (viii) any other contract,
commitment, agreement, understanding or arrangement that the Prema Properties
Members deems to be material to the business of Prema Properties.
(b) No Breaches or Defaults. Except as disclosed in the Prema
Properties Disclosure Letter, Prema Properties and is in full compliance with
each, and is not in default under any, Material Contract to which it is a party,
and no event has occurred that, with notice or lapse of time or both, would
constitute such a default thereunder. Prema Properties has not waived any rights
under or with respect to any of the Material Contracts to which it is a party.
The Prema Properties Members have no knowledge, and have not received any notice
to the effect, that any party with whom Prema Properties has contractual
arrangements under the Material Contracts to which it is a party, is in default
under any such contractual arrangements or that any event has occurred that,
with notice or lapse of time or both, would constitute such a default
thereunder. Each of the Material Contracts to which it is a party constitutes a
legal, valid and binding obligation of each the parties thereto and is
enforceable against each of the parties thereto in accordance with its
respective terms; except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the exercise of judicial discretion in accordance with
general principles of equity.
SECTION 11.15 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The Prema Properties Disclosure Letter
sets forth a true, complete and correct list of all Employee Benefit Plans and
all Benefit Arrangements to which Prema Properties is a party or to which Prema
Properties is obligated to contribute. None of the Employee Benefit Plans to
which Prema Properties or any ERISA Affiliate of Prema Properties is a party,
which Prema Properties or any ERISA Affiliate of Prema Properties sponsors or
maintains or to which Prema Properties or any ERISA Affiliate of Prema
Properties contributes is subject to the requirements of Section 302 of ERISA or
Section 412 of the Code.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the Prema Properties Disclosure Letter, each Employee Benefit Plan and Benefit
Arrangement to which Prema Properties is a party or to which Prema Properties is
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obligated to contribute has been operated or maintained in compliance in all
material respects with all Applicable Laws, including, without limitation, ERISA
and the Code, and has been maintained in material compliance with its terms.
Except as disclosed in the Prema Properties Disclosure Letter, with respect to
any Plan that is intended to qualify under Section 401 of the Code, a favorable
determination letter as to qualification under Section 401 of the Code has been
issued and any amendments required for continued qualification under Section 401
of the Code have been timely adopted and nothing has occurred subsequent to the
date of such determination letter that could adversely affect the qualified
status of any such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which Prema Properties is a party or to which Prema Properties is
obligated to contribute, under ERISA or the Code, for all periods of time prior
to the date hereof and that are attributable to Employees of Prema Properties
have been paid or otherwise adequately accrued against in the Prema Properties
Financial Statements, as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the
Prema Properties Disclosure Letter, Prema Properties is not liable for any
arrearage of wages, any accrued or vested vacation pay or any tax or penalty for
failure to comply with any Applicable Law relating to employment or labor above
the level accrued for or reserved against on the June 30, 1997 balance sheet
included in the Prema Properties Financial Statements, and there is no
controversy pending, threatened or in prospect between Prema Properties and any
of its Employees nor is there any basis for any such controversy. There is no
unfair labor practice charge or complaint currently pending against Prema
Properties with respect to or relating to any of its Employees before the
National Labor Relations Board or any other agency having jurisdiction over such
matters and no charges or complaints are currently pending against Prema
Properties before the Equal Employment Opportunity Commission or any state or
local agency having responsibility for the prevention of unlawful employment
practices. There are no actions, suits or claims pending, including proceedings
before the IRS, the DOL or the PBGC, with respect to any Employee Benefit Plan,
Benefit Arrangement or any administrator or fiduciary thereof, other than
benefit claims arising in the normal course of operation of such Employee
Benefit Plans or Benefit Arrangements, and, to the knowledge of the management
of Prema Properties, no Employee Benefit Plan or Benefit Arrangement is under
audit or investigation by any Governmental Authority.
(e) Severance Obligations. Except as disclosed in the Prema Properties
Disclosure Letter, all current employees of Prema Properties may be terminated
at will, without notice and without incurring any severance or other liability
or obligation to the employee in connection with the termination. Except to the
extent provided by the terms of the Employee Benefit Plans and Benefit
Arrangements disclosed in the Prema Properties Disclosure Letter, neither the
execution, delivery or performance of this Agreement nor the consummation of the
Closing will (i) increase any benefits otherwise payable under any Employee
Benefit Plan or Benefit Arrangement, (ii) result in the acceleration of the time
of payment or vesting of any such benefits, or (iii) give rise to an obligation
with respect to the payment of any severance pay. No "parachute payment" (within
the meaning of Section 280G of the Code), "change in control" or severance
payment has been made or will be required to be made by Prema Properties or any
ERISA Affiliate of Prema Properties to any Employee in connection with the
execution, delivery or performance of this Agreement or as a result of the
consummation of the Closing.
(f) Compliance with Laws on Employment Practices. Prema Properties has
complied in all material respects with all Applicable laws relating to
employment and employment practices, terms and conditions of employment, wages
and hours, and to the knowledge of the Prema Properties Members, is not engaged
in any unfair labor practice with respect to any of the current employees of
Prema Properties.
(g) Collective Bargaining Agreements. Except as disclosed in the Prema
Properties Disclosure Letter, none of the employees of Prema Properties are
subject to any collective bargaining agreement nor is Prema Properties required
under any agreement to recognize or bargain with any labor organization or union
on behalf of its employees.
(h) No Multi-Employer Plans. Prema Properties has not contributed to,
nor had the obligation to contribute to, any Multiemployer Plan within the
five-year period ending on the date of this Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by Prema Properties
relating to, or change in employee participation or coverage under, any Employee
Benefit Plan or Benefit Arrangement that would increase materially the expense
of maintaining such Employee Benefit Plan or Benefit Arrangement above the level
of the expense incurred in respect thereof for the fiscal year of Prema
Properties ended December 31, 1996.
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(j) No Unfunded Liabilities. Prema Properties nor any ERISA Affiliate
of Prema Properties has any current or projected liability for any unfunded
post-retirement medical or life insurance benefits in connection with any
Employee of Prema Properties or ERISA Affiliate of Prema Properties.
(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by Prema Properties or any ERISA Affiliate of Prema
Properties, which could subject any such Employee Benefit Plan, Prema
Properties, any ERISA Affiliate of Prema Properties, or the Holding Company
directly or indirectly (through an indemnification agreement or otherwise), to
any liability for or as a result of a breach of fiduciary duty, a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, or a civil penalty under Section 502 of ERISA or a Tax under Section 4971
of the Code. Neither Prema Properties nor any of its ERISA Affiliates have
incurred a "withdrawal" or "partial withdrawal," as defined in Sections 4203 and
4205 of ERISA, from, or failed to timely make contributions to any Multiemployer
Plan which has resulted in any unpaid liability of any of the Companies.
(l) Welfare Benefit Plans. (I) Except as disclosed in the Prema
Properties Disclosure Letter, none of the Employee Benefit Plans that are
"welfare benefit plans" as defined in ERISA contributions to Section 3(1)
provides for continuing benefits or coverage for any participant or beneficiary
of a participant after such participant's termination of employment, except to
the extent required by law; provided that any disclosure regarding this clause
(i) shall set forth (A) the number of individuals currently receiving such
continuing benefits or coverage, (B) the limit on liability with respect to such
coverage, (C) the terms and conditions of such coverage, and (D) the maximum
number of current employees or independent contractors who could become eligible
for such continuing benefits or coverage; (ii) there has been no violation of
Code Section 4980B or ERISA Sections 601-609 with respect to any such Plan that
could result in any material liability; (iii) no such Plans are "multiple
employer welfare arrangements" within the meaning of ERISA Section 3(40); (iv)
with respect to any such Plans that are self-insured, no claims have been made
pursuant to any such Plan that have not yet been paid (other than claims which
have not yet been paid but are in the normal course of processing) and no
individual has incurred injury, sickness or other medical condition with respect
to which claims may be made pursuant to any such plan where the liability to the
employer could in the aggregate with respect to each such individual exceed
$50,000 per year; (v) Prema Properties does not maintain and does not have any
obligation to contribute to any "voluntary employees' beneficiary association"
within the meaning of Code Section 501(c)(9) or other funding arrangement for
the provision of welfare benefits (such disclosure to include the amount of any
such funding); (vi) no such plan is intended to satisfy Code Section 125; and
(vii) no amounts are required in connection with any such Plan to be included in
income under Code Section 105(h) (under official regulations thereof to date);.
SECTION 11.17 TAX MATTERS.
(a) Affiliated Groups. Prema Properties is not a member of, and has
never been a member of, any "affiliated group" as that term is defined in
Section 1054(a) of the Code.
(b) Tax Returns and Payment of Taxes. Prema Properties has timely
filed or will timely file all federal, state, local, and other Tax Returns
required to be filed by it under Applicable Laws, including estimated Tax
Returns and reports, and has paid all required Income Taxes and other Taxes
(including any additions to taxes, penalties and interest related thereto) due
and payable on or before the date hereof. Prema Properties has paid, withheld,
or accrued, or will accrue, on the Prema Properties Financial Statements in
accordance with GAAP any and all Income Taxes and other Taxes in respect of the
conduct of its business or the ownership of its property and in respect of any
transactions for all periods (or portions thereof) through the close of business
on the Closing Date. Prema Properties has withheld and paid over all Taxes
required to have been withheld and paid over, and complied with all information
reporting and backup withholding requirements, including the maintenance of
required records with respect thereto, in connection with amounts paid or owing
to any Employee, creditor, independent contractor or other third party. Prema
Properties has collected all sales, use and value added Taxes required to be
collected, and has remitted, or will remit on a timely basis, such amounts to
the appropriate Government Authorities and have furnished properly completed
exemption certificates for all exempt transactions.
(c) Tax Reserves. The amount of Prema Properties's liability for
unpaid Taxes for all periods ending on or before the date of this Agreement does
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) as of the date of this Agreement,
and the amount of Prema Properties 's liability for unpaid Taxes for all periods
ending on or before the Closing Date shall not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals shall be reflected on the balance sheet of
Prema Properties as of the Closing Date.
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(d) Audits; No Deficiencies Asserted Against Company. The Tax Returns
of Prema Properties have never been audited by any Tax Authority, nor is any
such audit in process, pending or threatened (either in writing or verbally,
formally or informally). Except as disclosed in the Prema Properties Disclosure
Letter, no deficiencies have been asserted (or are expected to be asserted)
against Prema Properties as a result of IRS (or state or local Tax Authority)
examinations and no issue has been raised by any IRS (or state or local Tax
Authority) examination that, by application of the same principles, might result
in a proposed deficiency for any other period not so examined.
(e) No Waivers of Limitations. Except as disclosed in the Prema
Properties Disclosure Letter, there are no agreements, waivers of statutes of
limitations, or other arrangements providing for extensions of time in respect
of the assessment or collection of any unpaid Taxes against Prema Properties.
Prema Properties has disclosed on its federal Income Tax Returns all positions
taken therein that could, if not so disclosed, give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(f) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of Prema Properties with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that Prema Properties is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established on the Prema Properties Financial
Statements.
(g) Tax Elections and Special Tax Status. Prema Properties is not a
party to any safe harbor lease within the meaning of Section 168(f)(8) of the
Code. Prema Properties is a "partnership" for purposes of federal income
taxation and state income taxation in all states in which its income is subject
to taxation and has had the status of a "partnership" for purposes of federal
income taxation and state income taxation in all states in which its income is
subject to taxation or has been subject to taxation at all times since its
formation.
(h) Disqualified Leasebacks. Prema Properties is not a party to a
"disqualified leaseback or long-term agreement" described in Section 467(b)(4)
of the Code.
(i) Deferrals of Income. No income or gain of Prema Properties has
been deferred pursuant to Treasury Regulation (section xxxx)1.1502-13 or
1.1502-14, or Temporary Treasury Regulation (section xxxx) 1.1502-13T or
1.1502-14T.
(j) Tax Sharing and Similar Arrangements. Prema Properties is not a
party to or bound by any Tax sharing, Tax indemnity, Tax allocation or other
similar arrangement.
(k) No Non-Deductible Compensation Payments. Prema Properties has not
made any payments, nor is it obligated to make any payments, that would not be
deductible under Section 280G of the Code nor is it a party to any agreement
that under certain circumstances could obligate it to make any such payments.
SECTION 11.18 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by Prema
Properties and any other real property presently or formerly owned by, used by
or leased to or by Prema Properties (collectively, the "Prema Properties
Property"), the existing and prior uses of such Prema Properties Property and
all operations of the businesses of Prema Properties comply and have at all
times complied with all Environmental Laws and Prema Properties is not in
violation of nor has it violated, in connection with the ownership, use,
maintenance or operation of such property or the conduct of its business, any
Environmental Law.
(b) Prema Properties has all necessary permits, registrations,
approvals and licenses required by any Governmental Authority or Environmental
Law.
(c) There has been no spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any kind on, beneath or above such Prema
Properties Property or into the environment surrounding such Prema Properties
Property of any Hazardous Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such Prema
Properties Property. No asbestos-containing materials, underground improvements
(including, but not limited to treatment or storage tanks, sumps, or hydraulic
tanks or water, gas or oil xxxxx) or polychlorinated biphenyls (PCBs)
transformers, capacitors, ballasts, or other equipment which contain dielectric
fluid containing PCBs at levels in excess of fifty parts per million (50 PPM)
are or have ever been located on such Prema Properties Property.
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(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of Prema Properties (or any predecessor in interest) in connection with
(i) any actual or alleged failure to comply with any requirement of any
Environmental Law; (ii) the ownership, use, maintenance or operation of the
Property by any person; (iii) the alleged violation of any Environmental Law; or
(iv) the suspected presence of any Hazardous Material thereon.
SECTION 11.19 COMPLIANCE WITH LAWS.
Prema Properties has at all times conducted its business in material
compliance with all (and has not received any notice of any claimed violation of
any) Applicable Laws.
SECTION 11.20 LICENSES AND PERMITS.
Prema Properties possess all licenses, permits, and other governmental
consents, certificates, approvals, or other authorizations (the "Permits")
necessary for the operation of the business of Prema Properties. Prema
Properties has complied with the terms and conditions of all Permits in all
material respects and all such Permits are in full force and effect, and there
has occurred no event nor is any event, action, investigation or proceeding
pending or, to the knowledge of Prema Properties Members, threatened, which
could cause or permit revocation or suspension of or otherwise adversely affect
the maintenance of any Permits. The transactions contemplated by this Agreement
will not lead to the revocation, cancellation, termina tion or suspension of any
Permits.
SECTION 11.21 INSURANCE.
Prema Properties has regularly maintained all policies of commercial
liability, products liability, fire, casualty, worker's compensation, life and
other forms of insurance on an "occurrence" rather than a "claims made" basis in
amounts and types required by law and generally carried by reasonably prudent,
similarly situated businesses. Prema Properties is not in default under any
provision contained in any insurance policy maintained by Prema Properties
currently, nor has Prema Properties failed to give any notice or present any
claim thereunder in due and timely fashion and no cancellation, non-renewal,
reduction of coverage or arrearage in premiums has been threatened or occurred
with respect to any policy, nor is the Prema Properties Members aware of any
grounds therefor.
SECTION 11.22 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the Prema Properties Disclosure Letter or otherwise
permitted by this Agreement, since June 30, 1997, Prema Properties has not (i)
mortgaged, pledged or subjected to any Encumbrance any of its assets; (ii)
canceled or compromised any claim of or debts owed to it; (iii) sold, licensed,
leased, exchanged or transferred any of its assets except in the ordinary course
of business; (iv) entered into any material transaction other than in the
ordinary course of business; (v) experienced any material change in the
relationship or course of dealing with any supplier, customer or creditor; (vi)
suffered any material destruction, loss or damage to any of its assets; (vii)
made any management decisions involving any material change in its policies with
regard to pricing, sales, purchasing or other business, financial, accounting
(including reserves and the amounts thereof) or tax policies or practices;
(viii) declared, set aside or paid any dividends on or made any distributions in
respect of any outstanding shares of capital stock or made any other
distributions or payments to any of its shareholders; (ix) submitted any bid,
proposal, quote or commitment to any party in response to a request for proposal
or otherwise; (x) engaged in any merger or consolidation with, or agreed to
merge or consolidate with, or purchased or agreed to purchase, all or
substantially all of the assets of, or otherwise acquire, any other party; (xi)
entered into any strategic alliance, partnership, joint venture or similar
arrangement with any other party; (xii) incurred or agreed to incur any Debt or
prepaid or made any prepayments in respect of Debt; (xiii) issued or agreed to
issue to any party, any shares of stock or other securities; (xiv) redeemed,
purchased or agreed to redeem or purchase any of its outstanding shares of
capital stock or other securities; (xv) increased the rate of compensation
payable or to become payable to any of its officers, directors, employees or
agents over the rate being paid to them as of June 30, 1996 or agreed to do so
otherwise than in accordance with contractual agreements with such parties;
(xvi) made or agreed to make any charitable contributions or incurred or agreed
to incur any non-business expenses; or (xvii) charged off any bad debts or
increased its bad debt reserve except in the manner consistent with its past
practices.
SECTION 11.23 TITLE TO ASSETS.
Except as described in the Prema Properties Disclosure Letter, Prema
Properties has good and marketable title to its assets and properties, free and
clear of restrictions on or conditions to transfer or assignment, and free and
clear of all Encumbrances.
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SECTION 11.24 CORPORATE RECORDS.
The books and records of Prema Properties accurately reflect all minutes of
proceedings of and actions taken by the members of Prema Properties.
SECTION 11.25 BROKER AND FINDER FEES.
Prema Properties has not engaged any broker or finder in connection with
the transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company or Prema Properties by any broker, finder or intermediary in connection
with such transaction.
SECTION 11.26 ADEQUATE DISCLOSURE.
No representation or warranty made by Prema Properties pursuant to this
Agreement, or any statement contained in any Exhibit or Schedule to this
Agreement, or any certificate or document furnished or to be furnished by Prema
Properties pursuant to the terms of this Agreement in connection with the
transactions contemplated hereby, contains any untrue or misleading statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
SECTION 11.27 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the Prema Properties Disclosure Letter, and except
as expressly contemplated or permitted by this Agreement, since June 30, 1997,
Prema Properties has conducted its business in the ordinary course and
consistent with past practice, and Prema Properties has not suffered any change
that has had a Material Adverse Effect on Prema Properties. There are no
conditions, facts, developments or circumstances of an unusual or special nature
that reasonably could be expected to have a Material Adverse Effect upon the
financial condition, business or prospects of Prema Properties that have not
been disclosed in writing by Prema Properties pursuant to the Prema Properties
Disclosure Letter.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES OF XXXXXXX CAR WASH
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, Xxxxxxx Car Wash hereby makes
the following representations and warranties to the other parties to this
Agreement and the Holding Company:
SECTION 12.1 ORGANIZATION AND GOOD STANDING.
Xxxxxxx Car Wash is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Colorado, and has
full corporate power and authority to own, operate and lease its properties, and
to conduct its business as it is now being conducted, and is qualified to
transact business as a foreign limited liability company in each jurisdiction in
which the operation of its business or the ownership of its properties requires
such qualification.
SECTION 12.2 CAPITALIZATION OF XXXXXXX CAR WASH.
The Xxxxxxx Car Wash Members hold, in the aggregate, all of the membership
or equity interests in Xxxxxxx Car Wash. Xxxxxxx Car Wash has no issued or
outstanding equity securities, debt securities or other instruments which are
convertible into or exchangeable for at any time into equity securities of
Xxxxxxx Car Wash. Xxxxxxx Car Wash is not subject to any commitment or
obligation which would require the issuance or sale of any equity interest at
any time under options, subscriptions, warrants, rights, calls, preemptive
rights, convertible obligations or any other fixed or contingent obligations or
which would provide the holder thereof with the right to acquire any equity
securities of Xxxxxxx Car Wash. Xxxxxxx Car Wash has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof. There are no agreements, pledges, powers of
attorney, consents, assignments or other similar agreements or arrangements
either (I) restricting the transferability of the Membership interests of
Xxxxxxx Car Wash or (ii) relating to the Xxxxxxx Car Wash Membership Interests
which reasonably may be likely to prevent or delay the consummation of the
transactions contemplated hereby.
SECTION 12.3 SUBSIDIARIES; INVESTMENTS.
Xxxxxxx Car Wash does not own any shares of capital stock or equity
securities of, or any interest in any other entity.
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SECTION 12.4 EXECUTION AND EFFECT OF AGREEMENT.
Xxxxxxx Car Wash has the power to enter into this Agreement and to perform
its obligations hereunder. This Agreement has been duly executed and delivered
by Xxxxxxx Car Wash and constitutes a legal, valid and binding obligation of
Xxxxxxx Car Wash, fully enforceable against Xxxxxxx Car Wash in accordance with
its terms; except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the exercise of judicial discretion in accordance with
general principles of equity.
SECTION 12.5 RESTRICTIONS.
The execution and delivery of this Agreement by Xxxxxxx Car Wash, the
consummation of the transactions contemplated hereby by Xxxxxxx Car Wash and by
each of the Xxxxxxx Car Wash Members, and the performance of their respective
obligations hereunder will not (a) violate any of the provisions of the
operating agreement or articles of organization of Xxxxxxx Car Wash, (b) violate
or conflict with the provisions of any Applicable Laws, (c) result in the
creation of any Encumbrance upon any of the assets, rights or properties of
Xxxxxxx Car Wash, or (d) except as disclosed in the Xxxxxxx Car Wash Disclosure
Letter, conflict with, violate any provisions of, result in a breach of or give
rise to a right of termination, modification or cancellation of, constitute a
default of, or accelerate the performance required by, with or without the
passage of time or the giving of notice or both, the terms of any material
agreement, indenture, mortgage, deed of trust, security or pledge agreement,
lease, contract, note, bond, license, permit, authorization or other instrument
to which Xxxxxxx Car Wash or any of the Xxxxxxx Car Wash Members is a party or
to which Xxxxxxx Car Wash or any of the Xxxxxxx Car Wash Members or any of their
respective assets or properties are subject.
SECTION 12.6 CONSENTS.
Except as disclosed in the Xxxxxxx Car Wash Disclosure Letter, no filing
with, or consent, waiver, approval or authorization of, or notice to, any
governmental authority or any third party is required to be made or obtained by
Xxxxxxx Car Wash or any of the Xxxxxxx Car Wash Members in connection with the
execution and delivery of this Agreement or any document or instrument
contemplated hereby, the consummation of any of the transactions contemplated
hereby or the performance of any of their respective obligations hereunder or
thereunder.
SECTION 12.7 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of the audited
balance sheets and related statements of income, cash flows and changes in
member equity of Xxxxxxx Car Wash as at December 31, 1994, 1995 and 1996 and for
the year periods then ended and the unaudited financial statements of Xxxxxxx
Car Wash as at June 30, 1997 and for the six month period then ended
(collectively, the "Xxxxxxx Car Wash Financial Statements"). All of the Xxxxxxx
Car Wash Financial Statements have been prepared in accordance with an accrual
method of accounting, consistently applied, in a manner consistent with each
other and the books and records of Xxxxxxx Car Wash, and fairly present in all
material respects the financial condition and results of operations of Xxxxxxx
Car Wash at the dates and for the periods indicated therein. The regular books
of account of Xxxxxxx Car Wash fairly and accurately reflect all material
transactions involving Xxxxxxx Car Wash, are true, correct and complete and have
been prepared in accordance with an accrual method of accounting, consistently
applied, and on a basis consistent with the Financial Statements.
SECTION 12.8 DEBT.
The Xxxxxxx Car Wash Disclosure Letter contains a true, complete and
accurate listing of the original principal amount of all of the Debt of Xxxxxxx
Car Wash, the remaining principal balance thereof, the interest rate(s) payable
by Xxxxxxx Car Wash in respect thereof, if any, and the date(s) of maturity
thereof. Except as disclosed in the Xxxxxxx Car Wash Disclosure Letter, all of
the Debt of Xxxxxxx Car Wash may be prepaid at any time, without premium,
prepayment penalties, termination fees or other fees or charges.
SECTION 12.9 GUARANTEES.
The Xxxxxxx Car Wash Disclosure Letter contains a complete list of all
Guarantees provided by Xxxxxxx Car Wash for the benefit of any other party and
of all Guarantees provided by any other party for the benefit of Xxxxxxx Car
Wash or any party doing business with Xxxxxxx Car Wash.
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SECTION 12.10 NO UNDISCLOSED LIABILITIES.
Xxxxxxx Car Wash does not have any material liabilities or obligations of
any nature whatsoever (whether known or unknown, due or to become due, absolute,
accrued, contingent or otherwise, and whether or not determined or
determinable), except for (i) liabilities or obligations set forth in the
Xxxxxxx Car Wash Disclosure Letter, (ii) liabilities or obligations to the
extent expressly reflected on or reserved against in the June 30, 1997 balance
sheet included among the Xxxxxxx Car Wash Financial Statements or disclosed in
the notes thereto, (iii) liabilities or obligations of a type reflected on the
June 30, 1997 balance sheet and incurred in the ordinary course of business and
consistent with past practices since June 30, 1997, or (iv) liabilities or
obligations arising under the terms of the Material Contracts of Xxxxxxx Car
Wash. Except as otherwise contemplated or permitted by this Agreement, no
dividends or distributions have been declared on any Membership Interests of
Xxxxxxx Car Wash which are unpaid.
SECTION 12.11 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the Xxxxxxx
Car Wash Members, threatened, by or before any court, any Governmental Authority
or arbitrator, against Xxxxxxx Car Wash or any of the Xxxxxxx Car Wash Members
that reasonably could be expected to prevent or delay the consummation of any of
the transactions contemplated hereby. Except as disclosed in the Xxxxxxx Car
Wash Disclosure Letter, there is no material suit, claim, action at law or in
equity, proceeding or governmental investigation or audit pending, or to the
knowledge of Xxxxxxx Car Wash Members, threatened, by or before any arbitrator,
court, or other Governmental Authority, against Xxxxxxx Car Wash or involving
any of former or present employees, agents, businesses, properties, rights or
assets of Xxxxxxx Car Wash, nor, to the knowledge of Xxxxxxx Car Wash Members,
is there any basis for the assertion of any of the foregoing. Except as
disclosed in the Xxxxxxx Car Wash Disclosure Letter, there are no judgments,
orders, injunctions, decrees, stipulations or awards rendered by any court,
Governmental Authority or arbitrator against Xxxxxxx Car Wash or any of their
respective former or present Employees, agents, properties or assets.
SECTION 12.12 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The Xxxxxxx Car Wash Disclosure Letter sets forth a complete list of all
real property owned by or leased to Xxxxxxx Car Wash, and, with respect to all
properties leased by Xxxxxxx Car Wash, a description of the term of such lease
and the monthly rental thereunder. Xxxxxxx Car Wash is not in default (and will
not be in default with the passage of time or the receipt of notice or both) and
has not received notice of default, under any lease of real property. All real
property leased to Xxxxxxx Car Wash is available for immediate use in the
operation of its business and for the purpose for which such property currently
is being utilized. Subject in the case of leased property to the terms and
conditions of the respective leases, Xxxxxxx Car Wash has full legal and
practical access to all such real property.
SECTION 12.13 INTELLECTUAL PROPERTY.
The Xxxxxxx Car Wash Disclosure Letter sets forth a complete list of all
Intellectual Property owned, used or licensed by Xxxxxxx Car Wash, together with
the identity of the owner thereof, and (ii) all license agreements pursuant to
which any Intellectual Property is licensed to or by Xxxxxxx Car Wash. Xxxxxxx
Car Wash owns its Intellectual Property free and clear of any and all
Encumbrances, or, in the case of licensed Intellectual Property, has valid,
binding and enforceable rights to use such Intellectual Property. Xxxxxxx Car
Wash has duly and timely filed all renewals, continuations and other filings
necessary to maintain its Intellectual Property or registrations thereof. Except
as disclosed in the Xxxxxxx Car Wash Disclosure Letter, Xxxxxxx Car Wash (I) has
not received any notice or claim to the effect that the use of any Intellectual
Property infringes upon, conflicts with or misappropriates the rights of any
other party or that any of the Intellectual Property is not valid or
enforceable, and (ii) has not made any claim that any party has violated or
infringed upon its rights with respect to any Intellectual Property.
SECTION 12.14 MATERIAL CONTRACTS.
(a) List of Material Contracts. The Xxxxxxx Car Wash Disclosure Letter
sets forth a list of all material written, and a description of all oral,
commitments, agreements or contracts to which Xxxxxxx Car Wash is a party or by
which Xxxxxxx Car Wash is obligated, including, but not limited to, all
commitments, agreements or contracts embodying or evidencing the following
transactions or arrangements: (i) agreements for the employment of, or
independent contractor arrangements with, any officer or other individual
employee of Xxxxxxx Car Wash; (ii) any consulting agreement, agency agreement
and any other service agreement that will continue in force after the Closing
Date with respect to the employment or retention by Xxxxxxx Car Wash of
consultants, agents, legal counsel, accountants or anyone else who is not an
Employee; (iii) any single contract, purchase order or commitment providing for
expenditures by Xxxxxxx Car Wash after the date hereof of more than
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$25,000 or which has been entered into by Xxxxxxx Car Wash otherwise than in the
ordinary course of business; (iv) agreements between Xxxxxxx Car Wash and
suppliers to Xxxxxxx Car Wash pursuant to which Xxxxxxx Car Wash is obligated to
purchase or to sell or distribute the products of any other party other than
current purchase orders entered into in the ordinary course of business
consistent with past practices; (v) any contract containing covenants limiting
the freedom of Xxxxxxx Car Wash or any officer, director, or employee of Xxxxxxx
Car Wash to engage in any line or type of business or with any person in any
geographic area; (vi) any commitment or arrangement by Xxxxxxx Car Wash to
participate in a strategic alliance, partnership, joint venture, limited
liability company or other cooperative undertaking with any other Person; (vii)
any commitments by Xxxxxxx Car Wash for capital expenditures involving more than
$25,000 individually or $50,000 in the aggregate; and (viii) any other contract,
commitment, agreement, understanding or arrangement that the Xxxxxxx Car Wash
Members deems to be material to the business of Xxxxxxx Car Wash.
(b) No Breaches or Defaults. Except as disclosed in the Xxxxxxx Car
Wash Disclosure Letter, Xxxxxxx Car Wash and is in full compliance with each,
and is not in default under any, Material Contract to which it is a party, and
no event has occurred that, with notice or lapse of time or both, would
constitute such a default thereunder. Xxxxxxx Car Wash has not waived any rights
under or with respect to any of the Material Contracts to which it is a party.
The Xxxxxxx Car Wash Members have no knowledge, and have not received any notice
to the effect, that any party with whom Xxxxxxx Car Wash has contractual
arrangements under the Material Contracts to which it is a party, is in default
under any such contractual arrangements or that any event has occurred that,
with notice or lapse of time or both, would constitute such a default
thereunder. Each of the Material Contracts to which it is a party constitutes a
legal, valid and binding obligation of each the parties thereto and is
enforceable against each of the parties thereto in accordance with its
respective terms; except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the exercise of judicial discretion in accordance with
general principles of equity.
SECTION 12.15 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The Xxxxxxx Car Wash Disclosure Letter
sets forth a true, complete and correct list of all Employee Benefit Plans and
all Benefit Arrangements to which Xxxxxxx Car Wash or any of its ERISA
Affiliates is a party or to which Xxxxxxx Car Wash or any of its ERISA
Affiliates is obligated to contribute. None of the Employee Benefit Plans to
which Xxxxxxx Car Wash or any ERISA Affiliate of Xxxxxxx Car Wash is a party,
which Xxxxxxx Car Wash or any ERISA Affiliate of Xxxxxxx Car Wash sponsors or
maintains or to which Xxxxxxx Car Wash or any ERISA Affiliate of Xxxxxxx Car
Wash contributes is subject to the requirements of Section 302 of ERISA or
Section 412 of the Code and no liability under Title IV of ERISA (whether to the
PBGC or otherwise) has been incurred by Xxxxxxx Car Wash or any of its ERISA
Affiliates.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the Xxxxxxx Car Wash Disclosure Letter, each Employee Benefit Plan and Benefit
Arrangement to which Xxxxxxx Car Wash is a party or to which Xxxxxxx Car Wash is
obligated to contribute has been operated or maintained in compliance in all
material respects with all Applicable Laws, including, without limitation, ERISA
and the Code, and has been maintained in material compliance with its terms and
in material compliance with the terms of any applicable collective bargaining
agreement. Except as disclosed in the Xxxxxxx Car Wash Disclosure Letter, with
respect to any Employee Benefit Plan that is intended to qualify under Section
401 of the Code, a favorable determination letter as to qualification under
Section 401 of the Code that considered the Tax Reform Act of 1986 has been
issued and any amendments required for continued qualification under Section 401
of the Code have been timely adopted and nothing has occurred subsequent to the
date of such determination letter that could adversely affect the qualified
status of any such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which Xxxxxxx Car Wash or any of its ERISA Affiliates is a party
or to which Xxxxxxx Car Wash or any of its ERISA Affiliates is obligated to
contribute, under ERISA or the Code, for all periods of time prior to the date
hereof and that are attributable to Employees of Xxxxxxx Car Wash have been paid
or otherwise adequately accrued against in the Xxxxxxx Car Wash Financial
Statements, as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the
Xxxxxxx Car Wash Disclosure Letter, Xxxxxxx Car Wash is not liable for any
arrearage of wages, any accrued or vested vacation pay or any tax or penalty for
failure to comply with any Applicable Law relating to employment or labor above
the level accrued for or reserved against on the June 30, 1997 balance sheet
included in the Xxxxxxx Car Wash Financial Statements, and there is no
controversy pending, threatened or in prospect between Xxxxxxx Car Wash and any
of their respective Employees nor is there any basis for any such
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controversy. There is no unfair labor practice charge or complaint currently
pending against Xxxxxxx Car Wash with respect to or relating to any of their
respective Employees before the National Labor Relations Board or any other
agency having jurisdiction over such matters and no charges or complaints are
currently pending against Xxxxxxx Car Wash before the Equal Employment
Opportunity Commission or any state or local agency having responsibility for
the prevention of unlawful employment practices. There are no actions, suits or
claims pending, including proceedings before the IRS, the DOL or the PBGC, with
respect to any Employee Benefit Plan, Benefit Arrangement or any administrator
or fiduciary thereof, other than benefit claims arising in the normal course of
operation of such Employee Benefit Plans or Benefit Arrangements, and, to the
knowledge of the management of Xxxxxxx Car Wash, no Employee Benefit Plan or
Benefit Arrangement is under audit or investigation by any Governmental
Authority.
(e) Severance Obligations. Except as disclosed in the Xxxxxxx Car Wash
Disclosure Letter, all current employees of Xxxxxxx Car Wash may be terminated
at will, without notice and without incurring any severance or other liability
or obligation to the employee in connection with the termination. Except to the
extent provided by the terms of the Employee Benefit Plans and Benefit
Arrangements disclosed in the Xxxxxxx Car Wash Disclosure Letter, neither the
execution, delivery or performance of this Agreement nor the consummation of the
Closing will (i) increase any benefits otherwise payable under any Employee
Benefit Plan or Benefit Arrangement, (ii) result in the acceleration of the time
of payment or vesting of any such benefits, or (iii) give rise to an obligation
with respect to the payment of any severance pay. No "parachute payment" (within
the meaning of Section 280G of the Code), "change in control" or severance
payment has been made or will be required to be made by Xxxxxxx Car Wash or any
ERISA Affiliate of Xxxxxxx Car Wash to any Employee in connection with the
execution, delivery or performance of this Agreement or as a result of the
consummation of the Closing.
(f) Compliance with Laws on Employment Practices. Xxxxxxx Car Wash has
complied in all material respects with all Applicable Laws relating to
employment and employment practices, terms and conditions of employment, wages
and hours, and to the knowledge of the Xxxxxxx Car Wash Members, is not engaged
in any unfair labor practice with respect to any of the current employees of
Xxxxxxx Car Wash; and to the best knowledge of Xxxxxxx Car Wash, none of the
persons performing services for Xxxxxxx Car Wash or any of its ERISA Affiliates
have been improperly classified as independent contractors or as being exempt
from payment of wages or overtime.
(g) Collective Bargaining Agreements. Except as disclosed in the
Xxxxxxx Car Wash Disclosure Letter), none of the employees of Xxxxxxx Car Wash
are subject to any collective bargaining agreement nor is Xxxxxxx Car Wash
required under any agreement to recognize or bargain with any labor organization
or union on behalf of its employees.
(h) No Multi-Employer Plans. Neither Xxxxxxx Car Wash nor any of its
ERISA Affiliates has contributed to, or had the obligation to contribute to, any
Multiemployer Plan within the five-year period ending on the date of this
Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by Xxxxxxx Car Wash or
any of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Benefit Plan or Benefit Arrangement that would
increase materially the expense of maintaining such Employee Benefit Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year of Xxxxxxx Car Wash ended December 31, 1996.
(j) No Unfunded Liabilities. Neither Xxxxxxx Car Wash nor any ERISA
Affiliate of Xxxxxxx Car Wash has any current or projected liability for any
unfunded post-retirement medical or life insurance benefits in connection with
any Employee of Xxxxxxx Car Wash or ERISA Affiliate of Xxxxxxx Car Wash.
(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by Xxxxxxx Car Wash or any ERISA Affiliate of
Xxxxxxx Car Wash, which could subject any such Employee Benefit Plan, Xxxxxxx
Car Wash, any ERISA Affiliate of Xxxxxxx Car Wash, or the Holding Company
directly or indirectly (through an indemnification agreement or otherwise), to
any liability for or as a result of a breach of fiduciary duty, a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, or a civil penalty under Section 502 of ERISA or a Tax under Section 4971
of the Code. Neither Xxxxxxx Car Wash nor any of its ERISA Affiliates have
incurred a "withdrawal" or "partial withdrawal," as defined in Sections 4203 and
4205 of ERISA, from, or failed to timely make contributions to any Multiemployer
Plan which has resulted in any unpaid liability of any of the Companies.
(l) Welfare Benefit Plans. (i) Except as disclosed in the Xxxxxxx Car
Wash Disclosure Letter, none of the Employee Benefit Plans that are "employee
welfare benefit plans" as defined in ERISA Section 3(1) provides for continuing
benefits or coverage for any participant or beneficiary of a participant after
such participant's termination of employment, except to the extent required by
law; provided that any disclosure regarding this clause (i) shall set forth (A)
the number of individuals
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currently receiving such continuing benefits or coverage, (B) the limit on
liability with respect to such coverage, (C) the terms and conditions of such
coverage, and (D) the maximum number of current employees or independent
contractors who could become eligible for such continuing benefits or coverage;
(ii) there has been no violation of Code Section 4980B or ERISA Sections 601-609
with respect to any such plan that could result in any material liability; (iii)
no such plans are "multiple employer welfare arrangements" within the meaning of
ERISA Section 3(40); (iv) with respect to any such plans that are self-insured,
no claims have been made pursuant to any such plan that have not yet been paid
(other than claims which have not yet been paid but are in the normal course of
processing) and no individual has incurred injury, sickness or other medical
condition with respect to which claims may be made pursuant to any such plan
where the liability to the employer could in the aggregate with respect to each
such individual exceed $50,000 per year; (v) neither Xxxxxxx Car Wash nor any of
its ERISA Affiliates maintains or has any obligation to contribute to any
"voluntary employees' beneficiary association" within the meaning of Code
Section 501(c)(9) or other welfare benefit fund as defined at Section 419(e) of
the Code (such disclosure to include the amount of any such funding); (vi) no
such plan is intended to satisfy Code Section 125; (vii) no amounts are required
in connection with any such Plan to be included in income under Code Section
105(h) (under official regulations thereof to date); and (viii) neither Xxxxxxx
Car Wash nor any of its ERISA Affiliates maintains a nonconforming group health
plan as defined at Section 5000(c) of the Code.
SECTION 12.17 TAX MATTERS.
(a) Affiliated Groups. Xxxxxxx Car Wash is not a member of, and has
never been a member of, any "affiliated group" as that term is defined in
Section 1054(a) of the Code.
(b) Tax Returns and Payment of Taxes. Xxxxxxx Car Wash has timely
filed or will timely file all federal, state, local, and other Tax Returns
required to be filed by it under Applicable Laws, including estimated Tax
Returns and reports, and has paid all required Taxes (including any additions to
taxes, penalties and interest related thereto) due and payable on or before the
date hereof. Xxxxxxx Car Wash has paid, withheld, or accrued, or will accrue, on
the Xxxxxxx Car Wash Financial Statements in accordance with an accrual method
of accounting, consistently applied, any and all Taxes in respect of the conduct
of its business or the ownership of its property and in respect of any
transactions for all periods (or portions thereof) through the close of business
on the Closing Date. Xxxxxxx Car Wash has withheld and paid over all Taxes
required to have been withheld and paid over, and complied with all information
reporting and backup withholding requirements, including the maintenance of
required records with respect thereto, in connection with amounts paid or owing
to any Employee, creditor, independent contractor or other third party. Xxxxxxx
Car Wash has collected all sales, use and value added Taxes required to be
collected, and has remitted, or will remit on a timely basis, such amounts to
the appropriate Government Authorities and have furnished properly completed
exemption certificates for all exempt transactions.
(c) Tax Reserves. The amount of Xxxxxxx Car Wash's liability for
unpaid Taxes for all periods ending on or before the date of this Agreement does
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) as of the date of this Agreement,
and the amount of Xxxxxxx Car Wash's liability for unpaid Taxes for all periods
ending on or before the Closing Date shall not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals shall be reflected on the balance sheet of
Xxxxxxx Car Wash as of the Closing Date.
(d) Audits; No Deficiencies Asserted Against Company. Except as
disclosed in the Xxxxxxx Car Wash Disclosure Letter, the Tax Returns of Xxxxxxx
Car Wash have never been audited by any Tax Authority, nor is any such audit in
process, pending or threatened (either in writing or verbally, formally or
informally). Except as disclosed in the Xxxxxxx Car Wash Disclosure Letter, no
deficiencies have been asserted (or are expected to be asserted) against Xxxxxxx
Car Wash as a result of IRS (or state or local Tax Authority) examinations and
no issue has been raised by any IRS (or state or local Tax Authority)
examination that, by application of the same principles, might result in a
proposed deficiency for any other period not so examined.
(e) No Waivers of Limitations. Except as disclosed in the Xxxxxxx Car
Wash Disclosure Letter, there are no agreements, waivers of statutes of
limitations, or other arrange ments providing for extensions of time in respect
of the assessment or collection of any unpaid Taxes against Xxxxxxx Car Wash.
Xxxxxxx Car Wash has disclosed on its federal Income Tax Returns all positions
taken therein that could, if not so disclosed, give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(f) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of Xxxxxxx Car Wash with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that Xxxxxxx Car Wash is
contesting in good
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faith through appropriate proceedings and for which appropriate reserves have
been established on the Xxxxxxx Car Wash Financial Statements.
(g) Tax Elections and Special Tax Status. Xxxxxxx Car Wash is not a
party to any safe harbor lease within the meaning of Section 168(f)(8) of the
Code. Xxxxxxx Car Wash is a "partnership" for purposes of federal income
taxation and state income taxation in all states in which its income is subject
to taxation and has had the status of a "partnership" for purposes of federal
income taxation and state income taxation in all states in which its income is
subject to taxation or has been subject to taxation at all times since its
formation.
(h) Disqualified Leasebacks. Xxxxxxx Car Wash is not a party to a
"disqualified leaseback or long-term agreement" described in Section 467(b)(4)
of the Code.
(i) Deferrals of Income. No income or gain of Xxxxxxx Car Wash has
been deferred pursuant to Treasury Regulation (section xxxx) 1.1502-13 or
1.1502-14, or Temporary Treasury Regulation (section xxxx) 1.1502-13T or
1.1502-14T.
(j) Tax Sharing and Similar Arrangements. Xxxxxxx Car Wash is not a
party to or bound by any Tax sharing, Tax indemnity, Tax allocation or other
similar arrangement.
(k) No Non-Deductible Compensation Payments. Xxxxxxx Car Wash has not
made any payments, nor is it obligated to make any payments, that would not be
deductible under Section 280G of the Code, nor is it a party to any agreement
that under certain circumstances could obligate it to make any such payments.
SECTION 12.18 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by Xxxxxxx
Car Wash and any other real property presently or formerly owned by, used by or
leased to or by Xxxxxxx Car Wash (collectively, the "Xxxxxxx Car Wash
Property"), the existing and prior uses of such Xxxxxxx Car Wash Property and
all operations of the businesses of Xxxxxxx Car Wash comply and have at all
times complied with all Environmental Laws and Xxxxxxx Car Wash is not in
violation of nor has it violated, in connection with the ownership, use,
maintenance or operation of such property or the conduct of its business, any
Environmental Law.
(b) Xxxxxxx Car Wash has all necessary permits, registrations,
approvals and licenses required by any Governmental Authority or Environmental
Law.
(c) Except as disclosed in the Xxxxxxx Car Wash Disclosure letter,
there has been no spill, discharge, leak, emission, injection, disposal, escape,
dumping or release of any kind on, beneath or above such Xxxxxxx Car Wash
Property or into the environment surrounding such Xxxxxxx Car Wash Property of
any Hazardous Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such Xxxxxxx
Car Wash Property. No asbestos-containing materials, underground improvements
(including, but not limited to treatment or storage tanks, sumps, or hydraulic
tanks or water, gas or oil xxxxx) or polychlorinated biphenyls (PCBs)
transformers, capacitors, ballasts, or other equipment which contain dielectric
fluid containing PCBs at levels in excess of fifty parts per million (50 PPM)
are or have ever been located on such Xxxxxxx Car Wash Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of Xxxxxxx Car Wash (or any predecessor in interest) in connection with
(i) any actual or alleged failure to comply with any requirement of any
Environmental Law; (ii) the ownership, use, maintenance or operation of the
Property by any person; (iii) the alleged violation of any Environmental Law; or
(iv) the suspected presence of any Hazardous Material thereon.
SECTION 12.19 COMPLIANCE WITH LAWS.
Xxxxxxx Car Wash has at all times conducted its business in material
compliance with all (and has not received any notice of any claimed violation of
any) Applicable Laws.
SECTION 12.20 LICENSES AND PERMITS.
Xxxxxxx Car Wash possess all licenses, permits, and other governmental
consents, certificates, approvals, or other authorizations (the "Permits")
necessary for the operation of the business of Xxxxxxx Car Wash. Xxxxxxx Car
Wash has complied with the terms and conditions of all Permits in all material
respects and all such Permits are in full force and effect, and there has
occurred no event nor is any event, action, investigation or proceeding pending
or, to the knowledge of Xxxxxxx Car Wash
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Members, threatened, which could cause or permit revocation or suspension of or
otherwise adversely affect the maintenance of any Permits. The transactions
contemplated by this Agreement will not lead to the revocation, cancellation,
termination or suspension of any Permits.
SECTION 12.21 INSURANCE.
Xxxxxxx Car Wash has regularly maintained all policies of commercial
liability, products liability, fire, casualty, worker's compensation, life and
other forms of insurance on an "occurrence" rather than a "claims made" basis in
amounts and types required by law and generally carried by reasonably prudent,
similarly situated businesses. Xxxxxxx Car Wash is not in default under any
provision contained in any insurance policy maintained by Xxxxxxx Car Wash
currently, nor has Xxxxxxx Car Wash failed to give any notice or present any
claim thereunder in due and timely fashion and no cancellation, non-renewal,
reduction of coverage or arrearage in premiums has been threatened or occurred
with respect to any policy, nor is the Xxxxxxx Car Wash Members aware of any
grounds therefor.
SECTION 12.22 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the Xxxxxxx Car Wash Disclosure Letter or otherwise
permitted by this Agreement, since June 30, 1997, Xxxxxxx Car Wash has not (i)
mortgaged, pledged or subjected to any Encumbrance any of its assets; (ii)
canceled or compromised any claim of or debts owed to it; (iii) sold, licensed,
leased, exchanged or transferred any of its assets except in the ordinary course
of business; (iv) entered into any material transaction other than in the
ordinary course of business; (v) experienced any material change in the
relationship or course of dealing with any supplier, customer or creditor; (vi)
suffered any material destruction, loss or damage to any of its assets; (vii)
made any management decisions involving any material change in its policies with
regard to pricing, sales, purchasing or other business, financial, accounting
(including reserves and the amounts thereof) or tax policies or practices;
(viii) declared, set aside or paid any dividends on or made any distributions in
respect of any outstanding shares of capital stock or made any other
distributions or payments to any of its shareholders; (ix) submitted any bid,
proposal, quote or commitment to any party in response to a request for proposal
or otherwise; (x) engaged in any merger or consolidation with, or agreed to
merge or consolidate with, or purchased or agreed to purchase, all or
substantially all of the assets of, or otherwise acquire, any other party; (xi)
entered into any strategic alliance, partnership, joint venture or similar
arrangement with any other party; (xii) incurred or agreed to incur any Debt or
prepaid or made any prepayments in respect of Debt; (xiii) issued or agreed to
issue to any party, any shares of stock or other securities; (xiv) redeemed,
purchased or agreed to redeem or purchase any of its outstanding shares of
capital stock or other securities; (xv) increased the rate of compensation
payable or to become payable to any of its officers, directors, employees or
agents over the rate being paid to them as of June 30, 1996 or agreed to do so
otherwise than in accordance with contractual agreements with such parties;
(xvi) made or agreed to make any charitable contributions or incurred or agreed
to incur any non-business expenses; or (xvii) charged off any bad debts or
increased its bad debt reserve except in the manner consistent with its past
practices.
SECTION 12.23 TITLE TO ASSETS.
Except as described in the Xxxxxxx Car Wash Disclosure Letter, Xxxxxxx Car
Wash has good and marketable title to its assets and properties, free and clear
of restrictions on or conditions to transfer or assignment, and free and clear
of all Encumbrances.
SECTION 12.24 CORPORATE RECORDS.
The books and records of Xxxxxxx Car Wash accurately reflect all minutes of
proceedings of and actions taken by the members of Xxxxxxx Car Wash.
SECTION 12.25 BROKER AND FINDER FEES.
Xxxxxxx Car Wash has not engaged any broker or finder in connection with
the transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company or Xxxxxxx Car Wash by any broker, finder or intermediary in connection
with such transaction.
SECTION 12.26 ADEQUATE DISCLOSURE.
No representation or warranty made by Xxxxxxx Car Wash pursuant to this
Agreement, or any statement contained in any Exhibit or Schedule to this
Agreement, or any certificate or document furnished or to be furnished by
Xxxxxxx Car Wash pursuant to the terms of this Agreement in connection with the
transactions contemplated hereby, contains any untrue or
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misleading statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein not misleading.
SECTION 12.27 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the Xxxxxxx Car Wash Disclosure Letter, and except
as expressly contemplated or permitted by this Agreement, since June 30, 1997,
Xxxxxxx Car Wash has conducted its business in the ordinary course and
consistent with past practice, and Xxxxxxx Car Wash has not suffered any change
that has had a Material Adverse Effect on Xxxxxxx Car Wash. There are no
conditions, facts, developments or circumstances of an unusual or special nature
that reasonably could be expected to have a Material Adverse Effect upon Xxxxxxx
Car Wash that have not been disclosed in writing by Xxxxxxx Car Wash pursuant to
the Xxxxxxx Car Wash Disclosure Letter.
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES OF KBG
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, KBG hereby makes the
following representations and warranties to the other parties to this Agreement:
SECTION 13.1 ORGANIZATION AND GOOD STANDING.
KBG is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado, and has full corporate power and
authority to own, operate and lease its properties, and to conduct its business
as it is now being conducted, and is qualified to transact business as a foreign
corporation in each jurisdiction in which the operation of its business or the
ownership of its properties requires such qualification.
SECTION 13.2 EXECUTION AND EFFECT OF AGREEMENT.
KBG has the corporate power to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery by KBG of this Agreement, the
consummation by KBG of the transactions contemplated hereby, and the performance
by KBG of its obligations hereunder, have been duly and effectively authorized
by all necessary corporate action on the part of KBG. This Agreement has been
duly executed and delivered by KBG and constitutes a legal, valid and binding
obligation of KBG, fully enforceable against KBG in accordance with its terms;
except as enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the exercise of judicial discretion in accordance with general principles of
equity.
SECTION 13.3 RESTRICTIONS.
The execution and delivery of this Agreement by KBG, the consummation of
the transactions contemplated hereby by KBG, and, subject to the due
authorization and approval of its shareholders, the performance of the
obligations of KBG hereunder will not (a) violate any of the provisions of the
charter or by-laws of KBG, (b) violate or conflict with the provisions of any
Applicable Laws, (c) result in the creation of any Encumbrance upon any of the
assets, rights or properties of KBG, or (d) except as disclosed in the KBG
Disclosure Letter, conflict with, violate any provisions of, result in a breach
of or give rise to a right of termination, modification or cancellation of,
constitute a default of, or accelerate the performance required by, with or
without the passage of time or the giving of notice or both, the terms of any
material agreement, indenture, mortgage, deed of trust, security or pledge
agreement, lease, contract, note, bond, license, permit, authorization or other
instrument to which KBG is a party or to which any of any of the assets of KBG
are subject.
SECTION 13.4 CONSENTS.
No filing with, or consent, waiver, approval or authorization of, or notice
to, any governmental authority or any third party is required to be made or
obtained by KBG in connection with the execution and delivery of this Agreement
or any document or instrument contemplated hereby, the consummation of any of
the transactions contemplated hereby or the performance of its obligations
hereunder or thereunder which have not been obtained by KBG.
SECTION 13.5 OWNERSHIP OF PROPRIETARY CAR WASH COMPUTER SYSTEM.
KBG is the sole and exclusive owner of all of the copyright interests in,
patents of, and patent rights in, the Propriety Car Wash Computer Software and
has the sole and exclusive right to sell, assign and transfer the Proprietary
Computer
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Software and the intellectual property rights embodied therein to the Holding
Company. Except as disclosed on Schedule 13.5 to this Agreement, KBG has not
sold, transferred, assigned, conveyed, licensed or otherwise encumbered the
Proprietary Car Wash Computer Software or any of the intellectual property
rights embodied therein and has not granted any right, license or privilege with
respect thereto to any other Person. The Proprietary Car Wash Computer Software
does not infringe upon, conflict with or misappropriate the rights of any other
Person and KBG has not received any claim or notice from any other Person
whether oral or written, which states, in essence, that the use thereof
infringes upon or misappropriates the rights of any Person. KBG has not made any
claim which states, in essence, that any Person has violated or infringed upon
or misappropriated its rights in the Proprietary Car Wash Computer Software,
and, to the knowledge of the management of KBG, no person is infringing upon,
misappropriating, engaging in any unauthorized use thereof.
SECTION 13.6 BROKER AND FINDER FEES.
KBG has not engaged any broker or finder in connection with the
transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company or KBG by any broker, finder or intermediary in connection with such
transaction.
SECTION 13.7 ADEQUATE DISCLOSURE.
No representation or warranty made by KBG pursuant to this Agreement, or
any statement contained in any Exhibit or Schedule to this Agreement, or any
certificate or document furnished or to be furnished by KBG pursuant to the
terms of this Agreement in connection with the transactions contemplated hereby,
contains any untrue or misleading statement of a material fact or omits to state
a material fact necessary in order to make the statements contained therein not
misleading.
ARTICLE XIV
REPRESENTATIONS AND WARRANTIES OF MIRACLE PARTNERS
In order to induce each of the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, subject to the delivery
and acceptance of a definitive Disclosure Letter, Miracle Partners hereby makes
the following representations and warranties to the other parties to this
Agreement and to the Holding Company.
SECTION 14.1 ORGANIZATION AND GOOD STANDING.
Miracle Partners is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has full corporate power
and authority to own, operate and lease its properties, and to conduct its
business as it is now being conducted, and is qualified to transact business as
a foreign corporation in each jurisdiction in which the operation of its
business or the ownership of its properties requires such qualification.
SECTION 14.2 CAPITALIZATION OF MIRACLE PARTNERS.
The authorized capital stock of Miracle Partners consists solely of 500
shares of a single class of common stock, $-0-par value, of which 500 shares
have been issued and are outstanding as of the date of this Agreement. Each of
the shares of the capital stock of Miracle Partners issued and outstanding as of
the date hereof has been duly authorized and validly issued and is fully paid
and non-assessable. None of the shares of the issued and outstanding capital
stock of Miracle Partners has been issued in violation of shareholder preemptive
rights. Miracle Partners has no issued or outstanding equity securities, debt
securities or other instruments which are convertible into or exchangeable for
at any time into equity securities of Miracle Partners. Miracle Partners is not
subject to any commitment or obligation which would require the issuance or sale
of shares of its capital stock at any time under options, subscriptions,
warrants, rights, calls, preemptive rights, convertible obligations or any other
fixed or contingent obligations or which would provide the holder thereof with
the right to acquire any equity securities of Miracle Partners. Miracle Partners
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof.
SECTION 14.3 OWNERSHIP OF SHARES.
All of the issued and outstanding shares of the capital stock of Miracle
Partners are held of record and beneficially by C. Xxxxxx Deal. There are no
agreements, pledges, powers of attorney, assignments or similar agreements or
arrangements either (i) restricting the transferability of any of the shares of
the capital stock of Miracle Partners or (ii) which reasonably could be expected
to prohibit or delay the consummation of the transactions contemplated hereby.
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SECTION 14.4 SUBSIDIARIES; INVESTMENTS.
Miracle Partners does not own any shares of capital stock or equity
securities of, or any interest in any other entity.
SECTION 14.5 EXECUTION AND EFFECT OF AGREEMENT.
Miracle Partners has the corporate power to enter into this Agreement and
to perform its obligations hereunder. This Agreement has been duly executed and
delivered by Miracle Partners and constitutes a legal, valid and binding
obligation of Miracle Partners, fully enforceable against Miracle Partners in
accordance with its terms; except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws of general application relating to or affecting
enforcement of creditors' rights and the exercise of judicial discretion in
accordance with general principles of equity.
SECTION 14.6 RESTRICTIONS.
The execution and delivery of this Agreement by Miracle Partners, the
consummation of the transactions contemplated hereby by Miracle Partners, and,
subject to the due authorization and approval of its shareholders, the
performance of the obligations of Miracle Partners hereunder will not (a)
violate any of the provisions of the charter or by-laws of Miracle Partners, (b)
violate or conflict with the provisions of any Applicable Laws, (c) result in
the creation of any Encumbrance upon any of the assets, rights or properties of
Miracle Partners, or (d) except as disclosed in the Miracle Partners Disclosure
Letter, conflict with, violate any provisions of, result in a breach of or give
rise to a right of termination, modification or cancellation of, constitute a
default of, or accelerate the performance required by, with or without the
passage of time or the giving of notice or both, the terms of any material
agreement, indenture, mortgage, deed of trust, security or pledge agreement,
lease, contract, note, bond, license, permit, authorization or other instrument
to which Miracle Partners is a party or to which any of any of the assets of
Miracle Partners are subject.
SECTION 14.7 CONSENTS.
Except as disclosed in the Miracle Partners Disclosure Letter, no filing
with, or consent, waiver, approval or authorization of, or notice to, any
governmental authority or any third party is required to be made or obtained by
Miracle Partners in connection with the execution and delivery of this Agreement
or any document or instrument contemplated hereby, the consummation of any of
the transactions contemplated hereby or the performance of any of their
respective obligations hereunder or thereunder.
SECTION 14.8 FINANCIAL STATEMENTS.
Attached hereto as Exhibit E are true and correct copies of the audited
balance sheets and related statements of income, cash flows and changes in
stockholders' equity of Miracle Partners as at December 31, 1994, 1995 and 1996
and for the year periods then ended and the financial statements of Miracle
Partners as at June 30, 1997 and for the six month period then ended
(collectively, the "Miracle Partners Financial Statements"). All of the Miracle
Partners Financial Statements have been prepared in accordance with GAAP in a
manner consistent with each other and the books and records of Miracle Partners,
and fairly present in all material respects the financial condition and results
of operations of Miracle Partners at the dates and for the periods indicated
therein. The regular books of account of Miracle Partners fairly and accurately
reflect all material transactions involving Miracle Partners, are true, correct
and complete and have been prepared in accordance with GAAP and on a basis
consistent with the Financial Statements.
SECTION 14.9 DEBT.
The Miracle Partners Disclosure Letter contains a true, complete and
accurate listing of the original principal amount of all of the Debt of Miracle
Partners, the remaining principal balance thereof, the interest rate(s) payable
by Miracle Partners in respect thereof, if any, and the date(s) of maturity
thereof. Except as disclosed in the Miracle Partners Disclosure Letter, all of
the Debt of Miracle Partners may be prepaid at any time, without premium,
prepayment penalties, termination fees or other fees or charges.
SECTION 14.10 GUARANTEES.
The Miracle Partners Disclosure Letter contains a complete list of all
Guarantees provided by Miracle Partners for the benefit of any other party and
of all Guarantees provided by any other party for the benefit of Miracle
Partners or any party doing business with Miracle Partners.
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SECTION 14.11 NO UNDISCLOSED LIABILITIES.
Miracle Partners does not have any material liabilities or obligations of
any nature whatsoever (whether known or unknown, due or to become due, absolute,
accrued, contingent or otherwise, and whether or not determined or
determinable), except for (i) liabilities or obligations set forth in the
Miracle Partners Disclosure Letter, (ii) liabilities or obligations to the
extent expressly reflected on or reserved against in the June 30, 1997 balance
sheet included among the Miracle Partners Financial Statements or disclosed in
the notes thereto, (iii) liabilities or obligations of a type reflected on the
June 30, 1997 balance sheet and incurred in the ordinary course of business and
consistent with past practices since June 30, 1997, or (iv) liabilities or
obligations arising under the terms of the Material Contracts of Miracle
Partners. Except as otherwise contemplated or permitted by this Agreement no
dividends have been declared on any capital stock of Miracle Partners which are
unpaid.
SECTION 14.12 LITIGATION.
There is no suit, claim, action at law or in equity, proceeding or
governmental investigation or audit pending, or, to the knowledge of the
management of Miracle Partners, threatened, by or before any court, any
Governmental Authority or arbitrator, against Miracle Partners that reasonably
could be expected to prevent the consummation of any of the trans actions
contemplated hereby. Except as disclosed in the Miracle Partners Disclosure
Letter, there is no material suit, claim, action at law or in equity, proceeding
or governmental investigation or audit pending, or to the knowledge of
management of Miracle Partners, threatened, by or before any arbitrator, court,
or other Governmental Authority, against Miracle Partners or involving any of
the former or present employees, agents, businesses, properties, rights or
assets of Miracle Partners, nor, to the knowledge of management of Miracle
Partners, is there any basis for the assertion of any of the foregoing. Except
as disclosed in the Miracle Partners Disclosure Letter, there are no judgments,
orders, injunctions, decrees, stipulations or awards rendered by any court,
Governmental Authority or arbitrator against Miracle Partners or any of their
respective former or present Employees, agents, properties or assets.
SECTION 14.13 PROPERTIES; ABSENCE OF ENCUMBRANCES.
The Miracle Partners Disclosure Letter sets forth a complete list of all
real property owned by or leased to Miracle Partners, and, with respect to all
properties leased by Miracle Partners, a description of the term of such lease
and the monthly rental thereunder. Miracle Partners is not in default (and will
not be in default with the passage of time or the receipt of notice or both) and
has not received notice of default, under any lease of real property. All real
property leased to Miracle Partners is available for immediate use in the
operation of its business and for the purpose for which such property currently
is being utilized. Subject in the case of leased property to the terms and
conditions of the respective leases, Miracle Partners has full legal and
practical access to all such real property.
SECTION 14.14 INTELLECTUAL PROPERTY.
The Miracle Partners Disclosure Letter sets forth a complete list of (I)
all Intellectual Property owned, used or licensed by Miracle Partners, together
with the identity of the owner thereof, and (ii) all license agreements pursuant
to which any Intellectual Property is licensed to or by Miracle Partners.
Miracle Partners owns its Intellectual Property free and clear of any and all
Encumbrances, or, in the case of licensed Intellectual Property, has valid,
binding and enforceable rights to use such Intellectual Property. Miracle
Partners has duly and timely filed all renewals, continuations and other filings
necessary to maintain its Intellectual Property or registrations thereof. Except
as disclosed in the Miracle Partners Disclosure Letter, Miracle Partners (I) has
not received any notice or claim to the effect that the use of any Intellectual
Property infringes upon, conflicts with or misappropriates the rights of any
other party or that any of the Intellectual Property is not valid or
enforceable, and (ii) has not made any claim that any party has violated or
infringed upon its rights with respect to any Intellectual Property.
SECTION 14.15 MATERIAL CONTRACTS.
(a) List of Material Contracts. The Miracle Partners Disclosure Letter
sets forth a list of all material written, and a description of all oral,
commitments, agreements or contracts to which Miracle Partners is a party or by
which Miracle Partners is obligated, including, but not limited to, all
commitments, agreements or contracts embodying or evidencing the following
transactions or arrangements: (i) agreements for the employment of, or
independent contractor arrangements with, any officer or other individual
employee of Miracle Partners; (ii) any consulting agreement, agency agreement
and any other service agreement that will continue in force after the Closing
Date with respect to the employment or retention by Miracle Partners of
consultants, agents, legal counsel, accountants or anyone else who is not an
Employee; (iii) any single contract, purchase order or commitment providing for
expenditures by Miracle Partners after the date hereof of more than $25,000 or
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which has been entered into by Miracle Partners otherwise than in the ordinary
course of business; (iv) agreements between Miracle Partners and suppliers to
Miracle Partners pursuant to which Miracle Partners is obligated to purchase or
to sell or distribute the products of any other party other than current
purchase orders entered into in the ordinary course of business consistent with
past practices; (v) any contract containing covenants limiting the freedom of
Miracle Partners or any officer, director, or employee of Miracle Partners to
engage in any line or type of business or with any person in any geographic
area; (vi) any commitment or arrangement by Miracle Partners to participate in a
strategic alliance, partnership, joint venture, limited liability company or
other cooperative undertaking with any other Person; (vii) any commitments by
Miracle Partners for capital expenditures involving more than $25,000
individually or $50,000 in the aggregate; and (viii) any other contract,
commitment, agreement, understanding or arrangement that the management of
Miracle Partners deems to be material to the business of Miracle Partners.
(b) No Breaches or Defaults. Except as disclosed in the Miracle
Partners Disclosure Letter, Miracle Partners and is in full compliance with
each, and is not in default under any, Material Contract to which it is a party,
and no event has occurred that, with notice or lapse of time or both, would
constitute such a default thereunder. Miracle Partners has not waived any rights
under or with respect to any of the Material Contracts to which it is a party.
The management of Miracle Partners has no knowledge, or received any notice to
the effect, that any party with whom Miracle Partners has contractual
arrangements under its Material Contracts, is in default under any such
contractual arrangements or that any event has occurred that, with notice or
lapse of time or both, would constitute such a default thereunder. Each of the
Material Contracts to which Miracle Partners is a party constitutes a legal,
valid and binding obligation of each the parties thereto and is enforceable
against each of the parties thereto in accordance with its respective terms;
except as enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the exercise of judicial discretion in accordance with general principles of
equity.
SECTION 14.16 EMPLOYEE BENEFITS AND EMPLOYMENT MATTERS.
(a) Plans and Arrangements. The Miracle Partners Disclosure Letter
sets forth a true, complete and correct list of all Employee Benefit Plans and
all Benefit Arrangements to which Miracle Partners or any of its ERISA
Affiliates is a party or to which Miracle Partners or any of its ERISA
Affiliates is obligated to contribute. None of the Employee Benefit Plans to
which Miracle Partners or any ERISA Affiliate of Miracle Partners is a party,
which Miracle Partners or any ERISA Affiliate of Miracle Partners sponsors or
maintains or to which Miracle Partners or any ERISA Affiliate of Miracle
Partners contributes is subject to the requirements of Section 302 of ERISA or
Section 412 of the Code and no liability under Title IV of ERISA (whether to the
PBGC or otherwise) has been incurred by Miracle Partners or any of its ERISA
Affiliates.
(b) Compliance with Laws and Terms of Plans. Except as disclosed in
the Miracle Partners Disclosure Letter, each Employee Benefit Plan and Benefit
Arrangement to which Miracle Partners or any of its ERISA Affiliates is a party
or to which Miracle Partners or any of its ERISA Affiliates is obligated to
contribute has been operated or maintained in compliance in all material
respects with all Applicable Laws, including, without limitation, ERISA and the
Code, and has been maintained in material compliance with its terms and in
material compliance with the terms of any applicable collective bargaining
agreement. Except as disclosed in the Miracle Partners Disclosure Letter, with
respect to any Employee Benefit Plan that is intended to qualify under Section
401 of the Code, a favorable determination letter as to qualification under
Section 401 of the Code that considered the Tax Reform Act of 1986 has been
issued and any amendments required for continued qualification under Section 401
of the Code have been timely adopted and nothing has occurred subsequent to the
date of such determination letter that could adversely affect the qualified
status of any such Plan.
(c) Contributions. All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan or Benefit
Arrangement to which Miracle Partners or any of its ERISA Affiliates is a party
or to which Miracle Partners or any of its ERISA Affiliates is obligated to
contribute, under ERISA or the Code, for all periods of time prior to the date
hereof and that are attributable to Employees of Miracle Partners or any of its
ERISA Affiliates have been paid or otherwise adequately accrued against in the
Miracle Partners Financial Statements, as the case may be.
(d) Arrearages and Employment Disputes. Except as disclosed in the
Miracle Partners Disclosure Letter, Miracle Partners is not liable for any
arrearage of wages, any accrued or vested vacation pay or any tax or penalty for
failure to comply with any Applicable Law relating to employment or labor above
the level accrued for or reserved against on the June 30, 1997 balance sheet
included in the Miracle Partners Financial Statements, and there is no
controversy pending, threatened or in prospect between Miracle Partners and any
of its Employees nor is there any basis for any such controversy. There is no
unfair labor practice charge or complaint currently pending against Miracle
Partners with respect to or relating to any of its
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Employees before the National Labor Relations Board or any other agency having
jurisdiction over such matters and no charges or complaints are currently
pending against Miracle Partners before the Equal Employment Opportunity
Commission or any state or local agency having responsibility for the prevention
of unlawful employment practices. There are no actions, suits or claims pending,
including proceedings before the IRS, the DOL or the PBGC, with respect to any
Employee Benefit Plan, Benefit Arrangement or any administrator or fiduciary
thereof, other than benefit claims arising in the normal course of operation of
such Employee Benefit Plans or Benefit Arrangements, and, to the knowledge of
the management of Miracle Partners, no Employee Benefit Plan or Benefit
Arrangement is under audit or investigation by any Governmental Authority.
(e) Severance Obligations. Except as disclosed in the Miracle Partners
Disclosure Letter, all current employees of Miracle Partners may be terminated
at will, without notice and without incurring any severance or other liability
or obligation to the employee in connection with the termination. Except to the
extent provided by the terms of the Employee Benefit Plans and Benefit
Arrangements disclosed in the Miracle Partners Disclosure Letter, neither the
execution, delivery or performance of this Agreement nor the consummation of the
Closing will (i) increase any benefits otherwise payable under any Employee
Benefit Plan or Benefit Arrangement, (ii) result in the acceleration of the time
of payment or vesting of any such benefits, or (iii) give rise to an obligation
with respect to the payment of any severance pay. No "parachute payment" (within
the meaning of Section 280G of the Code), "change in control" or severance
payment has been made or will be required to be made by Miracle Partners or any
ERISA Affiliate of Miracle Partners to any Employee in connection with the
execution, delivery or performance of this Agreement or as a result of the
consummation of the Closing.
(f) Compliance with Laws on Employment Practices. Miracle Partners has
complied in all material respects with all Applicable laws relating to
employment and employment practices, terms and conditions of employment, wages
and hours, and to the knowledge of the management of Miracle Partners, is not
engaged in any unfair labor practice with respect to any of the current
employees of Miracle Partners; and to the best knowledge of Miracle Partners,
none of the persons performing services for Miracle Partners or any of its ERISA
Affiliates have been improperly classified as independent contractors or as
being exempt from the payment of wages or overtime.
(g) Collective Bargaining Agreements. Except as disclosed in the
Miracle Partners Disclosure Letter, none of the employees of Miracle Partners
are subject to any collective bargaining agreement nor is Miracle Partners
required under any agreement to recognize or bargain with any labor organization
or union on behalf of its employees.
(h) No Multi-Employer Plans. Neither Miracle Partners nor any of its
ERISA Affiliates has contributed to, or had the obligation to contribute to, any
Multiemployer Plan within the five-year period ending on the date of this
Agreement.
(i) No Amendments to Plans. There has been no amendment to, written
interpretation or announcement (whether or not written) by Miracle Partners or
any of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Benefit Plan or Benefit Arrangement that would
increase materially the expense of maintaining such Employee Benefit Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year of Miracle Partners ended December 31, 1996.
(j) No Unfunded Liabilities. Neither Miracle Partners nor any ERISA
Affiliate of Miracle Partners has any current or projected liability for any
unfunded post-retirement medical or life insurance benefits in connection with
any Employee of Miracle Partners or ERISA Affiliate of Miracle Partners.
(k) No Prohibited Transactions. No event has occurred with respect to
any Employee Benefit Plan or any employee benefit plan previously sponsored,
maintained or contributed to by Miracle Partners or any ERISA Affiliate of
Miracle Partners, which could subject any such Employee Benefit Plan, Miracle
Partners, any ERISA Affiliate of Miracle Partners, or the Holding Company
directly or indirectly (through an indemnification agreement or otherwise), to
any liability for or as a result of a breach of fiduciary duty, a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, or a civil penalty under Section 502 of ERISA or a Tax under Section 4971
of the Code. Neither Miracle Partners nor any of its ERISA Affiliates have
incurred a "withdrawal" or "partial withdrawal," as defined in Sections 4203 and
4205 of ERISA, from, or failed to timely make contributions to any Multiemployer
Plan which has resulted in any unpaid liability of Miracle Partners or any of
its ERISA Affiliates.
(l) Welfare Benefit Plans. (i) Except as disclosed in the Miracle
Partners Disclosure Letter, none of the Employee Benefit Plans that are
"employee welfare benefit plans" as defined in ERISA Section 3(1) provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except to the
extent required by law; provided that any disclosure regarding this clause (I)
shall set forth (A) the number of individuals currently receiving such
continuing benefits or coverage, (B) the limit on liability with respect to such
coverage, (C) the terms and conditions of such coverage, and (D) the maximum
number of current employees or independent contractors who
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could become eligible for such continuing benefits or coverage; (ii) there has
been no violation of Code Section 4980B or ERISA Sections 601-609 with respect
to any such plan that could result in any material liability; (iii) no such
plans are "multiple employer welfare arrangements" within the meaning of ERISA
Section 3(40); (iv) with respect to any such plans that are self-insured, no
claims have been made pursuant to any such plan that have not yet been paid
(other than claims which have not yet been paid but are in the normal course of
processing) and no individual has incurred injury, sickness or other medical
condition with respect to which claims may be made pursuant to any such plan
where the liability to the employer could in the aggregate with respect to each
such individual exceed $50,000 per year; (v) neither Miracle Partners nor any of
its ERISA Affiliates maintains or has any obligation to contribute to any
"voluntary employees' beneficiary association" within the meaning of Code
Section 501(c)(9) or other funding arrangement for the provision of welfare
benefits (such disclosure to include the amount of any such funding); (vi) no
such plan is intended to satisfy Code Section 125; (vii) no amounts are required
in connection with any such plan to be included in income under Code Section
105(h) (under official regulations thereof to date); and (viii) neither Miracle
Partners nor any of its ERISA Affiliates maintains a nonconforming group health
plan as defined at Section 5000(c) of the Code.
SECTION 14.17 TAX MATTERS.
(a) Affiliated Groups. Miracle Partners is not a member of, and has
never been a member of, any "affiliated group" as that term is defined in
Section 1454(a) of the Code.
(b) Tax Returns and Payment of Taxes. Miracle Partners has timely
filed or will timely file all federal, state, local, and other Tax Returns
required to be filed by it under Applicable Laws, including estimated Tax
Returns and reports, and has paid all required Income Taxes and other Taxes
(including any additions to taxes, penalties and interest related thereto) due
and payable on or before the date hereof. Miracle Partners has paid, withheld,
or accrued, or will accrue, on the Miracle Partners Financial Statements in
accordance with GAAP any and all Income Taxes and other Taxes in respect of the
conduct of its business or the ownership of its property and in respect of any
transactions for all periods (or portions thereof) through the close of business
on the Closing Date. Miracle Partners has withheld and paid over all Taxes
required to have been withheld and paid over, and complied with all information
reporting and backup withholding requirements, including the maintenance of
required records with respect thereto, in connection with amounts paid or owing
to any Employee, creditor, independent contractor or other third party. Miracle
Partners has collected all sales, use and value added Taxes required to be
collected, and has remitted, or will remit on a timely basis, such amounts to
the appropriate Government Authorities and have furnished properly completed
exemption certificates for all exempt transactions.
(c) Tax Reserves. The amount of Miracle Partners's liability for
unpaid Taxes for all periods ending on or before the date of this Agreement does
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) as of the date of this Agreement,
and the amount of Miracle Partners 's liability for unpaid Taxes for all periods
ending on or before the Closing Date shall not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals shall be reflected on the balance sheet of
Miracle Partners as of the Closing Date.
(d) Audits; No Deficiencies Asserted Against Company. The Tax Returns
of Miracle Partners have never been audited by any Tax Authority, nor is any
such audit in process, pending or threatened (either in writing or verbally,
formally or informally). Except as disclosed in the Miracle Partners Disclosure
Letter, no deficiencies have been asserted (or are expected to be asserted)
against Miracle Partners as a result of IRS (or state or local Tax Authority)
examinations and no issue has been raised by any IRS (or state or local Tax
Authority) examination that, by application of the same principles, might result
in a proposed deficiency for any other period not so examined.
(e) No Waivers of Limitations. Except as disclosed in the Miracle
Partners Disclosure Letter, there are no agreements, waivers of statutes of
limitations, or other arrangements providing for extensions of time in respect
of the assessment or collection of any unpaid Taxes against Miracle Partners.
Miracle Partners has disclosed on its federal Income Tax Returns all positions
taken therein that could, if not so disclosed, give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(f) No Tax Liens. There are no Encumbrances on any of the assets,
rights or properties of Miracle Partners with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that Miracle Partners is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established on the Miracle Partners Financial
Statements.
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(g) Tax Elections and Special Tax Status. Miracle Partners is not a
party to any safe harbor lease within the meaning of Section 168(f)(8) of the
Code. Miracle Partners is a "small business corporation" which has elected to be
subject to federal income taxation under subchapter S of the Code and has such
status for purposes of federal income taxation and state income taxation in all
states in which its respective income is subject to taxation or has been subject
to taxation at all times since its formation.
(h) Disqualified Leasebacks. Miracle Partners is not a party to a
"disqualified leaseback or long-term agreement" described in Section 467(b)(4)
of the Code.
(i) Deferrals of Income. No income or gain of Miracle Partners has
been deferred pursuant to Treasury Regulation (section xxxx) 1.1502-13 or
1.1502-14, or Temporary Treasury Regulation (section xxxx) 1.1502-13T or
1.1502-14T.
(j) Tax Sharing and Similar Arrangements. Miracle Partners is not a
party to or bound by any Tax sharing, Tax indemnity, Tax allocation or other
similar arrangement.
(k) No Non-Deductible Compensation Payments. Miracle Partners has not
made any payments, nor is it obligated to make any payments, that would not be
deductible under Section 280G of the Code, nor is it a party to any agreement
that under certain circumstances could obligate it to make any such payments.
SECTION 14.18 ENVIRONMENTAL MATTERS.
(a) The facilities presently or formerly occupied or used by Miracle
Partners and any other real property presently or formerly owned by, used by or
leased to or by Miracle Partners (collectively, the "Miracle Partners
Property"), the existing and prior uses of such Property and all operations of
the businesses of Miracle Partners comply and have at all times complied with
all Environmental Laws and Miracle Partners is not in violation of nor has it
violated, in connection with the ownership, use, maintenance or operation of
such property or the conduct of its business, any Environmental Law.
(b) Miracle Partners has all necessary permits, registrations,
approvals and licenses required by any Governmental Authority or Environmental
Law.
(c) There has been no spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any kind on, beneath or above such
Property or into the environment surrounding such Miracle Partners Property of
any Hazardous Materials.
(d) There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such Miracle
Partners Ventures Property. No asbestos-containing materials, underground
improvements (including, but not limited to the treatment or storage tanks,
sumps, or water, gas or oil xxxxx) or polychlorinated biphenyls (PCBs)
transformers, capacitors, ballasts, or other equipment which contain dielectric
fluid containing PCBs at levels in excess of fifty parts per million (50 PPM)
are located on such Miracle Partners Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened by any
Governmental Authority or third party with respect to the business or any
Property of Miracle Partners (or any predecessor in interest) in connection with
(i) any actual or alleged failure to comply with any requirement of any
Environmental Law; (ii) the ownership, use, maintenance or operation of the
Property by any person; (iii) the alleged violation of any Environmental Law; or
(iv) the suspected presence of any Hazardous Material thereon.
SECTION 14.19 COMPLIANCE WITH LAWS.
Miracle Partners has at all times conducted its business in material
compliance with all (and has not received any notice of any claimed violation of
any) Applicable Laws.
SECTION 14.20 LICENSES AND PERMITS.
Miracle Partners possess all licenses, permits, and other governmental
consents, certificates, approvals, or other authorizations (the "Permits")
necessary for the operation of the business of Miracle Partners. Miracle
Partners has complied with the terms and conditions of all Permits in all
material respects and all such Permits are in full force and effect, and there
has occurred no event nor is any event, action, investigation or proceeding
pending or, to the knowledge of management of Miracle Partners, threatened,
which could cause or permit revocation or suspension of or otherwise adversely
affect the maintenance of any Permits. The transactions contemplated by this
Agreement will not lead to the revocation, cancellation, termination or
suspension of any Permits.
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SECTION 14.21 INSURANCE.
Miracle Partners has regularly maintained all policies of commercial
liability, products liability, fire, casualty, worker's compensation, life and
other forms of insurance on an "occurrence" rather than a "claims made" basis in
amounts and types required by law and generally carried by reasonably prudent,
similarly situated businesses. Miracle Partners is not in default under any
provision contained in any insurance policy maintained by Miracle Partners
currently, nor has Miracle Partners failed to give any notice or present any
claim thereunder in due and timely fashion and no cancellation, non-renewal,
reduction of coverage or arrearage in premiums has been threatened or occurred
with respect to any policy, nor is the management of Miracle Partners aware of
any grounds therefor.
SECTION 14.22 EXTRAORDINARY TRANSACTIONS.
Except as disclosed in the Miracle Partners Disclosure Letter or otherwise
permitted by this Agreement, since June 30, 1997, Miracle Partners has not (I)
mortgaged, pledged or subjected to any Encumbrance any of its assets; (ii)
canceled or compromised any claim of or debts owed to it; (iii) sold, licensed,
leased, exchanged or transferred any of its assets except in the ordinary course
of business; (iv) entered into any material transaction other than in the
ordinary course of business; (v) experienced any material change in the
relationship or course of dealing with any supplier, customer or creditor; (vi)
suffered any material destruction, loss or damage to any of its assets; (vii)
made any management decisions involving any material change in its policies with
regard to pricing, sales, purchasing or other business, financial, accounting
(including reserves and the amounts thereof) or tax policies or practices;
(viii) declared, set aside or paid any dividends on or made any distributions in
respect of any outstanding shares of capital stock or made any other
distributions or payments to any of its shareholders; (ix) submitted any bid,
proposal, quote or commitment to any party in response to a request for proposal
or otherwise; (x) engaged in any merger or consolidation with, or agreed to
merge or consolidate with, or purchased or agreed to purchase, all or
substantially all of the assets of, or otherwise acquire, any other party; (xi)
entered into any strategic alliance, partnership, joint venture or similar
arrangement with any other party; (xii) incurred or agreed to incur any Debt or
prepaid or made any prepayments in respect of Debt; (xiii) issued or agreed to
issue to any party, any shares of stock or other securities; (xiv) redeemed,
purchased or agreed to redeem or purchase any of its outstanding shares of
capital stock or other securities; (xv) increased the rate of compensation
payable or to become payable to any of its officers, directors, employees or
agents over the rate being paid to them as of June 30, 1996 or agreed to do so
otherwise than in accordance with contractual agreements with such parties;
(xvi) made or agreed to make any charitable contributions or incurred or agreed
to incur any non-business expenses; or (xvii) charged off any bad debts or
increased its bad debt reserve except in the manner consistent with its past
practices.
SECTION 14.23 TITLE TO ASSETS.
Except as described in the Miracle Partners Disclosure Letter, Miracle
Partners has good and marketable title to its assets and properties, free and
clear of restrictions on or conditions to transfer or assignment, and free and
clear of all Encumbrances.
SECTION 14.24 CORPORATE RECORDS.
The minute books of Miracle Partners accurately reflect all minutes of
proceedings of and actions taken by the directors of Miracle Partners, and by
each committee of the Board of Directors of Miracle Partners, and all records of
meetings of and actions taken by the stockholders of Miracle Partners, that are
required by applicable laws to be recorded in or reflected in the corporate
records thereof.
SECTION 14.25 BROKER AND FINDER FEES.
Miracle Partners has not engaged any broker or finder in connection with
the transactions contemplated by this Agreement, and no action by any of the
foregoing will cause or support any claim to be asserted against the Holding
Company or Miracle Partners by any broker, finder or intermediary in connection
with such transaction.
SECTION 14.26 ADEQUATE DISCLOSURE.
No representation or warranty made by Miracle Partners pursuant to this
Agreement, or any statement contained in any Exhibit or Schedule to this
Agreement, or any certificate or document furnished or to be furnished by
Miracle Partners pursuant to the terms of this Agreement in connection with the
transactions contemplated hereby, contains any untrue or misleading statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
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SECTION 14.27 NO ADVERSE CHANGE OR CONDITIONS.
Except as set forth in the Miracle Partners Disclosure Letter, and except
as expressly contemplated or permitted by this Agreement, since June 30, 1997,
Miracle Partners has conducted its business in the ordinary course and
consistent with past practice, and Miracle Partners has not suffered any change
that has had a Material Adverse Effect on Miracle Partners. There are no
conditions, facts, developments or circumstances of an unusual or special nature
that reasonably could be expected to have a Material Adverse Effect upon Miracle
Partners that have not been disclosed in writing by Miracle Partners pursuant to
the Miracle Partners Disclosure Letter.
ARTICLE XV
REPRESENTATIONS AND WARRANTIES OF THE HOLDING COMPANY
To induce each of the Predecessor Companies to enter into this Agreement
and to consummate the transactions contemplated hereby, the Holding Company
represents and warrants to each of the Predecessor Companies as follows:
SECTION 15.1 ORGANIZATION AND GOOD STANDING.
The Holding Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Virginia. The Holding Company
has the requisite corporate power to own and hold its properties, to conduct its
business as it is now being conducted, to enter into, execute and deliver this
Agreement, to issue, sell and deliver the shares of Common Stock of the Holding
Company to be issued in the proposed IPO and pursuant to the transactions
contemplated by Article III of this Agreement.
SECTION 15.2 EXECUTION AND EFFECT OF AGREEMENT.
The execution and delivery by the Holding Company of this Agreement, the
performance by the Holding Company of its obligations hereunder, other than the
issuance, sale and delivery of the shares of Common Stock of the Holding Company
to be issued in the proposed IPO have been duly authorized by all necessary
corporate action on the part of the Holding Company. This Agreement has been
duly executed and delivered by the Holding Company and constitutes the legal,
valid and binding obligation of the Holding Company, enforceable against the
Holding Company in accordance with its terms, except as enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights including fraudulent conveyance laws
and the exercise of judicial discretion in accordance with general principles of
equity.
SECTION 15.3 AUTHORIZED CAPITAL STOCK.
The authorized capital stock of the Holding Company consists of 20,000,000
shares, of which (i) 19,000,000 are classified as shares of Common Stock, $.01
par value per share, and (ii) 1,000,000 are classified as shares of Preferred
Stock, $1.00 par value per share. As of the date hereof, none of the shares of
the Common Stock of the Holding Company have been issued by the Holding Company
[other than organizational shares subject to cancellation]. Except as
contemplated by this Agreement and for options which may be issued to officers,
directors, employees and agents of the Holding Company and its subsidiaries
pursuant to stock option plans or arrangements or other equity incentive, bonus
or similar plans or arrangements which are expected to be approved by the Board
of Directors of the Holding Company to purchase or subscribe for not more than
250,000 shares of the Common Stock of the Holding Company in the aggregate (the
"Management Option Shares"), as of the date hereof, the Holding Company is under
no obligation to issue any of its shares of Common Stock or other equity
securities pursuant to subscriptions, warrants, options, convertible securities
or other rights (contingent or otherwise) to purchase or otherwise acquire
equity securities of the Holding Company. As of the date hereof, except for the
Management Option Shares and shares to be issued pursuant to this Agreement, no
shares of Common Stock or other capital stock of the Holding Company are
reserved for possible future issuance. The Holding Company has no obligation
(contingent or other) to purchase, redeem or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof. There are no voting trusts or agreements,
stockholders' agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any securities of the
Holding Company (whether or not the Holding Company is a party thereto). The
shares of Common Stock of the Holding Company to be issued in the proposed IPO
and pursuant to the transactions contemplated by Article III of this Agreement,
when issued in accordance with the terms of this Agreement and the terms of the
Underwriting Agreement, will be validly issued, fully paid and nonassessable and
will be free and clear of all Encumbrances imposed by or through the Holding
Company (other than restrictions imposed by Federal and state securities laws).
Neither the issuance of the shares of Common Stock of the Holding
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Company in the IPO nor the issuance of shares of the Holding Company pursuant to
the transactions contemplated by Article III of this Agreement will be subject
to any preemptive or similar right of the stockholders of the Holding Company.
The holders of shares of the Common Stock of the Holding Company following the
issuance thereof in the IPO and pursuant to the transactions contemplated by
Article III of this Agreement will not be subject to personal liability for the
debts and obligations of the Holding Company solely by reason of being the
holders thereof.
SECTION 15.4 SUBSIDIARIES; INVESTMENTS.
As of the date hereof, the Holding Company has no Subsidiaries, and does
not own of record or beneficially, directly or indirectly, (I) any shares of
capital stock or securities convertible into capital stock of any other
corporation or (ii) any interest in any partnership, joint venture, limited
liability company or other non-corporate business enterprise, and does not
control, directly or indirectly, any other Person or entity.
SECTION 15.5 NO RESTRICTIONS.
The execution and delivery of this Agreement by the Holding Company, the
consummation by the Holding Company of the transactions contemplated hereby and
the performance of the obligations of the Holding Company hereunder do not and
will not (a) violate any of the provisions of the Certificate of Incorporation
or By-Laws of the Holding Company, (b) violate or conflict with the provisions
of the Virginia General Corporation Law or any award, judgment or decree of any
court or any agency, authority, bureau, commission, department or other
government instrumentality applicable to the Holding Company or (c) conflict
with, violate the provisions of, result in a breach of, give rise to a right of
termination, modification or cancellation of, constitute a default under, or
accelerate the performance required by, with or without the passage of time or
the giving of notice or both, the terms of any agreement, indenture, mortgage,
deed of trust, lease, agreement, note, bond, license, permit, authorization or
other instrument to which the Holding Company is a party or to which the Holding
Company is bound or subject.
SECTION 15.6 LITIGATION.
There is no action, suit, claim, proceeding, investigation or audit pending
or, to the best of the Holding Company's knowledge, threatened against or
affecting the Holding Company, at law or in equity, before or by any
Governmental Authority.
SECTION 15.7 LOANS.
The Holding Company has no outstanding loans or advances to any Person and
is not obligated to make any such loans or advances. Except as set forth in this
Agreement, the Holding Company has not incurred any obligation or liability to
any Person for borrowed money.
SECTION 15.8 CONSENTS.
No registration or filing with, notice to, consent or approval of, or other
action by, any Governmental Authority or any other party is or will be necessary
for the valid execution and delivery by the Holding Company of this Agreement or
the performance of its obligations hereunder, including the issuance, sale and
delivery of the Common Stock in the proposed IPO or pursuant to the transactions
contemplated by Article III of this Agreement, other than (i) filings and
registrations required pursuant to Federal and state securities laws (all of
which filings are expected to be made by or on behalf of the Holding Company
prior to the Closing) in connection with the issuance and sale of the Common
Stock of the Holding Company and the registration of the Common Stock of the
Holding Company with the Commission in connection with the IPO and the
transactions contemplated by Article III of this Agreement, and (ii) as required
by Applicable Laws relating to franchising.
SECTION 15.9 ADEQUATE DISCLOSURE.
No representation or warranty made by the Holding Company in this Agreement
contains any untrue or misleading statement of a material fact or omits to state
a material fact necessary to make the statements contained therein not
misleading. There is no fact that the Holding Company has not disclosed to the
Predecessor Companies and the Prema Properties Members or the Xxxxxxx Car Wash
Members of which the Holding Company is aware that materially and adversely
affects or could reasonably be expected to affect materially and adversely the
business, financial condition, operations, property or affairs of the Holding
Company.
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SECTION 15.10 BUSINESS OF THE HOLDING COMPANY.
The Holding Company was incorporated under the laws of the Commonwealth of
Virginia on April 17, 1997. Except for the rights, obligations and liabilities
of the Holding Company arising under this Agreement and its initial
capitalization, and except for the rights and obligations of the Holding Company
arising out of the engagements of legal counsel, underwriters and the certified
public accountants referred to in Article II of this Agreement, as of the date
of this Agreement, the Holding Company has no assets or liabilities or
obligations, whether mature or unmatured, due or to become due, fixed or
contingent.
ARTICLE XVI
CLOSING
SECTION 16.1 CLOSING.
The closing of the transactions contemplated by this Agreement shall take
place at the offices of Miles & Stockbridge, a Professional Corporation, located
at 00 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx, beginning at 10:00 a.m., Eastern
Standard Time, on the date of closing of the IPO.
SECTION 16.2 DOCUMENTS TO BE DELIVERED BY THE HOLDING COMPANY.
At the Closing, the Holding Company shall deliver, or shall cause to be
delivered, to each of the parties to this Agreement the following:
(a) A Certificate of the Secretary or an Assistant Secretary of the
Holding Company, dated the Closing Date, certifying that attached thereto are
true and complete copies of (i) the resolutions of the Board of Directors of the
Holding Company and each of the Merger Subsidiaries, which authorize (a) the
execution and delivery of the Agreement and (b) the consummation of the
transactions contemplated hereby by the Holding Company and each of the Merger
Subsidiaries, and certifying that such resolutions have not been amended or
rescinded and are in full force and effect; and (ii) the charter and by-laws of
the Holding Company as in effect as of the date of such certification, and
certifying the identity and incumbency of the officers and directors of the
Holding Company;
(b) A good standing certificate and certified charter documents, dated
as of a date reasonably close to the Closing Date, of the Holding Company and
each of the Merger Subsidiaries;
(c) An opinion letter from counsel to the Holding Company in form and
content reasonably satisfactory to each of the Predecessor Companies and their
counsel;
(d) A certificate of a duly authorized officer of the Holding Company
dated as of the Closing Date, certifying that (I) the Holding Company has
performed or complied with in all material respects all the covenants and
agreements made by the Holding Company herein which are to be performed or
complied with prior to the Closing Date or at the Closing pursuant to the terms
of this Agreement, and (ii) each of the representations and warranties made by
the Holding Company pursuant to the terms of this Agreement are true and correct
in all material respects as of the Closing Date (except with respect to those
representations and warranties made with respect to a certain date other than
the date of this Agreement or the Closing Date which representations and
warranties need be true and correct only as of such certain date);
(e) The tax opinions of Ernst & Young referred to in Article III of
this Agreement; and
(f) Such other documents, instruments or agreements as may be
reasonably necessary to effectuate the transactions contemplated by this
Agreement.
SECTION 16.3 DOCUMENTS TO BE DELIVERED BY THE CORPORATE PREDECESSOR COMPANIES.
At the Closing, each of the Corporate Predecessor Companies shall execute
and deliver, or cause to be delivered to the Holding Company and each of the
other parties to this Agreement the following:
(a) A certificate of the Secretary or an Assistant Secretary of such
Predecessor Company, dated the Closing Date, certifying that attached thereto
are true and complete copies of (I) the resolutions of the Board of Directors
and stockholders of such Corporate Predecessor Company which authorize (a) the
execution and delivery of this Agreement and (b) the consummation of the
transactions contemplated hereby, and certifying that such resolutions have not
been amended or rescinded
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and are in full force and effect; and (ii) the charter and by-laws of such
Corporate Predecessor Company as in effect as of the date of such certification;
and certifying the identity and incumbency of the officers of such Corporate
Predecessor Company;
(b) A good standing certificate and certified charter documents, dated
as of a date reasonably close to the Closing Date, of such Corporate Predecessor
Company;
(c) An opinion letter of legal counsel to such Corporate Predecessor
Company addressed to the Holding Company in form and content reasonably
satisfactory to the Holding Company and its counsel;
(d) A certificate of a duly authorized officer of such Corporate
Predecessor Company, dated as of the Closing Date, certifying that (i) such
Corporate Predecessor Company has performed or complied with in all material
respects all of the covenants and agreements made by such Corporate Predecessor
Company herein which are to be performed or complied with prior to the Closing
Date or at the Closing pursuant to the terms of this Agreement, and (ii) each of
the representations and warranties made by such Corporate Predecessor Company
pursuant to the terms of this Agreement are true and correct in all material
respects as of the Closing Date (except with respect to those representations
and warranties made with respect to a certain date other than the date of this
Agreement or the Closing Date, which representations and warranties need be true
and correct only as of such certain date); and
(e) Such other documents, instruments or agreements as may be
reasonably necessary to effectuate the transactions contemplated by this
Agreement.
SECTION 16.4 DELIVERIES BY THE PREMA PROPERTIES AND XXXXXXX CAR WASH.
At the Closing, each of Prema Properties and Xxxxxxx Car Wash shall execute
and deliver to the Holding Company and the other parties to this Agreement the
following:
(a) A certificate of its duly authorized manager, dated as of the
Closing Date, certifying that (i) attached thereto as an exhibit is a true,
correct and complete copy of the Articles of Organization and operating
agreement of such limited liability company, (ii) such limited liability company
has performed or complied with in all material respects all of the covenants and
agreements made by such company herein which are to be performed or complied
with prior to the Closing Date or at the Closing pursuant to the terms of this
Agreement, and (iii) each of the representations and warranties made by such
limited liability company pursuant to the terms of this Agreement are true and
correct in all material respects as of the Closing Date (except with respect to
those representations and warranties made with respect to a certain date other
than the date of this Agreement or the Closing Date, which representations and
warranties need be true and correct only as of such certain date);
(b) An opinion letter of legal counsel to Prema Properties and Xxxxxxx
Car Wash, respectively, addressed to the Holding Company, in form and content
reasonably satisfactory to the Holding Company and its counsel; and
(c) Such other documents, instruments or agreements as may be
reasonably necessary to effectuate the transactions contemplated by this
Agreement.
SECTION 16.5 CLOSING DELIVERIES OF KBG.
At the Closing, KBG shall execute and deliver to the Holding Company the
following:
(a) a certified copy of an Assignment of Intellectual Property Rights
with respect to the Proprietary Car Wash Software System between KBG, as
assignor, and KBG, LLC, as assignee, duly executed with signatures guaranteed,
together with a complete copy, in electronic form, of the Source Code and the
object code for the Proprietary Car Wash Software System;
(b) a certificate, dated as of the Closing Date, certifying that (I)
such KBG has performed or complied with in all material respects all of the
covenants and agreements made by such company herein which are to be performed
or complied with prior to the Closing Date or at the Closing pursuant to the
terms of this Agreement, and (ii) each of the representations and warranties
made by KBG pursuant to the terms of this Agreement are true and correct in all
material respects as of the Closing Date (except with respect to those
representations and warranties made with respect to a certain date other than
the date of this Agreement or the Closing Date, which representations and
warranties need be true and correct only as of such certain date);
(c) an opinion letter of legal counsel to KBG, addressed to the
Holding Company, in form and content reasonably satisfactory to the Holding
Company and its counsel; and
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(d) such other documents, instruments, certificates or agreements as
may be reasonably necessary to consummate the transaction contemplated by this
Agreement.
ARTICLE XVII
WITHDRAWAL AND EXCLUSION
FROM PARTICIPATION IN THE TRANSACTION
SECTION 17.1 WITHDRAWAL FROM TRANSACTION.
Notwithstanding anything contained herein which may be inconsistent or to
the contrary, each Predecessor Company shall have the right, upon written notice
delivered to the Holding Company and to each of the other Participant Groups in
which such Predecessor Company is not a Constituent Company, to withdraw from
further participation in the transactions contemplated by this Agreement,
without liability to the other parties to this Agreement (except as hereinafter
provided with respect to Transaction Expenses and in Section 21.1.1), if, and
only if:
(a) a Material Adverse Effect shall have occurred after the date of
this Agreement with respect to any Material Participant (other than such
Predecessor Company); or
(b) each of the conditions precedent to the obligations of the
Predecessor Company shall not have been or fulfilled or waived in writing by
such Predecessor Company on or before November 14, 1997.
(c) the Closing shall not have occurred before the close of business
on November 14, 1997.
SECTION 17.2 EFFECT OF WITHDRAWAL.
Upon the withdrawal of a Predecessor Company, such Predecessor Company
shall no longer be obligated to consummate the any of the transactions
contemplated hereby and this Agreement shall be terminated, unless the remaining
Predecessor Companies elect within 5 business days of their receipt of notice of
withdrawal (or deemed withdrawal in the case of the failure of a Corporate
Predecessor Company to obtain Board approval) from another Predecessor Company
proceed with the transactions contemplated hereby notwithstanding the withdrawal
of a Predecessor Company; provided, however, that no such withdrawal shall
operate to relieve any withdrawing Predecessor Company from its obligation to
contribute its proportionate share of its Participant Group's Transaction
Expense Share to the Transaction Expenses which have been incurred through the
date of the withdrawal of such Predecessor Company. For purposes hereof, a party
shall be considered to have withdrawn from participation on the date on which
notice of such withdrawal shall have been received by the Holding Company.
SECTION 17.3 EXCLUSION FROM TRANSACTION.
17.3.1 Right to Exclude Parties. Notwithstanding anything contained
herein which may be inconsistent or to the contrary, upon the affirmative vote
of 2/3 or more of the entire Board of Directors of the Holding Company, the
Holding Company shall have the right to exclude Xxxxxxx Car Wash and\or Rocky
Mountain I (an "Excluded Participant") from further participation in the
transactions contemplated hereby if, and only if, the Excluded Participant shall
suffer a Material Adverse Effect after the date of this Agreement and prior to
the Closing Date.
17.3.2 Effect of Exclusion. Upon the exclusion of an Excluded
Participant pursuant to the foregoing provisions, the Excluded Participant shall
thereafter be released from further liability to the other parties to this
Agreement, except (i) as provided in Section 21.1 and (ii) that the Excluded
Participant shall, nevertheless, remain liable for its agreed upon contribution
to Rocky Mountain Group's Transaction Expense Share with respect to Transaction
Expenses which have been incurred through the date of the exclusion of the
Excluded Participant from further participation in the transactions contemplated
hereby.
ARTICLE XVIII
TERMINATION OF AGREEMENT
SECTION 18.1 AGREEMENT OF TERMINATION.
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date by the written consent and
agreement of each of the parties to this Agreement.
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SECTION 18.2 EVENTS OF AUTOMATIC TERMINATION.
Notwithstanding anything contained herein to the contrary, this Agreement
shall terminate, and the transactions contemplated hereby shall be deemed to
have been abandoned, if the Closing shall not occur before the close of business
on November 17, 1997, unless the remaining parties to this Agreement shall agree
on or before such date to extend the term of this Agreement.
SECTION 18.3 TERMINATION BY THE HOLDING COMPANY.
If the lead underwriter engaged by the Holding Company to underwrite the
IPO shall at any time prior to the Closing advise the Board of Directors of the
Holding Company that the per share offering price in the IPO for the Holding
Company Common Stock reasonably can be expected to be less than $10.00, the
Board of Directors of the Holding Company shall promptly convene a meeting of
the Finance Committee of the Board of Directors to consider the advisability of
consummating the IPO and the other transactions contemplated by this Agreement.
If the Finance Committee shall determine that it is not advisable to proceed
with the IPO and the other transactions contemplated by this Agreement, then the
Finance Committee shall so notify the full Board of Directors of the Holding
Company and the Holding Company shall then terminate this Agreement by
delivering written notice to that effect to each of the parties to this
Agreement. The determination of the Finance Committee with respect to this
matter shall be made by a majority vote of all of the members of the Finance
Committee. If the Finance Committee shall become deadlocked as to its
determination with respect to the advisability of continuing with the
transactions contemplated hereby, the Finance Committee shall so notify the full
Board of Directors of the Holding Company, which shall then promptly convene a
special meeting of the full Board of Directors for purposes of considering such
matter. If the full Board of Directors determines at such meeting that it is not
advisable to proceed with the IPO and the other transactions contemplated by
this Agreement, then the Holding Company shall then terminate this Agreement,
effective immediately upon delivery of written notice to that effect delivered
to each of the parties to this Agreement.
SECTION 18.4 EFFECTS OF TERMINATION OF AGREEMENT.
In the event that this Agreement shall terminate pursuant to the foregoing
provisions of this Article, this Agreement shall become null and void and of no
further force and effect, and thereafter, none of the parties hereto shall have
any further obligation or liability hereunder, except that each of the
Contributing Companies shall, nevertheless, remain liable for their respective
agreed upon contribution to their proportionate share of their Participant
Group's Transaction Expense Share with respect to all Transaction Expenses which
have been incurred through the date of the termination of this Agreement and the
provision of Section 23.3 hereof relating to confidentiality shall remain
binding upon the parties hereto for a period of 5 years following the date of
the termination of this Agreement.
ARTICLE XIX
DEBT LEVEL GUARANTEES AND RELATED ESCROW ARRANGEMENT
SECTION 19.1 DEBT LEVEL GUARANTEES OF THE CONTRIBUTING COMPANIES.
The allocation of the number and related value of the shares to be issued
by the Holding Company to the Selling Stockholders and the Selling Members of
each of the Contributing Companies pursuant to the transactions contemplated by
Article III of this Agreement were determined by the parties based upon agreed
upon projected "enterprise values" of each of the Contributing Companies as of
the projected Closing Date, assuming that the aggregate Debt level of each of
the Contributing Companies would not exceed a specified level as of such date.
Therefore, each of the Contributing Companies hereby represents and warrants and
covenants and guarantees to the Holding Company, that its aggregate Debt will
not exceed the amount set forth in Schedule 19.1 opposite the name of such
Contributing Company under the heading entitled "Guaranteed Closing Date Debt
Level" (the "Guaranteed Closing Date Debt Level"); provided, however, that, if,
and to the extent that the incurrence by such Contributing Company of any
indebtedness or other obligations is permitted in accordance with the provisions
of Section 5.5 (f) of this Agreement, no portion of the amount of such
indebtedness or other obligation shall be considered to be part of the Debt of
Contributing Company, whether or not required by GAAP to be reflected as such on
the balance sheet of such Contributing Company as of the Closing Date.
SECTION 19.2 DEFINITION OF DEBT.
For purposes of this Agreement, "Debt" shall mean without duplication (in
each case whether such obligation is with full or limited recourse), (i) any and
all obligations of a Contributing Company for borrowed money, (ii) any and all
obligations of a Contributing Company in respect of the deferred purchase price
for any real or personal property or services,
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(iii) any and all obligations a Contributing Company in respect of any capital
lease, (iv) any and all amounts in respect of which a Contributing Company may
be liable, contingently or otherwise, under any guarantees of Debt of another
Person, and (v) any other items required to be reported as short-term or
long-term debt on the balance sheets of a Contributing Company in accordance
with GAAP.
SECTION 19.3 ESCROW OF SHARES.
At the Closing, the Holding Company shall deposit with the Escrow Agent, on
behalf of, and solely as an accommodation to, the Selling Stockholders and
Selling Members of each of the Contributing Companies, stock certificates issued
in the name of each Selling Stockholder and Selling Member of each Contributing
Company evidencing 10% of the aggregate number of shares of the Common Stock of
the Holding Company that each such Selling Stockholder or Selling Member would
otherwise be entitled to receive at the Closing pursuant to the transactions
contemplated by Article III of this Agreement (the "Debt Level Escrow Shares")
in order to secure to the Holding Company the guarantee of the Debt level made
by each Contributing Company pursuant to Section 19.1 of this Agreement. The
Escrow Agent shall hold and administer such certificates and the Debt Level
Escrow Shares in accordance with the terms of an escrow agreement in form and
content satisfactory to the parties (the "Debt Level Escrow Agreement").
Notwithstanding the deposit by the Holding Company of the Debt Level Escrow
Shares at the Closing, each of the Debt Level Escrow Shares shall be considered
to have been issued by the Holding Company at the Closing to the Person who
otherwise would have been entitled to receive the same and shall be reported by
the parties as having been so issued.
SECTION 19.4 DETERMINATION OF CLOSING DATE DEBT LEVEL.
Promptly following the Closing Date, the Holding Company shall review the
books and records of each of the Contributing Companies, and prepare (i) a
balance sheet, in accordance with GAAP, consistently applied, of each of the
Contributing Companies as at the Closing Date and (ii) a statement of the
aggregate Debt of each of the Contributing Companies as at the Closing Date as
shown on each such balance sheet (the "Closing Date Debt Level"), but with the
adjustments thereto contemplated by Section 19.2 of this Agreement, all of which
shall be delivered to each designated Representative of the Selling Stockholders
and the Selling Members of each Contributing Company not later than 45 days
following the Closing Date.
SECTION 19.5 DISPUTE RESOLUTION.
If any Representative of the Selling Stockholders or Selling Members of any
Contributing Company shall dispute the amount of the Closing Date Debt Level of
such Contributing Company set forth on the statement of the Closing Date Debt
Level described in Section 19.4, the Representative shall so notify the Holding
Company in writing of his objections within 15 days after delivery to him of
such statement and shall describe, in reasonable detail, the reasons for his
objections and his proposed calculation of the Closing Date Debt Level of such
Contributing Company. If the Representative of an applicable group of Selling
Stockholders or Selling Members of a Contributing Company fails to deliver a
notice of objection to the Holding Company within such 15-day period, the amount
of the Closing Date Debt Level of such Contributing Company set forth in the
statement thereof described in Section 19.4 shall be deemed to have been
accepted by such Selling Stockholders or Selling Members. If, however, the
Representative of an applicable group of Selling Stockholders or Selling Members
of a Contributing Company delivers a notice of objection to the Holding Company
within such 15-day period, the Holding Company and such Representative shall
endeavor in good faith to resolve any disputed items within 10 business days
after the date of the Holding Company's receipt of the applicable notice of
objection. In the event that the Holding Company and the Representative shall be
unable to resolve any items in dispute relating to the statement of the Closing
Date Debt Level described in Section 19.4, the Holding Company and such
Representative shall engage Ernst & Young to resolve all items remaining in
dispute, and the determination of Ernst & Young in respect of such items shall
be conclusive and binding on the parties. Ernst & Young shall be instructed by
the Holding Company and such Representative to prepare and deliver to the
Holding Company and to such Representative, after resolving any items in
dispute, a balance sheet of the applicable Contributing Company as of the
Closing Date reflecting its resolution of all issues in dispute and a statement
of the Closing Date Debt Level shown thereon. The Closing Date Debt Level of
each Contributing Company, as finally determined (whether by failure of the
Representative of the Selling Stockholders or Selling Members thereof to deliver
a notice of objection to the Holding Company, by the agreement of the parties or
by the final determination of Ernst & Young), shall be deemed to be, and shall
be referred to herein, as the "Final Closing Date Debt Level" of such
Contributing Company.
SECTION 19.6 SET-OFF AGAINST DEBT LEVEL ESCROW SHARES.
If the Final Closing Date Debt Level of any Contributing Company shall be
more than the Guaranteed Closing Date Debt Level of such Contributing Company,
the Holding Company shall have the right to set-off only against the Debt Level
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Escrow Shares so deposited with the Escrow Agent on behalf of the Selling
Stockholders or Selling Members of such Contributing Company Debt Level Escrow
Shares having a value equal to the full amount of the difference between the
Guaranteed Closing Date Debt Level of such Contributing Company and the Final
Closing Date Debt Level of such Contributing Company and any costs and expenses
to be reimbursed to the Holding Company pursuant to Section 19.8, and the Escrow
Agent shall be instructed by the Holding Company and the Representative of the
Selling Stockholders or Selling Members of such Contributing Company to disburse
to the Holding Company share certificates evidencing such number of Debt Level
Escrow Shares and to disburse the remaining balance of such Debt Level Escrow
Shares, if any, to the applicable group of Selling Stockholders or Selling
Members. If, on the other hand, the Final Closing Date Debt Level of the
Contributing Company shall be equal to or less than the Guaranteed Debt Level of
such Contributing Company, the Escrow Agent shall be instructed to disburse to
the Selling Stockholders or Selling Members of such Contributing Company share
certificates evidencing the full number of Debt Level Escrow Shares so deposited
on behalf of such former stockholders or members.
SECTION 19.7 TERM OF THE ESCROW.
The Escrow Agent shall hold all of the Debt Level Escrow Shares in escrow
in accordance with the terms of this Agreement and of the Debt Level Escrow
Agreement for a period of 60 days following the Closing Date, and shall not
disburse any of the Debt Level Escrow Shares from escrow prior to the date which
is 60 days after the Closing Date. On the date which is 60 days after the
Closing Date, the Escrow Agent shall deliver to each of the Selling Stockholders
and Selling Members of each Contributing Company, stock certificates evidencing
his or her pro rata portion of the aggregate number of shares of the Debt Level
Escrow Shares then on deposit with the Escrow Agent with respect to the Selling
Stockholders or Selling Members of such Contributing Company; provided, however,
that if the Final Debt Level of any Contributing Company shall not have been
determined as of such date due to an unresolved dispute as to the Closing Date
Debt Level of such Contributing Company, the Holding Company shall have the
right to set-off on such date against the Debt Level Escrow Shares attributable
to the Selling Stockholders or Selling Members of such Contributing Company Debt
Level Escrow Shares having a value equal to the undisputed amount of the
difference between the Guaranteed Closing Date Debt Level and the Closing Date
Debt Level shown on the statement thereof described in Section 19.4 or prepared
by Ernst & Young, as the case may be, if any, and Debt Level Escrow Shares
having a value equal to the disputed amount of the difference between the
Guaranteed Closing Date Debt Level and the Closing Date Debt Level shown on the
statement thereof described in Section 19.4 or prepared by Ernst & Young, as the
case may be shall remain on deposit with the Escrow Agent until the Final
Closing Date Debt Level of such Contributing Company shall have been determined,
and then disbursed either to the Holding Company or to the applicable group of
Selling Stockholders or Selling Members, as appropriate.
SECTION 19.8 EXPENSES RELATING TO DETERMINATION OF CLOSING DATE DEBT LEVEL.
The Holding Company shall bear all of the costs and expenses incurred by it
in reviewing the books and records of the Contributing Companies and preparing
the statements of Closing Date Debt Level described in Section 19.4. Each
Representative of the Selling Stockholders and Selling Members may incur the
costs and expenses (including the fees and expenses of their respective
accounting firms) in connection with their review of such statements of Closing
Date Net Debt Level which costs and expenses shall be paid by the Holding
Company and fully reimbursed by the Selling Stockholders or Selling Members of
such Contributing Company from the Debt Level Escrow Shares attributable to such
Selling Stockholders or Selling Members. If Ernst & Young is engaged with
respect to a dispute between the Holding Company and the Representative(s) of
any Selling Stockholders or Selling Members over the actual amount of the
Closing Date Net Debt Level of a Contributing Company, and the amount of the
Final Closing Date Debt Level as determined by Ernst & Young is greater than or
equal to the Holding Company's initial statement of the Closing Date Debt Level,
the fees and expenses of Ernst & Young shall be paid by the Holding Company and
fully reimbursed by the Selling Stockholders or Selling Members of the
Contributing Company from the Debt Level Escrow Shares attributable to the
Selling Stockholders or Selling Members of such Contributing Company; if Ernst &
Young is engaged, and the amount of the Final Closing Date Debt Level as
determined by the Independent Accountants is less than the Holding Company's
initial statement of the Closing Date Debt Level, the fees and expenses of Ernst
& Young shall be paid solely by the Holding Company.
SECTION 19.9 VALUE OF ESCROW SHARES.
For purposes of determining the actual amount of Debt Level Escrow Shares
against which the Holding Company shall be entitled to exercise its rights of
set-off or reimbursement under this Article XIX, each of the Debt Level Escrow
Shares shall be valued at the price per share at which the shares of the Common
Stock of the Holding Company shall be offered to the public in the IPO. Except
with respect to Debt Level Escrow Shares as to which the Holding Company shall
have exercised its rights of set off or reimbursement, all of the Debt Level
Escrow Shares shall nevertheless be deemed to be
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owned by the Selling Stockholders and Selling Members that otherwise would have
been entitled to receive such shares at the closing of the transactions
contemplated by Article III of this Agreement, and, subject to the provisions of
Article III of this Agreement, shall be entitled to vote the same and to receive
all dividends declared thereon; provided, however, that, notwithstanding the
foregoing, all shares issuable pursuant to any stock dividend or stock split
declared by the Holding Company with respect to the shares of the Common Stock
of the Holding Company which are applicable to any of the Debt Level Escrow
Shares shall also be deposited with the Escrow Agent and remain subject to the
provisions of this Article.
ARTICLE XX
INDEMNIFICATION ESCROW ARRANGEMENTS
SECTION 20.1 ESCROW OF INDEMNITY ESCROW SHARES.
At the Closing, the Holding Company shall deposit with the Escrow Agent, on
behalf of, and solely as an accommodation to, each of the Selling Stockholders
and Selling Members and KBG, stock certificates issued in the name of each
Selling Stockholder and Selling Member of each Contributing Company and KBG
evidencing 10% of the aggregate number of shares of the Holding Company Common
Stock that each of the Selling Stockholders and Selling Members and KBG,
respectively, would each otherwise be entitled to receive at the Closing
pursuant to the transactions contemplated by Article III of this Agreement
(collectively, the "Indemnity Escrow Shares"). The Escrow Agent shall hold and
administer such certificates and the Indemnity Escrow Shares in accordance with
the terms of an escrow agreement (the "Indemnity Escrow Agreement").
Notwithstanding the deposit by the Holding Company of the Indemnity Escrow
Shares at the Closing, each of the Indemnity Escrow Shares shall be considered
to have been issued by the Holding Company at the Closing to the Person who
otherwise would have been entitled to receive the same and shall be reported by
the parties as having been so issued.
SECTION 20.2 PURPOSE OF ESCROW; INDEMNIFICATION.
From and after the Closing, the Selling Stockholders or Selling Members of
each Contributing Company and KBG shall each, severally and not jointly, and not
jointly and severally with each other, indemnify and hold harmless the Holding
Company in respect of all Holding Company Indemnified Claims and Losses arising
out or, relating to or caused or incurred as a result of acts, omissions,
misstatements, misrepresentations, failures to act or breaches only by the
Predecessor Company of which such group of Selling Stockholders or Selling
Members were shareholders or members prior to the Closing or, in the case of
KBG, only by KBG in an amount equal to the value of Indemnity Escrow Shares
deposited with the Escrow Agent at the Closing on behalf of such Selling
Stockholders or Selling Members or KBG, as the case may be. The Holding Company
shall have the right to seek indemnification from such persons only by
exercising its rights of set off in the manner provided by Section 20.4 of this
Agreement and shall not have the right to seek indemnification from any Selling
Stockholder or Selling Member personally or against KBG, except to the extent of
the Indemnity Escrow Shares deposited with respect to KBG or the Selling
Stockholders or Selling Members of a Contributing Company. Although the
liability of the Selling Stockholders and Selling Members of each Contributing
Company and of KBG for indemnification of the Holding Company shall not be joint
or joint and several with each other, as amongst the Selling Stockholders and
Selling Members of each Contributing Company, the liability of each such Selling
Stockholder and Selling Member of each Contributing Company shall be joint and
several with every other Selling Stockholder or Selling Member of such
Contributing Company. For example, the liability of the Selling Stockholders of
WE JAC shall be joint and several with every other WE JAC Shareholder, but shall
not be joint or joint and several with the Selling Stockholders or Selling
Members of any other Contributing Company or with KBG.
SECTION 20.3 TERM OF THE ESCROW.
The Escrow Agent shall hold all of the Indemnity Escrow Shares in escrow in
accordance with the terms of the Indemnity Escrow Agreement for a period of one
year following the Closing Date, and shall not disburse any of the Indemnity
Escrow Shares, unless, and only to the extent that, the Holding Company shall
exercise its rights of setoff pursuant to Section 20.4 of this Agreement, prior
to the date which is one year after the Closing Date. On the date which is one
year after the Closing Date, the Escrow Agent shall deliver to each of the
Selling Stockholders and Selling Members of each of the Contributing Companies
and KBG, stock certificates evidencing his or her prorata portion of the
aggregate number of Indemnity Escrow Shares then on deposit with the Escrow
Agent with respect to the Selling Stockholders or Selling Members of such
Contributing Company or KBG, except to the extent that there then remains any
unresolved claim for indemnification by the Holding Company; in which event, the
Indemnity Escrow Shares attributable to the applicable Responsible Group or KBG,
as the case may be, having a value equal to such unresolved claims shall remain
on deposit with the Escrow Agent until such
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claim shall have been resolved, and then disbursed either to the Holding Company
or to the applicable group of Selling Stockholders or Selling Members or KBG, as
appropriate.
SECTION 20.4 SET-OFF RIGHTS OF THE HOLDING COMPANY.
20.4.1 WE JAC Indemnity Escrow Shares. Subject to the provisions of
Section 20.5 hereof, the Holding Company shall have the right to set-off from
time to time, in accordance with the terms of Section 20.5 hereof and of the
Indemnity Escrow Agreement, against the escrow deposit of the Indemnity Escrow
Shares made by the Holding Company with respect to the WE JAC Selling
Stockholders (the "WE JAC Indemnity Escrow Shares"), WE JAC Indemnity Escrow
Shares having a value equal to the full amount of any and all Holding Company
Indemnified Claims and Losses imposed upon, asserted against, suffered or
incurred by the Holding Company, directly or indirectly, based upon, arising out
of, resulting from (i) the inaccuracy or untruth of any of the representations
made by WE JAC pursuant to any certificate, document or instrument executed and
delivered by WE JAC or any of its Subsidiaries pursuant to or in connection with
this Agreement, (ii) the breach by WE JAC of any of the warranties or covenants
made by WE JAC pursuant to this Agreement or pursuant to any certificate,
document or instrument executed and delivered by WE JAC pursuant to or in
connection with this Agreement or the failure of WE JAC to perform, observe or
comply with, any of the covenants or agreements made by WE JAC pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by WE JAC pursuant to or in connection with this Agreement or (iii)
any untrue or allegedly untrue statement of any material fact contained in any
registration statement, summary prospectus, final prospectus, or amendment or
supplement thereto, or the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or allegedly untrue statement or omission or alleged
omission was made in such registration statement, summary prospectus, final
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished by WE JAC or any of its
Subsidiaries or any former WE JAC Shareholder.
20.4.2 Lube Ventures Indemnity Escrow Shares. Subject to the
provisions of Section 20.5 hereof, the Holding Company shall have the right to
set-off from time to time, in accordance with the terms of Section 20.5 hereof
and of the Indemnity Escrow Agreement, against the escrow deposit of the
Indemnity Escrow Shares made by the Holding Company with respect to the Lube
Ventures Selling Stockholders (the "Lube Ventures Indemnity Escrow Shares"),
Lube Ventures Indemnity Escrow Shares having a value equal to the full amount of
any and all Holding Company Indemnified Claims and Losses imposed upon, asserted
against, suffered or incurred by the Holding Company, directly or indirectly,
based upon, arising out of, resulting from (i) the inaccuracy or untruth of any
of the representations made by Lube Ventures or any of the Lube Ventures
Shareholders pursuant to this Agreement or pursuant to any certificate, document
or instrument executed and delivered by Lube Ventures pursuant to or in
connection with this Agreement, (ii) the breach by Lube Ventures of any of the
warranties or covenant or covenants made by Lube Ventures pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by Lube Ventures pursuant to or in connection with this Agreement or
the failure of Lube Ventures to perform, observe or comply with, any of the
covenants or agreements made by Lube Ventures pursuant to this Agreement or
pursuant to any certificate, document or instrument executed and delivered by
Lube Ventures or the Lube Ventures Shareholders pursuant to or in connection
with this Agreement or (iii) any untrue or allegedly untrue statement of any
material fact contained in any registration statement, summary prospectus, final
prospectus, or amendment or supplement thereto, or the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or allegedly untrue
statement or omission or alleged omission was made in such registration
statement, summary prospectus, final prospectus, or amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
by Lube Ventures or any former Lube Ventures Shareholder.
20.4.3 Miracle Industries Indemnity Escrow Shares. Subject to the
provisions of Section 20.5 hereof, the Holding Company shall have the right to
set-off from time to time, in accordance with the terms of Section 20.5 hereof
and of the Indemnity Escrow Agreement, against the escrow deposit of the
Indemnity Escrow Shares made by the Holding Company with respect to the Miracle
Industries Selling Stockholders (the "Miracle Industries Indemnity Escrow
Shares"), Miracle Industries Indemnity Escrow Shares having a value equal to the
full amount of any and all Holding Company Indemnified Claims and Losses imposed
upon, asserted against, suffered or incurred by the Holding Company, directly or
indirectly, based upon, arising out of, resulting from (i) the inaccuracy or
untruth of any of the representations made by Miracle Industries pursuant to
this Agreement or pursuant to any certificate, document or instrument executed
and delivered by Miracle Industries pursuant to or in connection with this
Agreement, (ii) the breach by Miracle Industries of any of the warranties or
covenants made by Miracle Industries pursuant to this Agreement or pursuant to
any certificate, document or instrument
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executed and delivered by Miracle Industries pursuant to or in connection with
this Agreement or the failure of Miracle Industries or any of the Miracle
Industries Shareholders to perform, observe or comply with, any of the covenants
or agreements made by Miracle Industries pursuant to this Agreement or pursuant
to any certificate, document or instrument executed and delivered by Miracle
Industries pursuant to or in connection with this Agreement or (iii) any untrue
or allegedly untrue statement of any material fact contained in any registration
statement, summary prospectus, final prospectus, or amendment or supplement
thereto, or the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or allegedly untrue statement or omission or alleged omission
was made in such registration statement, summary prospectus, final prospectus,
or amendment or supplement thereto, in reliance upon and in conformity with
written information furnished by Miracle Industries or any former Miracle
Industries Shareholder.
20.4.4 Rocky Mountain I Indemnity Escrow Shares. Subject to the
provisions of Section 20.5 hereof, the Holding Company shall have the right to
set-off from time to time, in accordance with the terms of Section 20.5 hereof
and of the Indemnity Escrow Agreement, against the escrow deposit of the
Indemnity Escrow Shares made by the Holding Company with respect to the Rocky
Mountain I Selling Stockholders (the "Rocky Mountain I Indemnity Escrow
Shares"), Rocky Mountain I Indemnity Escrow Shares having a value equal to the
full amount of any and all Holding Company Indemnified Claims and Losses imposed
upon, asserted against, suffered or incurred by the Holding Company, directly or
indirectly, based upon, arising out of, resulting from (i) the inaccuracy or
untruth of any of the representations made by Rocky Mountain I pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by Rocky Mountain I pursuant to or in connection with this Agreement,
(ii) the breach of the Rocky Mountain I of any of the warranties or covenants
made by Rocky Mountain I pursuant to this Agreement or pursuant to any
certificate, document or instrument executed and delivered by Rocky Mountain I
pursuant to or in connection with this Agreement or the failure of Rocky
Mountain I to perform, observe or comply with, any of the covenants or
agreements made by Rocky Mountain I pursuant to this Agreement or pursuant to
any certificate, document or instrument executed and delivered by Rocky Mountain
I pursuant to or in connection with this Agreement or (iii) any untrue or
allegedly untrue statement of any material fact contained in any registration
statement, summary prospectus, final prospectus, or amendment or supplement
thereto, or the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or allegedly untrue statement or omission or alleged omission
was made in such registration statement, summary prospectus, final prospectus,
or amendment or supplement thereto, in reliance upon and in conformity with
written information furnished by Rocky Mountain I or any former Rocky Mountain I
Shareholder.
20.4.5 Rocky Mountain II Indemnity Escrow Shares. Subject to the
provisions of Section 20.5 hereof, the Holding Company shall have the right to
set-off from time to time, in accordance with the terms of Section 20.5 hereof
and of the Indemnity Escrow Agreement, against the escrow deposit of the
Indemnity Escrow Shares made by the Holding Company with respect to the Rocky
Mountain II Selling Stockholders (the "Rocky Mountain II Indemnity Escrow
Shares"), Rocky Mountain II Indemnity Escrow Shares having a value equal to the
full amount of any and all Holding Company Indemnified Claims and Losses imposed
upon, asserted against, suffered or incurred by the Holding Company, directly or
indirectly, based upon, arising out of, resulting from (i) the inaccuracy or
untruth of any of the representations made by Rocky Mountain II pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by Rocky Mountain II pursuant to or in connection with this Agreement,
(ii) the breach by Rocky Mountain II of any of the warranties or covenants made
by Rocky Mountain II pursuant to this Agreement or pursuant to any certificate,
document or instrument executed and delivered by Rocky Mountain II pursuant to
or in connection with this Agreement or the failure of the Rocky Mountain II to
perform, observe or comply with, any of the covenants or agreements made by
Rocky Mountain II pursuant to this Agreement or pursuant to any certificate,
document or instrument executed and delivered by Rocky Mountain II pursuant to
or in connection with this Agreement or (iii) any untrue or allegedly untrue
statement of any material fact contained in any registration statement, summary
prospectus, final prospectus, or amendment or supplement thereto, or the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
allegedly untrue statement or omission or alleged omission was made in such
registration statement, summary prospectus, final prospectus, or amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished by Rocky Mountain II or any former Rocky Mountain II Shareholder.
20.4.6 KBG Indemnity Escrow Shares. Subject to the provisions of
Section 20.5 hereof, the Holding Company shall have the right to set-off from
time to time, in accordance with the terms of Section 20.5 hereof and of the
Indemnity Escrow Agreement, against the escrow deposit of the Indemnity Escrow
Shares made by the Holding Company with respect
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to KBG (the "KBG Indemnity Escrow Shares"), KBG Indemnity Escrow Shares having a
value equal to the full amount of any and all Holding Company Indemnified Claims
and Losses imposed upon, asserted against, suffered or incurred by the Holding
Company, directly or indirectly, based upon, arising out of, resulting from (i)
the inaccuracy or untruth of any of the representations made by KBG pursuant to
this Agreement or pursuant to any certificate, document or instrument executed
and delivered by KBG pursuant to or in connection with this Agreement, (ii) the
breach by KBG of any of the warranties or covenants made by KBG pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by KBG pursuant to or in connection with this Agreement or the failure
of KBG to perform, observe or comply with, any of the covenants or agreements
made by KBG pursuant to this Agreement or pursuant to any certificate, document
or instrument executed and delivered by KBG pursuant to or in connection with
this Agreement or (iii) any untrue or allegedly untrue statement of any material
fact contained in any registration statement, summary prospectus, final
prospectus, or amendment or supplement thereto, or the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or allegedly untrue
statement or omission or alleged omission was made in such registration
statement, summary prospectus, final prospectus, or amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
by KBG or any KBG Shareholder.
20.4.7 Prema Properties Indemnity Escrow Shares. Subject to the
provisions of Section 20.5 hereof, the Holding Company shall have the right to
set-off from time to time, in accordance with the terms of Section 20.5 hereof
and of the Indemnity Escrow Agreement, against the escrow deposit of the
Indemnity Escrow Shares made by the Holding Company with respect to the Prema
Properties Selling Members (the "Prema Properties Indemnity Escrow Shares"),
Prema Properties Indemnity Escrow Shares having a value equal to the full amount
of any and all Holding Company Indemnified Claims and Losses imposed upon,
asserted against, suffered or incurred by the Holding Company, directly or
indirectly, based upon, arising out of, resulting from (i) the inaccuracy or
untruth of any of the representations made by Prema Properties or any of the
Prema Properties Members pursuant to this Agreement or pursuant to any
certificate, document or instrument executed and delivered by Prema Properties
or the Prema Properties Members pursuant to or in connection with this
Agreement, (ii) the breach by Prema Properties or any of the Prema Properties
Members of any of the warranties or covenants made by Prema Properties or any of
the Prema Properties Members pursuant to this Agreement or pursuant to any
certificate, document or instrument executed and delivered by Prema Properties
or the Prema Properties Members pursuant to or in connection with this Agreement
or the failure of Prema Properties or any of the Prema Properties Members to
perform, observe or comply with, any of the covenants or agreements made by
Prema Properties or any of the Prema Properties Members pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by Prema Properties or the Prema Properties Members pursuant to or in
connection with this Agreement or (iii) any untrue or allegedly untrue statement
of any material fact contained in any registration statement, summary
prospectus, final prospectus, or amendment or supplement thereto, or the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
allegedly untrue statement or omission or alleged omission was made in such
registration statement, summary prospectus, final prospectus, or amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished by Prema Properties or any former Prema Properties Member.
20.4.8 Xxxxxxx Car Wash Indemnity Escrow Shares. Subject to the
provisions of Section 20.5 hereof, the Holding Company shall have the right to
set-off from time to time, in accordance with the terms of Section 20.5 hereof
and of the Indemnity Escrow Agreement, against the escrow deposit of the
Indemnity Escrow Shares made by the Holding Company with respect to the Xxxxxxx
Car Wash Selling Members (the "Xxxxxxx Car Wash Indemnity Escrow Shares"),
Xxxxxxx Car Wash Indemnity Escrow Shares having a value equal to the full amount
of any and all Holding Company Indemnified Claims and Losses imposed upon,
asserted against, suffered or incurred by the Holding Company, directly or
indirectly, based upon, arising out of, resulting from (i) the inaccuracy or
untruth of any of the representations made by Xxxxxxx Car Wash or any of the
Xxxxxxx Car Wash Members pursuant to this Agreement or pursuant to any
certificate, document or instrument executed and delivered by Xxxxxxx Car Wash
or the Xxxxxxx Car Wash Members pursuant to or in connection with this
Agreement, (ii) the breach by Xxxxxxx Car Wash or any of the Xxxxxxx Car Wash
Members of any of the warranties or covenants made by Xxxxxxx Car Wash or any of
the Xxxxxxx Car Wash Members pursuant to this Agreement or pursuant to any
certificate, document or instrument executed and delivered by Xxxxxxx Car Wash
or the Xxxxxxx Car Wash Members pursuant to or in connection with this Agreement
or the failure of Xxxxxxx Car Wash or any of the Xxxxxxx Car Wash Members to
perform, observe or comply with, any of the covenants or agreements made by
Xxxxxxx Car Wash or any of the Xxxxxxx Car Wash Members pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by Xxxxxxx Car Wash or the Xxxxxxx Car Wash Members pursuant to or in
connection with this Agreement or (iii) any untrue or allegedly untrue statement
of any material fact contained in any registration statement, summary
prospectus, final prospectus,
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or amendment or supplement thereto, or the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or allegedly untrue statement or omission
or alleged omission was made in such registration statement, summary prospectus,
final prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished by Xxxxxxx Car Wash or any former
Xxxxxxx Car Wash Member.
20.4.9 Miracle Partners Indemnity Escrow Shares. Subject to the
provisions of Section 20.5 hereof, the Holding Company shall have the right to
set-off from time to time, in accordance with the terms of Section 20.5 hereof
and of the Indemnity Escrow Agreement, against the escrow deposit of the
Indemnity Escrow Shares made by the Holding Company with respect to the Miracle
Partners Selling Stockholders (the "Miracle Partners Indemnity Escrow Shares"),
Miracle Partners Indemnity Escrow Shares having a value equal to the full amount
of any and all Holding Company Indemnified Claims and Losses imposed upon,
asserted against, suffered or incurred by the Holding Company, directly or
indirectly, based upon, arising out of, resulting from (i) the inaccuracy or
untruth of any of the representations made by Miracle Partners pursuant to this
Agreement or pursuant to any certificate, document or instrument executed and
delivered by Miracle Partners pursuant to or in connection with this Agreement,
(ii) the breach by Miracle Partners of any of the warranties or covenants made
by Miracle Partners pursuant to this Agreement or pursuant to any certificate,
document or instrument executed and delivered by Miracle Partners pursuant to or
in connection with this Agreement or the failure of Miracle Partners to perform,
observe or comply with, any of the covenants or agreements made by Miracle
Partners pursuant to this Agreement or pursuant to any certificate, document or
instrument executed and delivered by Miracle Partners pursuant to or in
connection with this Agreement or (iii) any untrue or allegedly untrue statement
of any material fact contained in any registration statement, summary
prospectus, final prospectus, or amendment or supplement thereto, or the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
allegedly untrue statement or omission or alleged omission was made in such
registration statement, summary prospectus, final prospectus, or amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished by Miracle Partners or any former Miracle Partners Shareholder.
SECTION 20.5 EXERCISE OF SET-OFF RIGHTS.
The rights of the Holding Company to set-off against the Indemnity Escrow
Shares described in Section 20.4 above shall be exercised by the Holding Company
only as follows:
20.5.1 Notice to Representative. The Holding Company shall deliver
written notice to the Representative of the Responsible Group of each claim for
indemnification of Holding Company Indemnified Losses and Claims for which the
Holding Company desires to exercise its right to set-off against the Indemnity
Escrow Shares attributable to such Responsible Group, which notice shall
describe in reasonable detail the basis for such set-off and the dollar amount
of such set-off.
20.5.2 Right to Dispute Claim. The Representative of the Responsible
Group (acting on behalf of its Responsible Group) shall then have fifteen days
(which period may be extended by mutual consent in writing) following receipt of
such notice in which to accept or dispute each such claim, in whole or in part.
To the extent that any such claim is not disputed in writing by the
Representative of the Responsible Group within such fifteen day period, such
claim shall be deemed to have been accepted by such Responsible Group, and the
Holding Company shall be entitled to set-off the entire amount of its claim
against the Indemnity Escrow Shares attributable to such Responsible Group.
20.5.3 Disputed Claims. In the event that the Representative of the
Responsible Group shall dispute any claim of the Holding Company, in whole or in
part or the claim relates to a third party claim described in Section 20.6 (each
a "Contested Claim"), the Indemnity Escrow Shares of the Responsible Group
representing the amount of the Contested Claim shall be retained by the Escrow
Agent until the Contested Claim has been resolved by agreement of the Holding
Company and the Representative of such Responsible Group, pursuant to the
arbitration proceeding hereinafter described or until otherwise ordered by a
court of competent jurisdiction. The Holding Company and the Representative of
the Responsible Group shall endeavor in good faith to resolve any Contested
Claim within forty-five days of (i) the date upon which the Holding Company gave
the Representative notice of the Contested Claim or, (ii) if the Contested Claim
is a third party claim described in Section 20.6, the date upon which such third
party claim is finally resolved. If the Holding Company and the Representative
of the Responsible Group are unable to reach an agreement within such forty-five
day period, the dispute or disagreement shall be referred to arbitration and
arbitrated by a single arbiter, who shall be selected in accordance with the
then current Commercial Arbitration Rules of the American Arbitration
Association. The arbiter so selected shall be instructed that, in addition to
making a decision on the merits of such dispute or disagreement, that he or she
also shall make a determination that, on balance, one of the parties is the
"prevailing party." The "prevailing party" as part of any such
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arbitration proceeding shall be entitled to reimbursement from the other party
for all costs and expenses incurred by it in connection with such arbitration,
including without limitation, reasonable attorneys' fees and disbursements and
consultants' fees and disbursements. Such reimbursement shall be included in the
order of the arbiter and, if the Holding Company is the "prevailing party," the
amount of such reimbursement shall be part of the Contested Claim. Any such
arbitration shall take place in Washington, D.C. Judgment may be entered upon
any award granted in any such arbitration in any court of competent
jurisdiction.
20.5.4 Disbursement of Contested Claim. The Escrow Agent shall be
instructed to promptly disburse the amount of the Contested Claim to the party
entitled thereto (as determined by agreement of the Holding Company and the
Representative of the Responsible Group or by arbitration) upon receipt of
joint, written instructions from the Holding Company and the Representative of
the Responsible Group to that effect or upon presentation of a certified copy of
an order of an arbiter selected in accordance with the foregoing provisions.
SECTION 20.6 THIRD PARTY CLAIMS AGAINST THE HOLDING COMPANY.
20.6.1 Claims. In the event that during the one-year period following
the Closing Date, any claim is asserted, any event occurs or any proceeding
(including governmental investigations or audits) is instituted relating to any
matter as to which the Holding Company may be or is entitled to indemnification
or reimbursement by means of set-off against any of the Indemnity Escrow Shares,
as soon as practicable after such the Holding Company receives any notice or
otherwise becomes aware of any such claim, proceeding or event, the Holding
Company shall so notify in writing the Representative of the Responsible Group.
Such notice shall also contain the information required of and shall constitute
a notice described in Section 20.5.1.
20.6.2 Defense of Claims. If any action is brought against the Holding
Company in respect of any such claim, event or proceeding, the Representative of
the Responsible Group shall be entitled to participate in the defense of such
action, and, to the extent that the Representative of the Responsible Group may
wish, to assume sole control over the defense and settlement of such action by
so notifying the Holding Company of its election to assume control of the
defense of any such action within 15 days after receipt of written notice
thereof from the Holding Company; provided, however, that: (i) the Holding
Company shall nevertheless be entitled to participate in the defense of such
action and to employ counsel at its own expense to assist in the handling of
such action; and (ii) the Representative of the Responsible Group shall obtain
the prior written approval of the Holding Company before entering into any
settlement of such action or ceasing to defend against such action.
Notwithstanding the foregoing, however, the Representative of the Responsible
Group shall not be entitled to assume sole control over the defense and
settlement of any claim, proceeding or action relating to any matter as to which
the Holding Company may be entitled to indemnification or reimbursement pursuant
to this Agreement if: (i) the claim, proceeding or action relates to, could
result in, or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation of any officer or employee of the
Holding Company; (ii) the claim, proceeding or action could result in or cause a
Material Adverse Effect on the Holding Company in the reasonable judgment of the
Holding Company; (iii) the claim, proceeding or action is one which seeks
principally injunctive or equitable relief against the Holding Company or to the
extent that the claim, proceeding or action seeks injunctive or equitable
relief; or (iv) a court, Governmental Authority or other arbiter of the claim,
proceeding or action rules that the Representative of the Responsible Group
failed or is failing to adequately protect the Holding Company's interests,
rights or remedies. If the Representative of the Responsible Group does not
elect to assume control over the defense or settlement of an action as provided
in this Section 20.6.2, the Holding Company shall have the right to defend the
action and related claims in any reasonable manner as it may deem appropriate.
20.6.3 Legal Expenses. After written notice by the Representative of
the Responsible Group to the Holding Company of its election to assume control
of the defense of any such action in accordance with the foregoing, (i) the
Responsible Group shall not be liable to the Holding Company or any other
Selling Stockholders or Selling Members (or KBG), as the case may be, for any
legal or other expenses (other than expenses of investigation) subsequently
incurred by any of such persons in connection therewith unless the Holding
Company shall be advised in writing by reputable legal counsel that it may have
defenses available to it which are inconsistent with or contrary to the defenses
available to the Responsible Group in connection with such action, claim or
proceeding (in which case, the Responsible Group shall be liable and responsible
for the reasonable fees and disbursements of legal counsel to the Holding
Company), and (ii) as long as the Representative of the Responsible Group is
reasonably contesting such action in good faith, the Holding Company shall not
admit any liability with respect to, or settle, compromise or discharge the
claim underlying such action, claim or proceeding without the prior written
consent of the Representative of the Responsible Group of Selling Stockholders
or Selling Members, which consent shall not be unreasonably withheld or delayed.
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SECTION 20.7 VALUE OF INDEMNITY ESCROW SHARES.
For purposes of determining the actual amount of Indemnity Escrow Shares
against which the Holding Company shall be entitled to set-off its claims for
indemnification, the shares of Holding Company Common Stock deposited into
escrow by the Holding Company shall be valued at the price per share at which
the shares of the Common Stock of the Holding Company shall be offered to the
public in the IPO. Except with respect to Indemnity Escrow Shares as to which
the Holding Company shall have exercised its right to setoff, all of the
Indemnity Escrow Shares shall nevertheless be deemed to be owned by the Selling
Stockholders and Selling Members and KBG that otherwise would have been entitled
to receive such shares at the closing of the transactions contemplated by
Article III of this Agreement, and, subject to the provisions of Article III of
this Agreement, shall be entitled to vote the same and to receive all dividends
declared thereon; provided, however, that, notwithstanding the foregoing, all
shares issuable pursuant to any stock dividend or stock split declared by the
Holding Company with respect to the shares of the Common Stock of the Holding
Company which are applicable to any of the Indemnity Escrow Shares shall also be
deposited with the Escrow Agent and remain subject to the provisions of this
Article.
SECTION 20.8 GENERAL.
It is the intent of the parties that the Holding Company shall treat all
Selling Stockholders or Selling Members who are members of a Responsible Group
equally with respect to the exercise by the Holding Company of its right of
setoff against the Indemnity Escrow Shares attributable to such Responsible
Group. To this end, Holding Company agrees that all decisions to exercise the
right of set off against Indemnity Escrow Shares attributable to any Responsible
Group shall be made by the Board of Directors of Holding Company. In making any
such decision with respect to the right of set off against Indemnity Escrow
Shares attributable to the Selling Stockholders or Selling Members of a
Predecessor Company (the "Affected Predecessor Company") the directors who were
designated by the Participant Group to which the Affected Predecessor Company
belongs shall not participate in the deliberations or voting on such decision.
SECTION 20.9. INDEMNIFICATION BY THE HOLDING COMPANY.
From and after the Closing Date, the Holding Company shall indemnify and
hold harmless the Selling Stockholders and Selling Members and KBG for, from and
against all Selling Stockholder Indemnified Claims and Losses.
ARTICLE XXI
ADDITIONAL LIMITED REMEDIES
In addition to the other rights and remedies of the parties hereto as
provided herein consequent upon a breach of this Agreement by another party
hereto, the parties shall have the following additional remedies:
SECTION 21.1 ADDITIONAL REMEDIES.
21.1.1 Willful Breach. Notwithstanding anything contained herein which
may be inconsistent or to the contrary, if any of the Predecessor Companies
shall willfully and knowingly fail to disclose to the other parties hereto and
to the Holding Company any material matter required to be disclosed by such
Predecessor Company in connection with the representations and warranties made
by such Predecessor Company herein or willfully and knowingly misrepresent any
matter to the other parties to this Agreement pursuant to the representations
and warranties made by such Predecessor Company herein (it being understood and
agreed that WE JAC shall not be deemed to have willfully or knowingly failed to
disclose any matter or misrepresented any matter unless the facts and
circumstances relating to such matter or actually known by Xxxx X. Xxxxxx, Xxxxx
Xxxxxxxx or Xxxxxx Xxxxxxxx; Lube Ventures shall not be deemed to have willingly
or knowingly failed to disclose any matter or misrepresented any matter unless
the facts and circumstances relating to such matter or actually known to or by
C. Xxxxxx Deal or Xxxxxx X. Xxxxx; Miracle Partners shall not be deemed to have
willingly or knowingly failed to disclose any matter or misrepresented any
matter unless the facts and circumstances relating to such matter or actually
known to or by C. Xxxxxx Deal; Miracle Industries and Prema Properties shall not
be deemed to have willingly or knowingly failed to disclose any matter or
misrepresented any matter unless the facts and circumstances relating to such
matter or actually known to or by Xxxxxx X. Xxxxx; Rocky Mountain I shall not be
deemed to have willingly or knowingly failed to disclose any matter or
misrepresented any matter unless the facts and circumstances relating to such
matter or actually known to or by Xxxxxxx X. Xxxxx; Rocky Mountain II shall not
be deemed to have willingly or knowingly failed to disclose any matter or
misrepresented any matter unless the facts and circumstances relating to such
matter or actually known to or by Xxxxxxx X. Xxxxx) or if any of the Predecessor
Companies shall, prior to the Closing, willfully fail to perform, comply with or
observe any of the
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covenants or agreements made by such Predecessor Company herein which are to be
performed, complied with or observed prior to the Closing, or, at the Closing,
default in the performance of its obligations hereunder, without prejudice to
any other rights or remedies to which any of the other parties to this Agreement
may be entitled, each of the other parties shall be entitled to recover from
such Predecessor Company (i) any and all actual damages that such Predecessor
Company may have incurred in connection with or as a result of any such failure,
misrepresentation, breach, nonperformance or noncompliance by such Predecessor
Company, together with reimbursement of its out-of-pocket costs and expenses and
its reasonable attorneys' fees incurred in connection with seeking such relief,
(ii) Termination Damages, and (iii) its ratable share of the Transaction
Expenses payable by such Predecessor Company based on the maximum number of
shares of Holding Company Common Stock that the shareholders or members of such
other party could have received in the Mergers and Exchange Offers described in
Article III compared to the maximum number of shares of Holding Company Common
Stock that the shareholders and members of all such other parties could have
received in the Mergers and Exchange Offers described in Article III.
21.1.2 Failure to Obtain Approvals. In the event that (A)(i) WE JAC
fails to obtain the approval of its shareholders described in Section 4.2.3;
(ii) Lube Venturess fails to obtain the approval of its shareholders described
in Section 4.3.2; (iii) Miracle Industries fails to obtain the approval of its
shareholders described in Section 4.4.2; (iv) Rocky Mountain I fails to obtain
the approval of its shareholders described in Section 4.5.3; (v) Rocky Mountain
II fails to obtain the approval of its shareholders described in Section 4.6.3;
(vi) stockholders of Miracle Partners shall have tendered to the Holding Company
for exchange in accordance with the terms of the Miracle Partners Exchange Offer
less than all of the issued and outstanding shares of the capital stock of
Miracle Partners; (vii) the members of Prema Properties (or other holders of
interests in Prema Properties) shall have tendered to the Holding Company for
exchange in accordance with the terms of the Prema Properties Exchange Offer
Membership Interests in Prema Properties representing less than 75% of all of
the Membership Interests in Prema Properties; (viii) the members of Xxxxxxx Car
Wash (or other holders of interests in Xxxxxxx Car Wash) shall have tendered to
the Holding Company for exchange in accordance with the terms of the Xxxxxxx Car
Wash Exchange Offer Membership Interests in Xxxxxxx Car Wash representing less
than 95% of all of the Membership Interests in Xxxxxxx Car Wash; or (ix) KBG
shall have tendered to the Holding Company for exchange in accordance with the
terms of the KBG Exchange Offer less than all of the Membership Interests in
KBG, LLC, and (B) within one year of the date hereof, such Predecessor Company
engages in a sale of substantially all of its assets or a merger or holders of
its common stock or membership interests transfer in the aggregate shares or
membership interests representing a majority of the outstanding shares or
membership interests of such Predecessor Company, such Predecessor Company shall
be liable for Termination Damages to the other Predecessor Companies which
Termination Damages shall be issued ratably to such other Predecessor Companies
based on the maximum number of shares of Holding Company Stock that the
shareholders or members of such other Predecessor Companies could have received
in the Mergers and Exchange Offers described in Article III compared to the
maximum number of shares of Holding Company Common Stock that the shareholders
and members of all such other Predecessor Companies could have received in the
Mergers and Exchange Offers described in Article III.
21.1.3 Termination Damages. "Termination Damages" shall mean the
obligation of a Predecessor Company to issue to the other parties hereto shares
of capital stock or Membership Interests in such Predecessor Company which,
following such issuance, shall represent 20% of the issued and outstanding
shares of capital stock or Membership Interests in such Predecessor Company
calculated on a fully diluted basis.
SECTION 21.2 EQUITABLE REMEDIES.
Each of the Predecessor Company hereby acknowledges and agrees that damages
that may result to the other Predecessor Companies from any breach or threatened
breach of any of the covenants or agreements contained in this Agreement which
are to be complied with or performed by each of the Predecessor Companies may be
intangible, in whole or in part, and incapable of being assessed of monetary
value and likely will result in irreparable harm to, and have a Material Adverse
Effect on, each of the other Predecessor Companies. Therefore, each of the
Predecessor Companies hereby agrees that, in the event of any breach or
threatened breach by them of any of the covenants or agreements contained in
this Agreement which are to be complied with or performed by them, without
prejudice to and in addition to any other remedies available to them at law or
in equity, each of the other Predecessor Companies shall be entitled to a decree
of specific performance and/or injunctive relief to prevent any such breach or a
continuation thereof and other equitable remedies, together with an award of
reasonable attorneys fees, expenses and disbursements incurred in connection
with seeking such relief.
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ARTICLE XXII
EMPLOYEE BENEFIT ARRANGEMENTS POST-CLOSING
SECTION 22.1 WE JAC OPTION PLANS.
The parties agree that, upon consummation of the WE JAC Merger, the Holding
Company shall succeed to, and assume, all of the obligations and liabilities of
WE JAC to issue capital stock pursuant to outstanding options and warrants to
purchase WE JAC common stock, including, without limitation, options outstanding
(i) under the 1996 Precision Tune Employee Stock Purchase Plan (ii) under the
Precision Tune Stock Option Plan, (iii) under the terms of the Stock Option
Agreements dated July 1, 1995 and October 3, 1996 by and between WE JAC and Xxxx
X. Xxxxxx and (iv) under warrants granted to Capitol Tune, Inc., Signet Bank and
Summit Bank. Schedule 22.1 sets forth a list of all such options and the number
of shares of Holding Company Common Stock and exercise price per share they will
be converted into at Closing.
SECTION 22.2 RESERVATION OF MANAGEMENT OPTION SHARES.
The Holding Company shall have the right to reserve at the Closing, for
issuance following the Closing to officers, directors, employees and agents of
the Holding Company and its subsidiaries pursuant to stock option plans or
arrangements or other equity incentive, bonus or similar plans or arrangements
approved by the Board of Directors thereunder, such number of shares of the
Common Stock of the Holding Company, which, if and when issued following the
consummation of the IPO, will represent not more than 5% of the issued and
outstanding shares of the Common Stock of the Holding Company.
ARTICLE XXIII
OTHER COVENANTS AND AGREEMENTS OF THE PARTIES
SECTION 23.1 DISCHARGE OF INDEBTEDNESS OF PREDECESSOR COMPANIES.
At the Closing, immediately following the consummation of the sale of the
Common Stock of the Holding Company to the underwriters in anticipation of the
IPO, the Holding Company shall discharge from the cash proceeds received in such
sale all of the indebtedness of the Predecessor Companies set forth in Schedule
23.1.
SECTION 23.2 RELEASE FROM GUARANTEES OF CORPORATE OBLIGATIONS.
From and after the Closing, to the extent that any obligation or
indebtedness of any Predecessor Company shall not be discharged at the Closing
as provided above, the Holding Company shall use its reasonable best efforts to
obtain the release of each Selling Stockholder and Selling Member (and his or
her spouse, if applicable) and of the officers of WE JAC from any and all
Guarantees of the obligations of any of the Predecessor Companies executed or
given prior to the Closing Date by such Selling Stockholder or Selling Member
(and his or her spouse) or by the officers of WE JAC; provided, however, that
the Holding Company shall not be obligated to expend any funds or post any bonds
in order to obtain such release(s). If the Holding Company shall be unable to
obtain such release(s) on behalf of any Selling Stockholder or Selling Member
(or his or her spouse), or any officer of WE JAC, or if the Holding Company
shall be unwilling to agree to any terms or conditions imposed by the party
granting such release(s) in order to obtain any such release(s), the Holding
Company shall indemnify such Selling Stockholder or Selling Member, or officer
of WE JAC, not so released from any such Guarantees from and against any and all
liabilities arising from any such Guarantee.
SECTION 23.3 CONFIDENTIALITY.
Each of the parties hereto for themselves and their respective officers,
directors, employees, stockholders and representatives, shall hold in confidence
all information, books, records and documents acquired from any other party
hereto prior to, on, or after the date hereof in the course of negotiation of
the transactions contemplated hereby or pursuant to the provisions hereof and
will not disclose the same to any third party except as required by law, and
except to the extent necessary to (a) respond to a subpoena, court order or
other legal process, (b) comply with Applicable Laws, (c) establish a lawful
claim or defense, or (d) obtain reasonably necessary advice of counsel. Should
the transactions contemplated hereby not be consummated for any reason, each
party shall promptly return to the other all originals and copies of such
documents and other written information obtained from the other in the course of
such negotiations or pursuant hereto and shall promptly destroy all evaluations
and studies prepared by it or by any of its representatives on the basis of such
information, books, records or documents.
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SECTION 23.4 MAINTENANCE OF INDEMNITY PROVISIONS IN CHARTERS AND OPERATING
AGREEMENTS.
From and after the Closing, the Holding Company shall maintain in effect
the indemnification provisions contained in the charters and operating
agreements of each of the Predecessor Companies as of the date hereof for a
period of three (3) years following the Closing, and will not seek to amend or
modify such provisions without first obtaining the written consent of a majority
of the last acting directors or the Selling Members of such Predecessor
Companies, it being understood and agreed, however, that, prior to the
expiration of such three (3) year period, the Holding Company may merge or
dissolve all or any of the Predecessor Companies in any such manner as the Board
of Directors of the Holding Company shall determine to be advisable, but, if it
should do so, the Holding Company shall ensure that the charter or other
organizational documentation pertaining to any successor to any Predecessor
Company shall contain provisions providing for the indemnification of the
officers and directors of such Predecessor Company substantially equivalent to
the indemnification provisions contained in the charters and operating
agreements of each of the Predecessor Companies as of the date hereof.
SECTION 23.5 OFFICERS AND DIRECTORS LIABILITY INSURANCE.
From and after the Closing, the Holding Company shall maintain in full
force and effect, with a reputable insurer, officer's and director's liability
insurance in such amounts and on such terms and conditions as the Board of
Directors shall determine to be reasonable or advisable.
SECTION 23.6 LOCK-UPS OF SHARES.
Each of the parties hereto acknowledges that, in order to accommodate the
underwriters for the proposed IPO, the sale, transfer, assignment, pledge, gift
or other disposition by any direct or indirect holder of 3,000 or more of the
Combination Shares to be received by the Selling Stockholders and the Selling
Members pursuant to the transactions contemplated by this Agreement shall be
prohibited for a period of 180 days following the Closing Date, unless the
Holding Company shall provide its written consent thereto in advance thereof,
and agrees that the Articles of Incorporation of the Holding Company may reflect
such restriction. In addition, each certificate evidencing the Combination
Shares to be issued by the Holding Company pursuant to the transactions
contemplated by this Agreement shall bear a conspicuous legend thereon which
shall read substantially as follows:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, GIFT OR OTHER
DISPOSITION BY ANY RECORD OR BENEFICIAL HOLDER OF 3,000 OR
MORE SHARES OF PRECISION AUTO CARE, INC. WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMPANY IS PROHIBITED UNTIL
, 1998."
SECTION 23.7 REGISTRATION RIGHTS.
23.7.1 Right to Include Shares in the IPO. Subject to the further
provisions of this Section 23.7, each of the Selling Stockholders or Selling
Members shall have the right to elect, following their receipt of the notices
given by the Predecessor Companies in accordance with applicable securities
laws, (but not later than 10 days after the effective date of the Form S-4
Registration Statement referred to in Section 4.1.1(b)) to include in the Form
S-1 Registration Statement and the IPO all or a portion of the Combination
Shares to be received by them pursuant to the Closing of the transactions
contemplated by this Agreement for offer and sale to the underwriters on the
same terms as may be offered to the Holding Company by the underwriters for the
IPO (except as otherwise provided for herein), which election shall be made by
written notice to the Holding Company within such 10-day period and shall
specify the number of shares of the Common Stock of the Holding Company Common
Stock that the Selling Stockholder or Selling Member desires to so include in
such registration statement, and which shall be accompanied by an executed
Selling Shareholder Questionnaire/Power of Attorney in the form that accompanies
the Notice or the Joint Proxy Statement\Prospectus included in the Form S-4
Registration Statement of the Holding Company; PROVIDED, HOWEVER, that the
Holding Company shall have no obligation to include in the Form S-1 Registration
Statement or the IPO any Combination Shares on behalf of any Selling Stockholder
or Selling Member who desires to include less than 3,000 Combination Shares in
the IPO; PROVIDED FURTHER, that each of the Selling Stockholders or Selling
Members who shall be required by federal or any applicable state income tax law
to recognize income in the year in which the Closing Date shall occur as a
result of the consummation of any of the transactions contemplated by Article V
of this Agreement otherwise than as a result of the receipt of a cash payment
from the Holding Company in lieu of fractional shares (each such Selling
Stockholder or Selling Member being referred to hereinafter as a "Tax Preference
Selling Shareholder") shall have the right, in preference to all other Selling
Stockholders or Selling Members, to include in the IPO such number of
Combination Shares, which, when sold in the IPO, will yield to the Selling
Stockholder or the Selling Member sufficient net cash proceeds to satisfy his or
her respective combined federal and state income tax liability which
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will arise from such transactions; and PROVIDED FURTHER, that the Holding
Company shall have no obligation to include in the Form S-1 Registration
Statement or the IPO more than 19% of the aggregate number of Combination Shares
to be issued pursuant to the transactions contemplated by Article III of this
Agreement (the "Selling Shareholder Share Limitation"). Notwithstanding the
foregoing, no election by a Selling Stockholder or Selling Member to include
Combination Shares in the IPO shall be valid or effective unless and until such
notice, together with the other materials referred to herein, have been
submitted to the Holding Company duly executed. Each election to include
Combination Shares in the IPO made by a Selling Shareholder or Selling Member
shall be irrevocable and may not be withdrawn except to the extent provided in
Section 23.7.2.
23.7.2 Reduction of Number of Combination Shares to be Included in the
IPO. If Selling Stockholders or Selling Members shall elect to include in the
IPO an aggregate number of Combination Shares which exceeds the Selling
Shareholder Share Limitation, or if the lead underwriter for the IPO advises the
Holding Company in good faith that inclusion of some or all of the Combination
Shares which the Selling Stockholders or Selling Members shall have requested be
included in such registration statement would adversely affect the marketing of
the entire offering of securities, then the Holding Company shall be obligated
to include in the registration statement and the IPO only such aggregate number
of Combination Shares which is equal to the Selling Shareholder Share Limitation
(or such lesser number of Combination Shares as the managing underwriter shall
in good faith advise the Holding Company may be included therein without, in the
opinion of the managing underwriter, adversely affecting the marketing of the
entire offering of shares of the Holding Company Common Stock in the IPO) (such
number of shares being referred to as the "Permissible Number of Shares"). If
the aggregate number of Combination Shares that the Selling Stockholders and
Selling Members shall have requested be included in such registration statement
exceeds the number of Permissible Number of Shares, the number of Combination
Shares that each Selling Stockholder or Selling Member shall be entitled to
include therein shall be reduced as follows: first, all of the Combination
Shares that Tax Preference Selling Shareholders elect to include shall be
included unless the amount of such shares exceeds the Permissible Number of
Shares. If the Permissible Number of Shares is so exceeded, the number of
Combination Shares that the Tax Preference Selling Shareholders may include
shall be reduced pro rata, based on the number of Combination Shares that each
Tax Preference Selling Shareholder initially requested be included in the
registration statement; second if, all of the Combination Shares that the Tax
Preference Selling Shareholders elect to include in the registration statement
is less than the Permissible Number of Shares, the Selling Stockholders and the
Selling Members (other than the Tax Preference Selling Shareholders) shall be
entitled to include their pro rata portion of the difference between the
Permissible Number of Shares and the number of Combination Shares that the Tax
Preference Selling Shareholders have elected to include in the registration
statement based upon the number of Combination Shares initially requested to be
included by the Selling Shareholders and Selling Members (other than the Tax
Preference Selling Shareholders).
SECTION 23.8 OBLIGATIONS OF SHAREHOLDERS SELLING IN THE IPO.
In addition to the obligations to be set forth in the Underwriting
Agreement, each Selling Stockholder or Selling Member who desires to include
Combination Shares in the IPO shall be required to (i) cooperate with the
Holding Company in preparing the Form S-1 Registration Statement to reflect the
inclusion of their Combination Shares therein, and execute such ordinary and
customary agreements as may be reasonably necessary in favor of the underwriters
for the IPO; (ii) promptly supply the Holding Company with all information,
documents, representations and agreements as the Holding Company or the
underwriter may reasonably deem necessary in connection with the registration of
such Combination Shares.
SECTION 23.9 EXPENSES OF REGISTRATION.
The costs and expenses of all registrations and qualifications under the
Securities Act and applicable state securities or blue sky laws, and of all
other actions, that the Holding Company is required to take or effect in order
to register the IPO Shares and any Combination Shares for offer and sale to the
public (including, without limitation, all registration and filing fees,
printing expenses, costs of special audits incidental to or required by any such
registration, and fees and disbursements of counsel and independent public
accountants for the Holding Company) shall be borne and paid for by the Holding
Company and the Contributing Companies as provided for in this Agreement. In
addition, all Selling Stockholders and Selling Members (other than Tax
Preference Selling Shareholders) shall bear their prorata portion of
underwriting discounts or commissions. The Holding Company shall pay
underwriting discounts or commissions attributable to Combination Shares that
Tax Preference Selling Shareholders include in the IPO.
SECTION 23.10 INCLUSION OF CERTAIN SHARES.
Notwithstanding the provisions of Section 23.7.2, the Holding Company shall
not permit the lead underwriter of the IPO to set the Permissible Number of
Shares below a number that permits Xxxxxxx X. Xxxxx to include in the Form X-0
X-000
Xxxxxxxxxxxx Statement and the IPO such number of Combination Shares to be
received by him pursuant to the transactions contemplated by Article III, which,
when sold in the IPO, will yield to him sufficient net cash proceeds to satisfy
his combined federal and state income tax liability which will arise as a result
of the discharge by the Holding Company of the indebtedness described in
Schedule 19.1.
ARTICLE XXIV
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
SECTION 24.1 SURVIVAL IN GENERAL.
Except as otherwise provided in this Agreement, all of the representations,
warranties, covenants and agreements of the parties contained in this Agreement
shall survive the Closing. The representations and warranties made by the
parties to this Agreement to each of the other parties to this Agreement shall
terminate and expire effective as of the Closing, except with respect to the
representations and warranties made by each party to the Holding Company
pursuant to the terms of this Agreement. From and after the Closing, the Holding
Company shall have the sole and exclusive right to exercise all remedies against
the parties hereto with respect to any inaccuracy or untruth of any of the
representations made by any of the parties to this Agreement pursuant to the
terms of this Agreement or pursuant to any certificate, document or instrument
executed and delivered by any of the parties pursuant to or in connection with
this Agreement or the breach by any party of any of the warranties or covenants
made by any such party pursuant to this Agreement or the failure of any such
party to perform, observe or comply with, any of the covenants or agreements
made by such party pursuant to this Agreement or in connection with this
Agreement. Furthermore, except as provided in the next sentence, from and after
the Closing the Holding Company's sole and exclusive remedy against parties who
proceed to Closing hereunder with respect to the foregoing shall be limited to
its right to exercise its right of setoff against the Indemnity Escrow Shares as
provided in Article XX of this Agreement. The Holding Company shall not, except
in the cases of fraud, have the right to seek to impose personal liability upon
any of the Selling Stockholders or the Selling Members in the capacity as former
stockholders or former members, as the case may be, of any of the Predecessor
Companies.
SECTION 24.2 SURVIVAL OF INDEMNITY OBLIGATIONS.
The obligations of the Selling Shareholders and the Selling Members and of
KBG to indemnify the Holding Company shall, except with respect to any
unresolved claims made by the Holding Company for indemnification, expire and
terminate at 5:00 Eastern Daylight Time on the date which is one year after the
Closing Date.
SECTION 24.3 SURVIVAL OF COVENANTS AND AGREEMENTS.
Each of the covenants of the parties contained in or made by the parties
pursuant to the terms of this Agreement which are to be performed by the parties
at and after the Closing, other than the indemnity obligations of the parties
with respect to representations and warranties (which shall survive the Closing
as provided for in the foregoing provisions of this Section), shall survive the
Closing until the same shall have been performed or discharged in full.
SECTION 24.4 EFFECT OF DUE DILIGENCE.
Notwithstanding any investigation or audit conducted by any of the parties
to this Agreement prior to the Closing, each of the parties to this Agreement
shall be entitled to rely upon the representations and warranties made by the
other parties pursuant to this Agreement, and such representations and
warranties shall not be deemed to have been waived or otherwise affected by any
such investigation or audit or any knowledge attributable to any party.
ARTICLE XXV
MISCELLANEOUS
SECTION 25.1 ENTIRE AGREEMENT.
This Agreement, together with the Collateral Agreements, constitutes the
entire agreement and understanding between the parties hereto in respect of the
matters set forth herein, and, except as otherwise specifically provided for
herein with respect to certain provisions of the Memorandum of Understanding
relating to Transaction Expenses, which provisions are incorporated herein by
reference, all prior negotiations, writings and understandings relating to the
subject matter of this
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Agreement (including, without limitation, all other provisions of the Memorandum
of Understanding and all supplements thereto or amendments thereof) are merged
herein and are superseded and canceled by this Agreement.
SECTION 25.2 AMENDMENT AND WAIVER.
This Agreement may be amended, modified, supplemented or changed in whole
or in part only by an agreement in writing making specific reference to this
Agreement and executed by each of the parties hereto. Any of the terms and
conditions of this Agreement may be waived in whole or in part, but only by an
agreement in writing making specific reference to this Agreement and executed by
the party that is entitled to the benefit thereof. The failure of any party
hereto to insist upon strict performance of or compliance with the provisions of
this Agreement shall not constitute a waiver of any right of any such party
hereunder or prohibit or limit the right of such party to insist upon strict
performance or compliance at any other time.
SECTION 25.3 BINDING AGREEMENT AND SUCCESSORS.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
SECTION 25.4 ASSIGNMENT.
This Agreement and the rights of the parties hereunder may not be assigned,
and the obligations of the parties hereunder may not be delegated, in whole or
in part, by any party without the prior written consent of the other parties
hereto.
SECTION 25.5 NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement is intended to confer any rights or remedies upon
any Person other than (i) the parties hereto, (ii) the indemnified Persons under
Article XX and (iii) M&S with respect to the provisions of Section 1.2.1.
SECTION 25.6 NOTICES.
Any notice, request, instruction or other document or communication
required or permitted to be given under this Agreement shall be in writing and
shall be deemed given (i) three days after being deposited in the mail, postage
prepaid, certified or registered mail, (ii) on the next business day after
delivery to a reputable overnight delivery service such as Federal Express, or
(iii) upon personal delivery if delivered or addressed to the addresses set
forth below or to such other address as any party may hereafter specify by
written notice to the other parties hereto:
(a) If to WE JAC prior to the Closing, delivered or mailed to WE JAC
Corporation, 000 Xxxxxx Xxxxx, XX, Xxxxxxxx, Xxxxxxxx 00000, Attention: Board of
Directors, with a copy delivered or mailed to Xxxx X. Xxxxxx, Esquire, Miles &
Stockbridge, a Professional Corporation, 00 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx
00000;
(b) If to Miracle Industries prior to the Closing, delivered or mailed
to Miracle Industries, Inc., c/o Miracle Car Wash, 0000 Xxxx Xxxxxx Xxxx,
Xxxxxxxxx, Xxxx 00000, Attention: President;
(c) If to Lube Venturess prior to the Closing, delivered or mailed to
Lube Venturess, Inc., 0000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000, Attention:
President;
(d) If to Miracle Partners prior to the Closing, delivered or mailed
to Miracle Partners, Inc., c/o Lube Venturess, Inc., 0000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxx 00000, Attention: President;
(e) If to Prema Properties prior to the Closing, delivered or mailed
to Prema Properties, Ltd., 00 Xxxx 00xx Xxxxxx, Xxxxxxxx, Xxxx 00000, Attention:
Managing Member;
(f) If to Rocky Mountain I, Rocky Mountain II or Xxxxxxx Car Wash
prior to the Closing, delivered or mailed c/o Rocky Mountain Ventures, Inc.,
00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000-0000, Attention:
President;
(g) If to KBG prior to the Closing, delivered or mailed to The Xxxx
Xxxxx Group, Inc., 0000 X. Xxxxxxx Xxx #000, Xxxxxx, Xxxxxxxx 00000, Attention:
President.
SECTION 25.7 FURTHER ASSURANCES.
The parties hereto each agree to execute, make, acknowledge, and deliver
such instruments, agreements and other documents as may be reasonably required
to effectuate the purposes of this Agreement and to consummate the transactions
contemplated hereby.
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SECTION 25.8 ARTICLE AND SECTION HEADINGS.
The Article and Section headings contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning or interpretation of this Agreement or any of its terms and conditions.
SECTION 25.9 GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with and shall
be governed by the laws of the Commonwealth of Virginia, without regard to its
principles of conflict of laws.
SECTION 25.10 CERTAIN DEFINITIONS.
The following terms, whenever used in capitalized form in this Agreement,
shall have the following meanings:
"Affiliate" shall mean any Person that directly or indirectly controls,
is controlled by, or is under common control with the Person in question. For
purposes of determining whether a Person is an Affiliate, the term "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of securities, contract or otherwise.
"Agreements Not to Compete" shall mean the Agreements Not to Compete in
the forms attached hereto as Exhibits which will be entered into by and between
the Holding Company and the Person listed on Schedule 4.1.7 at the Closing.
"Applicable Laws" shall mean any law, statute, ordinance, code, rule,
regulation, standard, ruling, decree, judgment, award, order or other
requirement of any Government Authority that is applicable to a Predecessor
Company.
"Benefit Arrangements" shall mean all life and health benefits,
hospitalization, savings, bonus, deferred compensation, incentive compensation,
severance pay, disability, sick pay, vacation pay, stock option, award or
similar plans, and fringe benefit plans, individual employment and severance
contracts and other policies and practices, whether written or oral, providing
employee or executive compensation or benefits to Employees of a Predecessor
Company or their dependents, other than Employee Benefit Plans.
"Xxxxx Group" shall mean and refer to KBG and its shareholders and
Subsidiaries.
"Closing" shall mean the consummation of the transactions contemplated
by Article III of this Agreement.
"Closing Date" shall mean the date on which the Closing actually shall
occur pursuant to this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral Agreements" shall mean the Agreements Not to Compete, the
Employment Agreements and the Underwriting Agreement which are expected to be
executed by the Holding Company at the Closing.
"Combination Shares" shall mean the shares of the Common Stock of the
Holding Company to be issued pursuant to the transactions contemplated by
Article III hereof.
"Commission" shall mean the Securities and Exchange Commission of the
United States of America.
"Constituent Company" of a Participant Group shall mean and refer to
each of the corporations and limited liability companies (and the shareholders
and members thereof) of such Participant Group.
"Contest" shall mean any administrative or judicial Tax audit,
examination, proceeding or litigation involving any Tax Authority.
"Contributing Companies" or "Contributing Company" shall refer only to
the WE JAC Group, Miracle Industries, Prema Properties, Lube Venturess, Miracle
Partners, Rocky Mountain I, Rocky Mountain II and Xxxxxxx Car Wash, but shall
not include or refer to KBG.
"Corporate Predecessor Companies" and "Corporate Predecessor Company"
shall mean and refer to WE JAC, Miracle Industries, Lube Ventures, KBG, Miracle
Partners, Rocky Mountain I and Rocky Mountain II.
"Debt Level Escrow Shares" shall mean the share of Common Stock of the
Holding Company to be deposited into escrow at the Closing by the Holding
Company pursuant to Section 19.1.
"DOL" shall mean the United States Department of Labor.
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"Employee Benefit Plan" shall mean each "employee benefit plan," as
defined in Section 3(3) of ERISA, maintained or contributed to by any of the
Predecessor Companies or any of its Subsidiaries or any of its ERISA Affiliates,
but excluding Multiemployer Plans.
"Employees" or "Employee" shall mean and refer to the current employees,
former employees and retired employees of a Predecessor Company.
"Encumbrance" shall mean any interest of any Person, including, without
limitation, any right to acquire, option, right of preemption, or any mortgage,
lease, charge, pledge, lien, encumbrance, assignment, hypothecation, security
interest, title retention, claim, covenant, condition, easement or any other
security agreement or arrangement or any restriction of any kind or character.
"Environmental Laws" shall mean any law, statute, regulation, rule,
order, consent, decree, or governmental requirement that relates to or otherwise
imposes liability or standards of conduct concerning Hazardous Materials or
discharges or releases of any Hazardous Materials into air, water or land,
including (but not limited to) the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended; the Resource Conservation
and Recovery Act of 1978, as amended; the Clean Water Act, the Clean Air Act, or
any other similar federal, state or local statutes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any Person that is treated as a single
employer with the Person in question under Section 414(b), (c), (m) or (o) of
the Code.
"Exchange Agent" shall mean such bank or trust company as the exchange
agent for the Subsidiary Mergers.
"Exchange Offers" shall mean the Prema Properties Exchange Offer, the
Miracle Partners Exchange Offer, the Xxxxxxx Car Wash Exchange Offer and the KBG
Exchange Offer.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States as of the date hereof.
"Governmental Authority" shall mean any government or state (or any
subdivision thereof), whether domestic, foreign or multinational, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.
"Guarantees" shall mean any obligations, contingent or otherwise, of a
Person in respect of any indebtedness, obligation or liability of another
Person, including but not limited to direct or indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of business), notes
co-made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or
discharge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received.
"Hazardous Materials" shall mean (a) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976, as amended from time to
time, and regulations promulgated thereunder; and (b) any "hazardous substance"
as defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time, and regulations promulgated
thereunder; and (c) any "hazardous material" as defined by the Hazardous
Materials Transportation Act, as amended from time to time, and regulations
promulgated thereunder; and shall include without limitation, asbestos, PCBs,
petroleum products, and urea-formaldehyde (in situations where considered
hazardous or toxic).
"Indemnity Escrow Shares" shall mean the shares of the Common Stock of
the Holding Company deposited into escrow by the Holding Company at the Closing
pursuant to Section 20.1 of this Agreement.
"Income Taxes" shall mean any income, gross receipts, gains, net worth,
surplus, franchise or withholding taxes (including interest, penalties or other
additions to Tax) imposed by a Tax Authority.
"Holding Company Indemnified Claims and Losses" shall mean demands,
suits, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs, judgments and expenses, including, without limitation,
interest, penalties, reasonable attorneys' fees, disbursements and expenses, and
reasonable consultants' fees, disbursements and expenses.
"Intellectual Property" shall mean all patents, patent applications,
trademarks, trademark registrations and applications therefor, service marks,
service xxxx registrations and applications therefor, copyrights, copyright
registrations and applications therefor, trade names, trade secrets, software
and computer programs, know-how, inventions, processes and procedures.
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"IPO" shall mean the proposed public offering by the Holding Company of
shares of its Common Stock following the Closing.
"IPO Shares" shall mean and refer to such number of shares of the
authorized shares of the Common Stock of the Holding Company which shall be
issued by the Holding Company in the IPO.
"IRS" shall mean the Internal Revenue Service of the United States of
America.
"Lease Agreements" shall mean the Lease Agreements described in Sections
5.14, 5.15 and 5.16.
"Lube Ventures Disclosure Letter" shall mean the Disclosure Letter dated
of even date with this Agreement submitted by Lube Ventures to each of the other
parties hereto in connection with the representations and warranties made by
Lube Ventures herein.
"Lube Ventures Dissenting Shares" shall mean each of the shares of the
Common Stock of Lube Ventures with respect which the holder thereof shall have
exercised and perfected Dissenter' Rights under the laws of the State of Ohio.
"Lube Ventures System" shall mean Lube Ventures's proprietary system for
the operation of retail service centers which are devoted to providing
lubrication services for automobiles and light trucks.
"Management Option Shares" shall mean the shares of the Common Stock of
the Holding Company to be reserved for issuance by the Holding Company pursuant
to Section 22.2.
"Material Adverse Effect" shall mean a material adverse change in the
business, assets, rights, properties, liabilities, financial condition or
prospects of a Person.
"Material Contracts" shall mean those contracts, agreements, commitments
or understanding required to be disclosed by a Predecessor Company in its
Disclosure Letter pursuant to this Agreement.
"Material Participant" shall mean WE JAC, Miracle Industries, Miracle
Partners, Prema Properties, Lube Venturess and Rocky Mountain II.
"Membership Interest" shall mean, with respect to the Prema Properties
Members, all of the rights of each of the Prema Property Members as a member of
Prema Properties and all of their respective right, title and interest in, to
and under the Amended Operating Agreement dated March , 1996 by and among the
Prema Properties Members, and, with respect to the Xxxxxxx Car Wash Members, all
of the rights of each of the Xxxxxxx Car Wash Members as a member of Xxxxxxx Car
Wash and all of their respective right, title and interest in, to and under the
Operating Agreement dated September 5, 1991, by and among the Xxxxxxx Car Wash
Members.
"Memorandum of Understanding" shall mean and refer to that certain
Memorandum of Understanding dated as of October 18, 1996 by and among WE JAC,
Precision Tune, Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxx Xxxxx, Lube Venturess, Prema
Properties, Miracle Industries, Rocky Mountain I, Rocky Mountain II and Xxxxxxx
Car Wash, as supplemented by the Supplemental Memorandum of Understanding dated
as of February 28, 1997 by and among WE JAC, Precision Tune, Xxxxx Xxxxx,
Xxxxxxx Xxxxx, Xxxx Xxxxx, Lube Ventures, Prema Properties, Miracle Industries,
Rocky Mountain I, Rocky Mountain II and Xxxxxxx Car Wash, as amended by that
certain Joinder and Amendment No. 1 to Supplemental Memorandum of Understanding
dated as of March 17, 1997 by and among and among WE JAC, Precision Tune, Xxxxx
Xxxxx, Xxxxxxx Xxxxx, Xxxx Xxxxx, Lube Venturess, Prema Properties, Miracle
Industries, Rocky Mountain I, Rocky Mountain II, Xxxxxxx Car Wash, Miracle
Partners and C. Xxxxxx Deal.
"Miracle Industries Disclosure Letter" shall mean the Disclosure Letter
dated of even date with this Agreement submitted by Miracle Industries to each
of the other parties hereto in connection with the representations and
warranties made by Miracle Industries herein.
"Miracle Industries Dissenting Shares" shall mean each of the shares of
the Common Stock of Miracle Industries with respect which the holder thereof
shall have exercised and perfected Dissenter' Rights under the laws of the State
of Ohio.
"Miracle Industries Subsidiaries" shall mean Hydro-Spray and Indy
Ventures.
"Multiemployer Plan" shall mean a plan described in Sections 3(37) and
4001(a)(3) of ERISA to which any of of the Predecessor Companies or any of its
Subsidiaries has an obligation to contribute.
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"National 60 Minute Tune" shall mean and refer to National 60 Minute
Tune, Inc., a Washington corporation and a wholly-owned subsidiary corporation
of WE JAC.
"Ohio Group" shall mean and refer to Lube Venturess and Miracle
Industries and their respective shareholders and Subsidiaries and the Prema
Properties Group.
"Operating Committee" shall mean a committee comprised of two
Representatives of the WE JAC Group, one Representative of the Ohio Group and
one Representative of the Rocky Mountain Group which Representatives shall be
the following individuals until changed in accordance with Section 24.14: Xxxx
X. Xxxxxx and Xxxxx Xxxxxxxx as the Representatives of the WE JAC Group; Xxxxx
X. Xxxxx as the Representative of the Ohio Group; and Xxxxxxx X. Xxxxx as the
Representative of the Rocky Mountain Group.
"Option Agreements" shall mean the Option Agreements described in
Sections 5.14, 5.15 and 5.16.
"Participant Group" shall mean and refer to the Rocky Mountain Group,
the Ohio Group, the WE JAC Group and the Xxxxx Group, respectively.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any Employee Benefit Plan that is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA.
"Person" shall mean any individual, corporation, unincorporated
association, business trust, estate, partnership, limited liability company,
limited liability partnership, trust, government or any agency or political
subdivision thereof, or any other entity.
"Precision Tune" shall mean and refer to Precision Tune Auto Care, Inc.,
a Virginia corporation and a wholly-owned subsidiary corporation of WE JAC.
"Precision Tune System" shall mean Precision Tune's proprietary system
for the operation of retail service centers which are devoted to providing brake
repairs, engine tune-ups, lubrication services, oil and filter changes, engine
diagnostics, emissions systems installation and certification, preventative
maintenance services, minor air conditioning and engine cooling system services
and minor repairs to the distributor, carburetor, fuel and ignition systems for
automobiles and light trucks.
"Predecessor Companies" shall mean and refer to WE JAC, Precision Tune,
Lube Ventures, Miracle Industries, Hydro-Spray, Indy Ventures, KBG, Rocky
Mountain I, Rocky Mountain II, Miracle Partners, Prema Properties and Xxxxxxx
Car Wash.
"Prema Properties Disclosure Letter" shall mean the Disclosure Letter
dated of even date with this Agreement submitted by the Prema Properties Members
to each of the other parties hereto in connection with the representations and
warranties made by the Prema Properties Members herein.
"Prema Properties Group" shall mean and refer to Prema Properties and
the Prema Properties Members.
"Proprietary Car Wash Software System" shall mean the Proprietary Car
Wash Computer Software System designed for the operation of car wash centers
which has been developed by The Xxxx Xxxxx Group and Xxxx Xxxxx.
"PTW" shall mean and refer to PTW, Inc., a Washington corporation and a
wholly-owned subsidiary corporation of Precision Tune.
"Xxxxxxx Car Wash Disclosure Letter" shall mean the Disclosure Letter
dated of even date with this Agreement submitted by the Xxxxxxx Car Wash Members
to each of the other parties hereto in connection with the representations and
warranties made by the Xxxxxxx Car Wash Members herein.
"Real Estate Partnerships" shall mean and refer to each partnership
described in Sections 5.14, 5.15 and 5.16.
"Responsible Group" shall mean the Selling Stockholders or the Selling
Members of any Contributing Company or KBG with respect to whom the Holding
Company exercises its rights of reimbursement and indemnification pursuant to
the terms of this Agreement following the Closing (whether pursuant to the
exercise of its rights to set-off against the Indemnity Escrow Shares or
otherwise).
"Rocky Mountain Group" shall mean and refer to Rocky Mountain I and
Rocky Mountain II and their respective shareholders, and Xxxxxxx Car Wash and
the Xxxxxxx Car Wash Members.
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"Rocky Mountain I Disclosure Letter" shall mean the Disclosure Letter
dated of even date with this Agreement submitted by Rocky Mountain I to each of
the other parties hereto in connection with the representations and warranties
made by Rocky Mountain I herein.
"Rocky Mountain II Disclosure Letter" shall mean the Disclosure Letter
dated of even date with this Agreement submitted by Rocky Mountain II to each of
the other parties hereto in connection with the representations and warranties
made by Rocky Mountain II herein.
"Rocky Mountain I Dissenting Shares" shall mean each of the shares of
the Common Stock of Rocky Mountain I with respect which the holder thereof shall
have exercised and perfected Dissenter' Rights under the laws of the State of
Colorado.
"Rocky Mountain II Dissenting Shares" shall mean each of the shares of
the Common Stock of Rocky Mountain II with respect which the holder thereof
shall have exercised and perfected Dissenter' Rights under the laws of the State
of Colorado.
"Securities Act" shall mean The Securities Act of 1933, as amended and
in effect from time to time, and the rules and regulations of the Commission
adopted or promulgated thereunder.
"Selling Stockholders or Members" shall mean and refer to only to those
Persons who are shareholders or members of the Predecessor Companies as of the
time of the Closing whose shares therein shall be converted to Holding Company
Common Stock at the Closing pursuant to the Subsidiary Mergers or who actually
exchange shares with or contribute interests to the Holding Company at the
Closing.
"Selling Stockholder Indemnified Claims and Losses" shall mean demands,
suits, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs, judgments and expenses, including, without limitation,
interest, penalties, reasonable attorneys' fees, disbursements and expenses, and
reasonable consultants' fees, disbursements and expenses, based upon, arising
out of, asserted against, resulting to, imposed on, or incurred by the Selling
Stockholders, directly or indirectly, from the breach by the Holding Company of
any covenant or agreement to be performed or complied with by the Holding
Company from and after the Closing.
"Source Code" shall mean all computer codes, programmer documentation,
flow charts and schematics that a computer programmer reasonably skilled in the
programming language in which the Proprietary Car Wash Software is written would
need to support, enhance, modify and make derivatives of such software.
"Subsidiary" as it relates to any Person, shall mean a corporation,
limited liability company, partnership, joint venture or other Person 50% or
more of whose outstanding securities or equity interests the Person has the
right, other than as affected by events of default, directly or indirectly, to
vote for the election of directors.
"Subsidiary Mergers" shall mean and refer to the WE JAC Merger, the Lube
Ventures Merger, the Miracle Industries Merger, the Rocky Mountain I Merger and
the Rocky Mountain II Merger.
"Tax Authority" shall mean a foreign or United States federal, state, or
local Governmental Authority having jurisdiction over the assessment,
determination, collection or imposition of any Tax, as the context requires.
"Tax Returns" shall mean all returns (including information returns and
amended returns), declarations, reports, claims for refunds, estimates and
statements regarding Taxes, required to be filed under Applicable Laws.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including without limitation, all net income, gross income, gross
receipts, sales, use, value added, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, windfall profit, alternative or add
on minimum, excise, estimated, severance, stamp, occupation, property or other
taxes, customs, duties, fees, assessments, or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any Tax Authority.
"Termination Damages" shall have the meaning provided in Section 21.3.
"WE JAC Disclosure Letter" shall mean the Disclosure Letter dated of
even date with this Agreement submitted by WE JAC to each of the other parties
hereto in connection with the representations and warranties made by WE JAC
herein.
"WE JAC Dissenting Shares" shall mean each of the shares of the Common
Stock of WE JAC with respect which the holder thereof shall have exercised and
perfected Dissenter' Rights under the laws of the State of Delaware.
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"WE JAC Group" shall mean and refer to WE JAC, Precision Tune, National
60 Minute Tune, PTW and the shareholders of WE JAC.
SECTION 25.11 CONSTRUCTION.
As used in this Agreement, any reference to the masculine, feminine or
neuter gender shall include all genders, the plural shall include the singular,
and the singular shall include the plural. With regard to each and every term
and condition of this Agreement and any and all agreements and instruments
contemplated hereby, the parties hereto understand and agree that the same have
or has been mutually negotiated, prepared and drafted, and that if at any time
the parties hereto desire or are required to interpret or construe any such term
or condition or any agreement or instrument subject hereto, no consideration
shall be given to the issue of which party hereto actually prepared, drafted or
requested any term or condition of this Agreement or any agreement or instrument
subject hereto. The Exhibits and Schedules to this Agreement constitute a
substantive part of this Agreement and are hereby incorporated into this
Agreement by this reference.
SECTION 25.12 COUNTERPARTS.
This Agreement may be executed in counterparts and multiple originals, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
SECTION 25.13 TIME OF THE ESSENCE.
Time is of the essence with respect to each and every term and provision of
this Agreement.
SECTION 25.14 REPRESENTATIVE OF SELLING STOCKHOLDERS AND SELLING MEMBERS
AND KBG.
The Selling Stockholders of each of the Predecessor Companies whose shares
therein shall be converted to Holding Company Common Stock at the Closing
pursuant to the Subsidiary Mergers and the Selling Stockholders and Selling
Members of each of the other Predecessor Companies who actually exchange shares
or membership interests for Holding Company Common Stock at the Closing and KBG
irrevocably make, constitute and appoint as their exclusive agent and attorney-
in-fact to act on their behalf with respect to any and all matters, claims,
controversies or disputes arising out of the terms of this Agreement including,
without limitation, the matters addressed in Articles XIX and XX hereof, the
individuals named below as the Representative (each a "Representative") of the
indicated Predecessor Company.
PREDECESSOR COMPANY REPRESENTATIVE
--------------------------------------------------------- ---------------------------------------------------------
WE JAC Xxxxxx Xxxxxxxx
Miracle Industries Xxxxx Xxxxxxxxx
Lube Ventures Xxxxxx X. Xxxxx
Rocky Mountain I Xxxxxxx X. Xxxxx
Rocky Mountain II Xxxxxxx X. Xxxxx
Miracle Partners C. Xxxxxx Deal
Prema Properties Xxxxxx X. Xxxxxxx
Xxxxxxx Car Wash Xxxxxxx X. Xxxxx
KBG Xxxx Xxxxx
In the event of the death, resignation or incapacity of any Representative,
the majority of the individuals who comprised the board of directors of a
Corporate Predecessor Company immediately prior to the Closing and the members
who held a majority of the membership interest in any other Predecessor Company
shall appoint a successor Representative of the Selling Stockholders and Selling
Members of such Predecessor Company and provide notice of such appointment to
the Holding Company and the Escrow Agent, provided that, if a successor
Representative is not so appointed within 15 days of the death, resignation or
incapacity of any Representative, the Board of Directors of the Holding Company
may appoint as such successor Representative any individual who is a Selling
Stockholder or a Selling Member of such Predecessor Company by providing notice
of such appointment to the Selling Stockholders or Selling Members of such
Predecessor Company and to the Escrow Agent. The Holding Company shall have the
right to rely upon any actions taken or omitted to be taken by the
Representative as being the act or omission of each applicable group of Selling
Stockholders or Selling Members, without the need for any inquiry and any such
actions or omissions of the Representative shall be binding upon the applicable
group of Selling Stockholders or Selling Members. The Representatives shall not
be liable to the parties hereto for any action taken or omitted by the
Representatives in good faith and in no even shall the Representatives be liable
or responsible except for its own gross negligence or willful misconduct. The
Selling Stockholders and Selling Members of each Contributing Company agree that
the Selling Stockholders and Selling Members of each Contributing Company shall
be liable, jointly and severally,
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to hold its Representatives from, and to indemnify and reimburse its
Representatives from, all claims, liabilities, losses and expenses (including
out-of-pocket and incidental expenses reasonably incurred and reasonable legal
fees) arising in connection with any action, suit or claim under this Agreement,
provided that the Representatives have not acted with gross negligence, bad
faith or willful misconduct with respect to any of the events relating to such
claims, liabilities, losses or expenses. In no event shall the Representatives
be responsible or liable for special, indirect or consequential loss or damages
of any kind, regardless of the form of action.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the date and year set forth in the preamble to this First Amendment.
ATTEST: PRECISION AUTO CARE, INC.
By:
WE JAC CORPORATION
By:
LUBE VENTURES, INC.
By:
ROCKY MOUNTAIN VENTURES, INC.
By:
ROCKY MOUNTAIN VENTURES II, INC.
By:
PREMA PROPERTIES, LTD.
By:
MIRACLE INDUSTRIES, INC.
By:
MIRACLE PARTNERS, INC.
By:
XXXXXXX CAR WASH, LTD.
By:
THE XXXX XXXXX GROUP, INC.
By:
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