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EXHIBIT 10.21
COAST LIQUID GAS, INC.
STOCK PURCHASE AGREEMENT
DATED AS OF:
JULY ___, 2001
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TABLE OF CONTENTS
Page
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ARTICLE I THE TRANSACTION...........................................................1
1.1 Purchase and Sale of Stock...........................................1
1.2 Purchase Price.......................................................2
1.3 Adjustments to Purchase Price........................................2
1.4 Adjustment Procedure.................................................2
1.5 Payment of the Closing Estimated Purchase Price......................3
1.6 Excluded Assets......................................................4
1.7 Accounts Receivable..................................................4
ARTICLE II THE CLOSING AND TRANSFER OF STOCK........................................6
2.1 Closing..............................................................6
2.2 Deliveries by the Buyer..............................................6
2.3 Deliveries by the Sellers............................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS...............................8
3.1 Authority; Good Title to Stock.......................................8
3.2 Organization.........................................................8
3.3 No Conflict..........................................................9
3.4 Capitalization of the Company........................................9
3.5 Subsidiaries.........................................................9
3.6 Financial Statements................................................10
3.7 Subsequent Events...................................................10
3.8 Absence of Undisclosed Liabilities..................................11
3.9 Banking Relationships...............................................11
3.10 Insurance...........................................................11
3.11 Assets; Inventory...................................................12
3.12 Real Estate.........................................................13
3.13 Personal Property Leases............................................13
3.14 Intellectual Property...............................................14
3.15 Employees...........................................................14
3.16 Labor Matters.......................................................14
3.17 Employee Benefit Plans..............................................15
3.18 Licenses and Permits................................................16
3.19 Material Contracts..................................................16
3.20 Taxes...............................................................17
3.21 Product Warranty....................................................18
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3.22 Legal Proceedings...................................................18
3.23 Environmental Matters...............................................19
3.24 Compliance with Law.................................................20
3.25 Plant and Equipment.................................................20
3.26 Capital Expenditures................................................21
3.27 Brokers.............................................................21
3.28 Transactions with Related Parties...................................21
3.29 No Implied Representation...........................................21
3.30 Disclosure Schedule Supplements.....................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.................................22
4.1 Authority...........................................................22
4.2 Organization........................................................22
4.3 No Conflicts........................................................22
4.4 Buyer's Investment Intent...........................................22
4.5 Buyer's Business Investigation......................................23
4.6 Disputes or Proceedings.............................................23
4.7 Financing...........................................................23
4.8 Brokers.............................................................23
ARTICLE V COVENANTS OF SELLERS.....................................................24
5.1 [Intentionally deleted].............................................24
5.2 Interim Conduct of Business.........................................24
5.3 Access; Tank Verification...........................................25
5.4 Sellers' Efforts....................................................26
5.5 No Shop.............................................................26
5.6 Covenant Not To Compete.............................................26
5.7 Pay Off of Long Term Debt; Purchase of Vehicles; Intra-Company
Payables............................................................27
5.8 Financial Statement Review..........................................27
ARTICLE VI COVENANTS OF BUYER......................................................28
6.1 [Intentionally deleted].............................................28
6.2 Records and Documents...............................................28
6.3 Buyer's Efforts.....................................................28
6.4 Confidentiality.....................................................28
6.5 Employee Matters....................................................29
6.6 Insurance...........................................................30
6.7 Audited Financial Statements........................................30
6.8 Post-Closing Tax Matters............................................30
6.9 Environmental Site Assessment.......................................31
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ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER...........................32
7.1 Accuracy of Warranties and Performance of Covenants.................32
7.2 No Pending Action...................................................33
7.3 No Adverse Change...................................................33
7.4 No Proceeding or Litigation.........................................33
7.5 Escrow Agreement....................................................33
7.6 Closing of Related Transactions.....................................33
7.7 Title Insurance.....................................................33
7.8 Ability to Obtain Opinion as to Financial Statements................34
7.9 Non-Competition Agreement...........................................34
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS........................34
8.1 Accuracy of Warranties and Performance of Covenants.................34
8.2 No Pending Action...................................................34
8.3 No Proceeding or Litigation.........................................35
8.4 Escrow Agreement....................................................35
8.5 Non-Competition Agreement...........................................35
8.6 Closing of Related Transactions.....................................35
ARTICLE IX SURVIVAL AND INDEMNIFICATION............................................35
9.1 Survival of Representations and Warranties..........................35
9.2 Indemnification of the Buyer........................................36
9.3 Indemnification of the Sellers......................................36
9.4 Defense of Third Party Claims.......................................36
9.5 Liability of Sellers................................................37
9.6 Liability of Buyer..................................................38
9.7 Exclusivity.........................................................38
9.8 Reduction for Reserves..............................................38
9.9 Reduction for Insurance Proceeds and Tax Savings....................39
9.10 Subrogation.........................................................39
ARTICLE X TERMINATION BY THE PARTIES...............................................39
10.1 Events of Termination...............................................39
10.2 Action Upon Termination.............................................39
10.3 Effect of Termination...............................................40
ARTICLE XI SELLERS' REPRESENTATIVE.................................................40
11.1 Appointment of Sellers' Representative..............................40
11.2 Sellers' Representative Escrow......................................40
11.3 Successor Sellers' Representative...................................40
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ARTICLE XII GENERAL PROVISIONS.....................................................41
12.1 Amendments and Waiver...............................................41
12.2 Notices.............................................................41
12.3 Confidentiality.....................................................42
12.4 No Public Announcement..............................................42
12.5 Expenses............................................................42
12.6 Successors and Assigns..............................................43
12.7 Entire Transaction..................................................43
12.8 Severability........................................................43
12.9 Governing Law and Jurisdiction......................................43
12.10 Dispute Resolution..................................................44
12.11 Headings............................................................45
12.12 Counterparts........................................................45
12.13 Construction........................................................45
12.14 Further Assurances..................................................45
EXHIBITS
Exhibit A Sellers
Exhibit B Escrow Agreement
Exhibit C Form of Opinion of Buyer's Counsel
Exhibit D Form of Opinion of Sellers' Counsel
Exhibit E Form of Officer and Director Release
Exhibit F Consents
Exhibit G Form of Non-Competition Agreement
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STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of July __, 2001, by and among the parties listed on the signature page hereto
under the heading "Sellers" (collectively, the "Sellers" and each a "Seller"),
and Heritage Holdings, Inc., a Delaware corporation (the "Buyer"). The Sellers
and the Buyer are hereinafter collectively referred to herein as the "Parties"
and each as a "Party."
RECITALS
A. The Sellers are the record and beneficial owners of all of the issued
and outstanding stock of COAST LIQUID GAS, INC., a
California corporation (the
"Company"), consisting of Five Hundred shares of Common Stock, no par value per
share (the "Stock"). The Sellers are the record and beneficial owners of the
shares of the Stock listed opposite their respective names on Exhibit A attached
hereto.
B. The Company is engaged in the business of retail marketing of propane to
residential, commercial, industrial and agricultural customers and wholesale
distribution to dealers that resell propane to residential and commercial
customers (the "Business").
C. The Buyer desires to purchase from the Sellers, and the Sellers desire
to sell to the Buyer, all, but not less than all, of the Stock, on the terms and
conditions set forth herein.
D. Defined terms used and not otherwise defined in the body of this
Agreement shall have the respective meanings assigned in the Appendix attached
hereto.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
ARTICLE I
THE TRANSACTION
1.1 Purchase and Sale of Stock. At the Closing (as hereinafter defined),
the Sellers shall sell, transfer, assign and deliver to the Buyer, and the Buyer
shall purchase, accept and receive from the Sellers, all of the Sellers' right,
title and interest in and to the Stock, free and clear of any Liens.
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1.2 Purchase Price. The aggregate purchase price for the Stock shall be
U.S. $2,466,222 (the "Purchase Price"), as adjusted in the manner provided in
Section 1.3. The Purchase Price shall be allocated among the Sellers in
proportion to their respective holdings of Company Stock as shown on Exhibit A
hereto (their "Allocable Shares of Stock").
1.3 Adjustments to Purchase Price. The Purchase Price shall be (i)
increased dollar-for-dollar by the amount of all cash and cash equivalents of
the Company as of the Closing Date, (ii) decreased dollar-for-dollar by the
amount of Assumed Debt (as described in Section 5.7), and (iii) increased by the
amount of the Benefit Expense Proration. (For purposes of this Agreement, the
"Benefit Expense Proration" shall equal the expense paid in advance by the
Company and its Subsidiaries with respect to the Benefit Plans for the month in
which the Closing occurs, prorated for the number of days that elapse in such
month until the Closing Date). In addition, the Purchase Price shall be adjusted
for the difference between U.S. $354,535 and the Company's Net Working Capital
(as defined on Schedule 1.3) as of the Closing Date (the "Adjustment Amount").
Net Working Capital shall be calculated in accordance with the accounting
principles set forth on Schedule 1.3 attached hereto (collectively, the
"Accounting Principles").
1.4 Adjustment Procedure.
(a) The Sellers will prepare and will cause the Company's certified
public accountants to review consolidated financial statements ("Closing
Financial Statements") of the Company as of the Closing Date and for the period
from the date of the Interim Balance Sheet (as defined in Section 3.6 below)
through the Closing Date, including a computation of the Company's cash and cash
equivalents (the "Final Cash Amount"), Net Working Capital, Assumed Debt and
Benefit Expense Proration as of the Closing Date. The Sellers will deliver the
Closing Financial Statements (together with detail and working papers reasonably
required for Buyer's review including tax accruals for the short tax period
ending at the Closing) to the Buyer within sixty (60) days after the Closing
Date. If, within thirty (30) days following delivery of the Closing Financial
Statements, the Buyer has not given the Sellers notice of its objection to the
Closing Financial Statements (such notice must contain a detailed statement of
the basis of the Buyer's objection), then the Company's Final Cash Amount and
Net Working Capital and Assumed Debt and Benefit Expense Proration reflected in
the Closing Financial Statements will be used in computing the amount to be paid
by Buyer for the Company's cash and cash equivalents, the Adjustment Amount, the
amount of the Assumed Debt and the Benefit Expense Proration amount. If the
Buyer gives such notice of objection, then the issues in dispute will be
submitted to such nationally recognized accounting firm (other than Xxxxxx
Xxxxxxxx) as the Parties may designate (the "Accountants"), for resolution. If
issues in dispute are submitted to the Accountants for resolution, (i) each
Party will
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furnish to the Accountants such workpapers and other documents and information
relating to the disputed issues as the Accountants may request and are available
to that Party or its Subsidiaries (or its independent public accountants), and
will be afforded the opportunity to present to the Accountants any materials
relating to the determination and to discuss the determination with the
Accountants; (ii) the determination by the Accountants, as set forth in a notice
delivered to both Parties by the Accountants, will be made within sixty (60)
days of submission and will be binding and conclusive on the Parties; and (iii)
the Buyer and the Sellers will each bear one-half of the fees of the Accountants
for such determination.
(b) On the tenth business day following the final determination of the
amount to be paid by Buyer for the Company's cash and cash equivalents, the
Adjustment Amount, the amount of the Assumed Debt and the Benefit Expense
Proration, if the Purchase Price, as adjusted in the manner provided herein, is
greater than the Estimated Purchase Price paid by the Buyer pursuant to Section
1.5, the Buyer will pay the difference to the Sellers together with the Net
Working Capital Holdback described in Section 2.2(a)(ii), and if such Purchase
Price is less than such Estimated Purchase Price (the "Purchase Price
Shortfall"), (i) the Sellers will pay to the Buyer the amount by which the
Purchase Price Shortfall exceeds the Net Working Capital Holdback, if the
Purchase Price Shortfall is greater than the amount of the Net Working Capital
Holdback, or (ii) the Buyer shall pay to the Sellers the amount by which the Net
Working Capital Holdback exceeds the Purchase Price Shortfall, if the amount of
the Net Working Capital Holdback is greater than the Purchase Price Shortfall.
All payments will be made together with interest at 8% per annum beginning on
the Closing Date and ending on the date of payment. Payments to the Sellers
shall be made by wire transfer of immediately available funds and shall be made
in the manner and will be allocated in the proportions described in Section 1.2.
Payment to the Buyer shall be made out of the Escrow Fund (as defined in the
Escrow Agreement) pursuant to the terms of the Escrow Agreement.
1.5 Payment of the Closing Estimated Purchase Price. Not later than two (2)
business days prior to the Closing Date, the Sellers shall prepare and deliver
to the Buyer a statement setting forth a good faith estimate of (i) the amount
of the Company's cash and cash equivalents as of the Closing Date (the
"Estimated Cash Amount"), (ii) the Net Working Capital as of the Closing Date
(the "Estimated Net Working Capital") prepared in accordance with the Accounting
Principles, (iii) the amount of Assumed Debt as of the Closing Date (the
"Estimated Assumed Debt"), and (iv) the amount of the Benefit Expense Proration
as of the Closing Date (the "Estimated Benefit Expense Proration). The
"Estimated Purchase Price" shall mean an amount equal to the following:
(i) if the Estimated Net Working Capital is greater than or equal
to $354,535, then the Purchase Price plus (a) the Estimated
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Cash Amount, (b) the excess of the Estimated Net Working Capital over
$354,535, and (c) the Estimated Benefit Expense Proration, less the
Estimated Assumed Debt; and
(ii) if the Estimated Net Working Capital is less than $354,535,
then the Purchase Price plus (a) the Estimated Cash Amount and (b) the
Estimated Benefit Expense Proration, less the excess of $354,535 over the
Estimated Net Working Capital and less the Estimated Assumed Debt.
1.6 Excluded Assets. Notwithstanding anything to the contrary contained
herein, the following assets (the "Excluded Assets") shall not be sold or
transferred to the Buyer, and ownership of the Excluded Assets shall be
transferred from the Company to the Sellers prior to Closing:
(i) furnishings and personal effects of the Sellers which may be
located at a Company office or facility but which are not listed on the
Company's Balance Sheet; and
(ii) the office equipment, furnishing, and vehicles listed on
Schedule 1.6.
1.7 Accounts Receivable.
(a) At the Closing, the accounts receivable of the Company and its
Subsidiaries as of the Closing Date (the "Accounts Receivable"), less a reserve
placed in a sub-account of the Escrow in an amount equal to ten percent (10%) of
their face amount (the "A/R Reserve Escrow"), shall be determined. As of the
date four (4) months (the "Collection Period') following the Closing, Buyer
shall determine in good faith the amount, if any, by which the Accounts
Receivable exceed the actual collection of such Accounts Receivable after
applying any applicable customer deposits or credits made or given prior to the
Closing Date with respect to such Accounts Receivable or the transactions giving
rise thereto (the "Accounts Receivable Deficiency") at the expiration of such
Collection Period. Buyer shall, within twenty (20) days following the expiration
of such Collection Period, provide the Sellers with reasonably satisfactory
evidence of the amount of the Accounts Receivable Deficiency and the components
thereof, and subject to the provisos below, shall cause the Company and its
Subsidiaries, or their successors or assigns, to assign to the Sellers any such
Accounts Receivable which have not been collected within the Collection Period,
and any rights to interest and/or penalties relating thereto, provided that:
(i) Buyer may elect to cause the Company to retain any such
Accounts Receivable, in which event the aggregate amounts of such
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Accounts Receivable shall be excluded in determining the Accounts
Receivable Deficiency; or
(ii) Buyer may elect to return the uncollected Accounts
Receivable to the Sellers at their book value to determine the Accounts
Receivable Deficiency.
(b) Except where (i) a customer that owes an Account Receivable is on
a COD basis on the day of the Closing, or (ii) Buyer in good faith, causes the
Company or its Subsidiaries, or their successors in interest, to convert a
customer to COD basis after Closing, the first payments received by the Company
or its Subsidiaries, or their successors in interest, from such customer shall
be applied to the payment of the oldest outstanding balance of such customer's
account. Payments made to the Company or its Subsidiaries, or their successors
in interest, by any such customer for products sold by the Company or its
Subsidiaries, or their successors in interest, on a COD basis shall not be
applied to the Accounts Receivable that existed prior to the Closing, but shall
be retained exclusively by the Company or its Subsidiaries, or their successors
in interest. Buyer agrees to notify Sellers at the time it causes the Company or
its Subsidiaries, or their successors in interest, to place any customer on a
COD basis.
(c) Buyer agrees to use its best efforts to collect Accounts
Receivable, but shall not be required to cause the Company or its Subsidiaries
to institute legal action for any collection.
(d) On or about the date three (3) months after the Closing Date,
Buyer shall provide Sellers with a status report setting forth in reasonable
detail Buyer's collections of, and collection efforts with respect to, the
Accounts Receivable and confer with Sellers regarding appropriate steps to be
taken to collect unpaid Accounts Receivable.
Within twenty-five (25) days after Sellers' receipt of Buyer's written
notice of the Accounts Receivable Deficiency, Buyer shall receive from the A/R
Reserve Escrow the Accounts Receivable Deficiency, with interest on such
Accounts Receivable Deficiency, as earned on such amount under the A/R Reserve
Escrow. In the event that the A/R Reserve Escrow is insufficient to satisfy the
Accounts Receivable Deficiency, then such insufficiency shall be deducted from
the Escrow Fund. In the event the amount of the A/R Reserve Escrow exceeds the
Accounts Receivable Deficiency, then the Escrow Agent shall promptly transfer
the excess to the Sellers' Representative Escrow and Buyer shall so instruct the
Escrow Agent.
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ARTICLE II
THE CLOSING AND TRANSFER OF STOCK
2.1 Closing. The closing of the purchase and sale of Stock contemplated by
this Agreement (the "Closing") shall occur at the offices of Sheppard, Mullin,
Xxxxxxx & Xxxxxxx, LLP, Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX
00000, no later than the third business day after the conditions to Closing
(other than those which by their nature are to be fulfilled at the Closing) are
fulfilled or waived, or at such other place or time as may be mutually agreed
upon by the Parties (the "Closing Date"). Upon consummation, the Closing shall
be deemed to have taken place as of the close of business on the Closing Date.
2.2 Deliveries by the Buyer. At the Closing, the Buyer shall deliver the
following:
(a) By wire transfer of immediately available funds to the Sellers'
accounts (a portion of which shall be placed into the Sellers' Representative
Escrow as provided in Section 11.2 herein), an aggregate amount equal to the
Estimated Purchase Price, reduced by (i) an amount (the "Escrow Amount") equal
to twenty percent (20%) of the excess of the Estimated Purchase Price over the
Estimated Cash Amount, to be deposited in the escrow (the "Escrow") with the
Escrow Agent pursuant to the terms of the Escrow Agreement described in Section
2.2(b) below, (ii) a sum equal to twenty percent (20%) of the Estimated Net
Working Capital (such sum, the "Net Working Capital Holdback"), and (iii) the
A/R Reserve Escrow amount, to be deposited into a sub-account of the Escrow as
provided in Section 1.7.
(b) By wire transfer of immediately available funds to the account of
U.S. Bank (the "Escrow Agent"), an amount equal to the Escrow Amount and the A/R
Reserve Escrow amount, to be held pursuant to the terms of the Escrow Agreement
by and among the Buyer, the Sellers' Representative (as defined herein) and the
Escrow Agent in substantially the form attached hereto as Exhibit B (the "Escrow
Agreement");
(c) The Escrow Agreement, executed on behalf of the Buyer;
(d) The Non-Competition Agreement, executed on behalf of the Buyer;
(e) An opinion of the Buyer's counsel in the form attached as Exhibit
C;
(f) A Certificate of the Secretary of the Buyer as to the resolutions
authorizing the transactions contemplated hereby and a Certificate of an
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executive officer of the Buyer reaffirming, and updating as necessary, the
Buyer's representations and warranties contained in Article IV; and
(g) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated hereby.
2.3 Deliveries by the Sellers. At the Closing, the Sellers shall deliver
the following:
(a) Stock certificates, with fully executed stock powers, evidencing
the Stock and any other documentation necessary to effect the transfer of
ownership thereof to the Buyer;
(b) All Company records including the accounting books and records,
minute books, stock records and By-laws of the Company and the Subsidiaries
together with the stock certificates representing the ownership of the
Subsidiaries by the Company;
(c) Articles of Incorporation of the Company (and any amendments
thereto) certified as of a recent date by the Secretary of State of the State of
California;
(d) The Escrow Agreement, executed by the Sellers' Representative;
(e) The Non-Competition Agreement executed by Xxxxx Xxxxxxx-Xxxxx,
Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx;
(f) An opinion of the Sellers' counsel in the form attached as Exhibit
D;
(g) A Certificate of Good Standing of the Company and each Subsidiary
certified as of a recent date by the Secretary of State of the State of
California;
(h) Resignations from all of the Company's directors and officers;
(i) A Certificate of the Sellers' Representative reaffirming, and
updating as necessary, on behalf of the Sellers, the Sellers' representations
and warranties contained in Article III;
(j) UCC lien releases with respect to the financing statements listed
on Schedule 3.11 filed with respect to the Company or its Subsidiaries to the
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extent such releases or terminations have not been provided to Buyer prior to
the Closing;
(k) A release signed by each of the officers and directors of the
Company and its Subsidiaries in the form of Exhibit E;
(l) A termination agreement terminating on or prior to the closing the
Consulting Agreement dated December 1, 1997 with Xxxx Xxxxxxxxxxx Xxxxxxx
described in Schedule 3.28 and the Company's obligations thereunder;
(m) A termination agreement terminating on or prior to the Closing the
Workforce Proposal and Agreement dated December, 1996 described in Schedule 3.28
and the Company's obligations thereunder;
(n) The consents described on Exhibit F; and
(o) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers hereby represent and warrant to the Buyer, severally in
proportion to their Allocable Shares of Stock and not jointly, that except as
provided in the Schedules referred to herein:
3.1 Authority; Good Title to Stock. Each Seller has full right, power and
authority and has taken all action necessary to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by each Seller and constitutes
a valid and legally binding obligation of each Seller, enforceable against each
Seller in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity. Each Seller has good title to the number of shares of
Stock shown opposite such Seller's name on Exhibit A hereto, and the absolute
right to sell, assign, transfer and deliver the same to the Buyer, free and
clear of all Liens and the transfer and delivery of such Stock by such Seller to
the Buyer as contemplated by this Agreement will transfer good title to such
Stock to the Buyer free and clear of all Liens.
3.2 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California and has
full power and authority to own, lease and operate its assets and to carry on
the Business. The Company is duly licensed, registered and qualified to do
business as a
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foreign corporation and is in good standing in all jurisdictions in which the
ownership, leasing or operation of its assets or the conduct of its business
requires such qualification, except where the failure to be so licensed,
registered or qualified would not have a material adverse effect upon its assets
or operations. Schedule 3.2 sets forth each state or other jurisdiction in which
the Company is licensed or qualified to do business.
3.3 No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
creation of any Lien or, except as set forth in Schedule 3.3, the termination or
acceleration of any indebtedness or other obligation of the Company, and are not
prohibited by, do not violate or conflict with any provision of, and do not
constitute a default under or a breach of (a) the Articles of Incorporation or
By-laws of the Company, (b) any Material Contract (as defined in Section 3.19
below), (c) any order, writ, injunction, decree or judgment of any court or
governmental agency, or (d) any law, rule or regulation applicable to any Seller
or the Company. No approval, authorization, registration, consent, notice, order
or other action of or filing with any Person, including any Governmental Entity,
is required for the execution and delivery by the Sellers of this Agreement or
the consummation of the transactions contemplated hereby, other than as set
forth on Schedule 3.3.
3.4 Capitalization of the Company. The Company's equity capital consists of
25,000 authorized shares of common stock, without par value, of which 25,000
shares are issued, outstanding and owned beneficially and of record by the
Sellers free and clear of any Liens. The Sellers are the record and beneficial
owners of the shares of the Stock listed opposite their respective names on
Exhibit A attached hereto. All outstanding shares of Stock are duly authorized,
validly issued, fully paid and nonassessable, and were not issued in violation
of any preemptive, subscription or other right of any Person to acquire
securities. There is no outstanding subscription, option, convertible or
exchangeable security, preemptive right, warrant, call or agreement (other than
this Agreement) relating to the Stock or other obligation or commitment to issue
any shares of Stock. There are no voting trusts or other agreements,
arrangements or understandings applicable to the exercise of voting or any other
rights with respect to any Stock.
3.5 Subsidiaries. The Company is the record and beneficial owner of a
majority of the outstanding capital stock of the corporations, if any, listed on
Schedule 3.5 attached hereto (such majority owned corporations, if any, are
referred to in this Agreement and the Schedules hereto as the "Subsidiaries").
The equity capital stock of each Subsidiary is as set forth in Schedule 3.5. The
number of issued and outstanding shares of capital stock of each Subsidiary
owned beneficially and of record by the Company is set forth on Schedule 3.5 and
all of such shares are owned free and clear of any Liens and have been duly
authorized, validly issued, are fully
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paid and non-assessable, and have not been issued in violation of any preemptive
rights of stockholders. No options, warrants or other rights to acquire, sell or
issue shares of capital stock of any of the Subsidiaries, whether upon
conversion of other securities or otherwise, are outstanding. Except for the
Company's ownership of the capital stock of the Subsidiaries and except as may
be set forth on the Interim Balance Sheet, neither the Company nor any
Subsidiary, either directly or indirectly, owns an equity interest in any other
corporation, limited liability company, partnership or other entity other than
as set forth on Schedule 3.5, which Schedule accurately describes the nature of
the Company's or its Subsidiary's interest in such entity and the number and
type of shares of stock or other equity interest held in such entity.
3.6 Financial Statements. The Sellers have delivered to the Buyer (i) the
unaudited consolidated balance sheets of the Company and its Subsidiaries as of
each of the fiscal years ended June 30, 2000, 1999 and 1998, and the statements
of income for each of such years, and (ii) an unaudited consolidated balance
sheet of the Company and its Subsidiaries as at April 30, 2001 (the "Interim
Balance Sheet") and the related statement of income for the ten (10) months then
ended. Except as set forth on Schedule 3.6, all such balance sheets and the
notes thereto fairly present in all material respects the financial position of
the Company and its Subsidiaries as of the respective dates thereof and such
statements of income and the notes thereto fairly present in all material
respects the results of operations for the periods therein referred to, all in
accordance with GAAP but subject, in the case of interim financial statements,
to normal year-end adjustments.
3.7 Subsequent Events. Except as set forth on Schedule 3.7, since May 1,
2001, the Company has been operated only in the ordinary course of business and
there has not been any (i) material adverse change in the assets, liabilities,
financial condition, earnings, properties, business, customer base or results of
operations, (ii) damage, destruction or condemnation with respect to any
material asset or property owned, leased or otherwise used by the Company or any
Subsidiary, whether or not covered by insurance, (iii) declaration, setting
aside or payment of any dividend whether in cash, stock or property with respect
to the Stock or any redemption or other acquisition of the Stock by the Company,
(iv) change by the Company in accounting methods, practices or principles, or
(v) other material transaction not in the ordinary course of business entered
into by the Company or any Subsidiary. Without limiting the foregoing, except as
set forth on Schedule 3.7 and in each case, except in the ordinary course of
business, since May 1, 2001 to the date hereof, neither the Company nor any
Subsidiary has:
(a) sold, leased, transferred or otherwise disposed of any tangible
assets or property related to the business of the Company or canceled,
compromised, released or assigned any debt or claim relating to the business of
the Company, in each case, in an amount individually in excess of $10,000;
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(b) created any Lien on any of the assets of the Company;
(c) made (or committed to make) capital expenditures in an aggregate
amount in excess of $10,000 in any month;
(d) instituted, settled or agreed to settle any litigation, action or
proceeding before any Governmental Entity, except for settlement of workers'
compensation and similar claims or other claims for personal injury, in each
case not in excess of $10,000;
(e) assumed, guaranteed, endorsed or otherwise become responsible for
the obligations of any Person;
(f) granted any increase in compensation or fringe benefits;
(g) agreed, undertaken, or committed to carry out any investigation,
assessment, remediation or response action regarding the presence or possible
presence of hazardous substances;
(h) except for Material Contracts listed on Schedule 3.19, entered
into any material agreement, contract, license, lease, arrangement or
commitment; or
(i) authorized or entered into any binding commitment (whether written
or oral) to take any of the types of actions described in the foregoing
paragraphs (a) through (h).
3.8 Absence of Undisclosed Liabilities. Except (i) as reflected elsewhere
in this Agreement, (ii) as shown in Schedule 3.8, (iii) as reflected in the
Interim Balance Sheet, (iv) for liabilities which would be fully covered by
insurance (except for normal deductible amounts), or (v) for liabilities and
obligations incurred in the ordinary course of business consistent with past
practices, neither the Company nor any Subsidiary has any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
which individually or in the aggregate would subject the Company or a Subsidiary
to a liability in excess of $10,000.
3.9 Banking Relationships. Schedule 3.9 sets forth a correct and complete
list of all banks and financial institutions in which the Company or any
Subsidiary has an account, deposit, safe-deposit box, lock box or line of credit
or other loan facility, and the names of all Persons authorized to draw on those
accounts or deposits, or to borrow under such lines of credit or other loan
facilities, or to obtain access to such boxes.
3.10 Insurance. Schedule 3.10 sets forth a correct and complete list
(including the name of the insurer, coverage, self-retention and expiration
date) of all
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binders and policies of fire, casualty, liability, product liability, workers'
compensation, vehicular and other insurance purchased from outside parties and
held by the Sellers, the Company or any Subsidiary on behalf of the Company or
any Subsidiary in effect as of the date hereof. All policies and binders listed
on Schedule 3.10 are valid and binding in accordance with their terms, have been
in full force and effect continuously for the three (3) years prior to the date
hereof, and are in full force and effect as of the date hereof. Except for
claims set forth on Schedule 3.10, there are, as of the date hereof, no
outstanding unpaid claims under any such policy or binder, and, except as set
forth on Schedule 3.10, neither the Sellers, the Company nor any Subsidiary has
received any notice of cancellation or non-renewal of any such policy or binder.
The Company's liability insurance policy described on Schedule 3.10 is an
occurrence-based policy. Schedule 3.10 sets forth (i) each pending claim under
the Company's or any Subsidiary's insurance policies, and except as set forth on
Schedule 3.10, each such claim has been accepted by the insurer without
reservations as covered under the applicable policy; (ii) each person or entity
not employed by the Company or a Subsidiary that is covered under any policy or
binder of the Company as a named insured and the terms of the agreement or
understanding for the maintenance of such coverage(s) including any payments
made to the Company or any Subsidiary for such coverage.
3.11 Assets; Inventory.
(a) Except as set forth on Schedule 3.11, the Company and each
Subsidiary has good title to all of its properties, or has possession of all
leased properties, necessary for operation of the business of the Company as
presently conducted, including all of the assets reflected on the Interim
Balance Sheet (but excluding any Real Estate, as to which Section 3.12 applies),
free and clear of any Lien, except for:
(i) properties disposed of, or subject to purchase or sales
orders, in the ordinary course of business since the date of the Interim
Balance Sheet; and
(ii) Liens securing taxes, assessments, governmental charges or
levies, or the claims of materialmen, carriers, landlords and like persons,
all of which are not yet due and payable or are being contested in good
faith, so long as such contest does not involve any substantial danger of
the sale, forfeiture or loss of any material asset of the Company and the
Subsidiaries necessary for the operation of the Business as presently
conducted.
(b) All propane inventory of the Company is (i) of a quality
sufficient to meet industry specifications, and (ii) of a quantity usable by the
Company and saleable at normal selling prices in the normal course of the
Business.
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3.12 Real Estate.
(a) Schedule 3.12 sets forth a correct and complete list (including
the street address) of each parcel of real property owned by the Company or a
Subsidiary (the "Real Estate"). Schedule 3.12 also correctly sets forth for
certain properties included in the Real Estate the approximate dates such
properties were acquired by the Company or its Subsidiaries. The Company or such
Subsidiary is the legal and equitable owner of all right, title and interest in,
has good title to, and is in possession of, the Real Estate, free and clear of
all tenancies except as set forth on Schedule 3.12 or other possessory
interests, security interests, conditional sale or other title retention
agreements, Liens, options, and rights of first refusal, except as set forth on
Schedule 3.12, except as disclosed in the policies of title insurance to be
obtained by Buyer pursuant to Section 7.7 or any preliminary title reports
obtained in connection therewith, and except those that will not prohibit the
use of the Real Estate immediately after the Closing (assuming for this purpose
that legal ownership to the Real Estate had been transferred to Buyer as of the
Closing Date) in substantially the same manner as such Real Estate is currently
used.
(b) Except as set forth on Schedule 3.12, since the date of the
Interim Balance Sheet, no portion of any Real Estate has been condemned,
requisitioned or otherwise taken by any public authority, and, to the Sellers'
Knowledge, no such condemnation, requisition or taking is threatened or
contemplated.
(c) Prior to the Closing, the Sellers will have delivered to the Buyer
correct and complete copies of all title insurance policies, abstracts, title
reports, and existing surveys, environmental audits and similar reports, if any,
in the possession of the Sellers with respect to each parcel of Real Estate.
(d) Schedule 3.12 sets forth a correct and complete list of each
parcel of real property leased by the Company or a Subsidiary (the "Real Estate
Leases"). The Company or a Subsidiary is in peaceable possession of the premises
covered by each Real Estate Lease. Except as disclosed in Schedule 3.12, neither
the Company nor any Subsidiary is in default under any Real Estate Lease to
which it is a party, where such default would prohibit the use of such property
immediately after the Closing in substantially the same manner as such property
is currently used. At least five (5) business days prior to the Closing, the
Sellers will have provided to the Buyer correct and complete copies of each Real
Estate Lease.
3.13 Personal Property Leases. Schedule 3.13 sets forth a correct and
complete list of all leases of personal property to which the Company or any
Subsidiary is a party which provides for payment or performance by either party
thereto involving an aggregate annual payment or performance obligation of
$10,000 or more (the "Personal Property Leases"). The Company or a Subsidiary is
in
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peaceable possession of the property covered by each Personal Property Lease.
Neither the Company nor any Subsidiary is in default under any Personal Property
Lease to which it is a party, where such default would prohibit the use of such
property immediately after the Closing in substantially the same manner as such
property is currently used.
3.14 Intellectual Property. Schedule 3.14 sets forth a correct and complete
list of all patents, registered trademarks, registered trade names, registered
service marks and registered copyrights owned by the Company or a Subsidiary and
pending applications for any of the foregoing (the "Intellectual Property").
Schedule 3.14 sets forth a correct and complete list of all licenses and other
agreements relating to any Intellectual Property. Except as set forth in
Schedule 3.14, with respect to the Intellectual Property, (a) no action, suit,
proceeding or investigation is pending or, to the Sellers' Knowledge,
threatened; (b) to the Sellers' Knowledge, none of the Intellectual Property
interferes with, infringes upon, conflicts with or otherwise violates the rights
of others or is being interfered with or infringed upon by others, and none is
subject to any outstanding order, decree, judgment, stipulation or charge; and
(c) there are no royalties, commissions or similar arrangements, and no
licenses, sublicenses or agreements, pertaining to any of the Intellectual
Property.
3.15 Employees. Schedule 3.15 sets forth a correct and complete list of all
written agreements with employees of the Company or any Subsidiary regarding
services to be rendered, terms and conditions of employment, and compensation as
of the date hereof (the "Employment Contracts"). For purposes of the Agreement,
the term "Employees" shall include leased employees of the Company or any
Subsidiary. Schedule 3.15 sets forth a correct and complete list of all
Employees of the Company, including name, title or position, the present annual
compensation (including bonuses, commissions and deferred compensation), and any
interests in any incentive compensation plan. Except as set forth on Schedule
3.15, there are no claims or proceedings pending or, to the Sellers' Knowledge,
threatened involving any Employees.
3.16 Labor Matters. Neither the Company nor any Subsidiary has a collective
bargaining, union or labor agreement or other arrangement with any group of
Employees, labor union or employee representative(s). The Company and each
Subsidiary is in compliance with all federal, state or other applicable laws
respecting employment and employment practices and terms and conditions of
employment, including, without limitation, health and safety, and wage and hour.
No unfair labor practice complaint is pending against the Company or any
Subsidiary before the National Labor Relations Board or any similar agency.
There is no labor strike, slow down or work stoppage pending or, to the Sellers'
Knowledge, threatened against the Company or any Subsidiary.
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3.17 Employee Benefit Plans.
(a) Schedule 3.17 sets forth a correct and complete list of each of
the following, whether funded or unfunded, qualified or unqualified (all the
following being herein called "Benefit Plans"), maintained or contributed to by
the Company or a Subsidiary for the benefit of any of its officers, Employees or
other persons: any (i) "employee welfare benefit plan" (as defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) ("Pension Plans"); (ii) any bonus, profit sharing, deferred compensation,
incentive or other compensation plan or arrangement; (iii) any termination or
severance agreements or contracts; or (iv) any other employee fringe benefit
plans. Without limiting the foregoing, Schedule 3.17 specifically discloses any
obligation of the Company or any Subsidiary to provide post-retirement health
benefits to current or former employees of the Company or any Subsidiary.
(b) Except as set forth in Schedule 3.17, each Benefit Plan and any
related trust agreement or annuity contract or any other funding instrument
complies in all material respects with the provisions of applicable law,
including ERISA and the Code, and all necessary governmental approvals for the
Benefit Plans have been obtained. There are no actions, suits, or claims (other
than routine claims for benefits) pending or, to the Sellers' Knowledge,
threatened, against or with respect to any Benefit Plan or the assets of any
such Benefit Plan, and to the Sellers' Knowledge no facts exist that would
likely give rise to any actions, suits or claims (other than routine claims for
benefits) against such Benefit Plans or assets. Neither the Company, nor, to the
knowledge of the Company, any other "disqualified person" or "party in interest"
(as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transaction in connection with any Benefit Plan
that violates Section 406 or 407 of ERISA or that could reasonably be expected
to result in the imposition on the Company of a penalty pursuant to Section 502
of ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section
4975 of the Code. Each Pension Plan is qualified in form under Section 401(a) of
the Code, the Internal Revenue Service has issued a favorable determination
letter with respect to each Pension Plan, and to the Sellers' Knowledge no event
has occurred that will or would likely give rise to a disqualification under
Section 401(a) of the Code. No Pension Plan is subject to the provisions of
Title IV of ERISA.
(c) With respect to each "group health care plan" set forth in
Schedule 3.17 which must comply with Section 4980B of the Code and Sections 601
through 608 of ERISA, the Sellers acknowledge and agree that they or one or more
of the Retained Entities will have the legal obligation to make COBRA
continuation coverage available to qualified beneficiaries whose qualifying
event occurred before the Closing Date. With respect to each "employee pension
benefit plan" set forth in
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Schedule 3.17: (i) all contributions (including the Company and any Subsidiary
contributions, and Employee salary redirection contributions) have been paid or
accrued for any period ending on or before the Closing Date; (ii) resolutions
shall have been adopted before the Closing Date terminating each such employee
pension benefit plan with a termination date which precedes the Closing Date,
and all Employees of the Company and any Subsidiary, as applicable, have been
100% vested; and (iii) the distribution process will begin pursuant to the terms
of such plan.
(d) Prior to the Closing, the Sellers shall have furnished to the
Buyer correct and complete copies of (i) the plan documents and summary plan
descriptions (including any summaries of material modifications), (ii) the most
recent determination letter received from the Internal Revenue Service, (iii)
the two most recent Form 5500 Series Annual Reports required to be filed for
each such Benefit Plan, (iv) all related trust agreements, insurance contracts
or other funding agreements which implement such Benefit Plan, and (v) all
service agreements that affect such Benefit Plan.
3.18 Licenses and Permits. Schedule 3.18 contains a correct and complete
list of each license, permit, certificate, approval, exemption, franchise,
registration or authorization issued to the Company or a Subsidiary by a
governmental body or agency where the failure to have such license or permit
would prohibit the Company or any Subsidiary from carrying on the Business as
presently conducted (collectively, the "Licenses and Permits"), other than
certain Cal OSHA Division of Industrial Safety Permits ("DIS Permits") obtained
by the Company or its subsidiaries in the normal course of business. The
Licenses and Permits and material DIS Permits are valid and in full force and
effect and there are not pending nor, to the Sellers' Knowledge, threatened, any
proceedings which would likely result in the termination, revocation, limitation
or impairment of any License or Permit or material DIS Permit. The Licenses and
Permits and DIS Permits constitute all material licenses and permits necessary
under applicable laws, rules and regulations for the Company to conduct its
business as such business is now being conducted.
3.19 Material Contracts. Except for Real Estate Leases, Personal Property
Leases, licenses of Intellectual Property, Benefit Plans and Employment
Contracts (which are set forth on other Schedules hereto), Schedule 3.19 sets
forth a correct and complete list of all instruments, commitments, agreements,
arrangements and understandings in effect as of the date hereof related to the
Business of the Company and each Subsidiary to which the Company or a Subsidiary
is a party or by which any of its assets are subject or bound and meeting any of
the criteria set forth below (the "Material Contracts"):
(a) Loan agreements, security agreements and promissory notes; and
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(b) Any other contract, commitment, agreement, arrangement or
understanding related to the Business which (i) provides for payment or
performance by either party thereto involving an aggregate annual payment or
performance obligation of $10,000 or more, (ii) is not terminable without
payment or penalty on sixty (60) days (or less) notice, or (iii) is with any
affiliate of the Company or any officers or directors of the Company. Prior to
the Closing Date, correct and complete copies of each Material Contract
identified on Schedule 3.19 shall be delivered or made available to the Buyer;
provided, however, that the Sellers shall not be required to disclose the
identity of any individual customer, reseller or other agent or provide any
customer lists to the Buyer (but the other provisions of any Material Contract
shall be provided) until all conditions to Closing have been satisfied or
waived. To the Sellers' Knowledge, each Material Contract is in full force and
effect and is valid, binding and enforceable in accordance with its terms. No
event has occurred which is or, after the giving of notice or passage of time,
or both, would constitute a default under or a breach of any Material Contract
by the Company or any Subsidiary, or, to the Sellers' Knowledge, by any other
party. There is no Lien on the Company's or any Subsidiary's interest under any
Material Contract.
3.20 Taxes.
(a) The Company and each of the Subsidiaries has paid all federal,
state and local taxes (including, but not limited to, income, profits,
estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital, transfer, withholding, employment, unemployment
compensation, payroll and property taxes) and other governmental charges and
assessments, including any deficiencies, interest, additions to tax or interest
and penalties with respect thereto (collectively "Taxes" or, individually, a
"Tax") required to be paid by it through the date hereof, and shall timely pay
any Taxes required to be paid by it on or prior to the Closing Date for periods
ending on or before the Closing Date. The provisions for Taxes (as opposed to
any reserve for deferred taxes established to reflect timing differences between
book and tax income), including federal, state and local income taxes on the
Interim Balance Sheet are sufficient for the payment of all Taxes due with
respect to the conduct of the Business of the Company and the Subsidiaries and
the effect of the consummation of the Related Transactions at the Closing up to
and through the date of the Interim Balance Sheet and the Closing Date, but
excluding the effects of any transaction that occurs on the Closing Date after
the Closing contemplated by this Agreement and the closing of the Related
Transactions have occurred (for purposes of eliminating doubt, the transactions
the effects of which shall be excluded pursuant to the immediately preceding
phrase beginning with the word "but" include Buyer's liquidation of the Company
by merger or otherwise upon or after the Closing under this Agreement, the
effects of any such liquidation being solely the responsibility of Buyer
notwithstanding any provision of this Agreement that might be construed to the
contrary).
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(b) The Company and each of the Subsidiaries has timely filed all tax
returns required to be filed by them through the date hereof, and the Sellers
shall prepare and timely file, in a manner consistent with prior years and
applicable law, all tax returns required to be filed on or before the Closing
Date.
(c) Except as set forth in Schedule 3.20, no penalties or other
charges are or will become due with respect to the late filing of any tax return
of the Company or any Subsidiary required to be filed for any period ending on
or before the Closing Date.
(d) With respect to all tax returns of the Company and the
Subsidiaries, except as set forth on Schedule 3.20(i), to the Sellers'
Knowledge, no audit is in progress, and no extension of time is in force with
respect to any date on which any such return for Taxes was or is to be filed and
no waiver or agreement is in force for the extension of time for the assessment
or payment of any Tax, and (ii) copies of such returns supplied to Buyer in the
data room (i.e. for the tax years 1999, 1998, 1997 and 1996) are true and
correct in all material respects).
(e) Except as set forth on Schedule 3.20, neither the Company nor any
Subsidiary is a party to, nor is bound by or has any obligation under any tax
sharing, tax indemnification or similar agreement.
(f) Neither the Company nor any of the Subsidiaries currently has a
permanent establishment in any foreign country or engages or has previously
engaged in a trade or business in any foreign country. Neither the Company nor
any of the Subsidiaries is a foreign person within the meaning of Code Section
1445.
3.21 Product Warranty. To the Sellers' Knowledge, all products processed,
distributed, shipped or sold by the Company or any Subsidiary conform with all
applicable contractual commitments, except where a failure to conform by the
Company or a Subsidiary (i) would not permit the other party to terminate such
contract, or (ii) have a material adverse effect on the Company or any
Subsidiary. No products distributed, sold or delivered by the Company or a
Subsidiary prior to the date of this Agreement are now subject to any guarantee,
express warranty, claim for product liability, or patent or other indemnity,
other than those set forth or described in Schedule 3.21.
3.22 Legal Proceedings. Except as set forth in Schedule 3.22, neither the
Company nor any Subsidiary is engaged in or is a party to or, to Sellers'
Knowledge, threatened with any action, suit, proceeding, complaint, charge,
hearing, investigation or arbitration or other method of settling disputes or
disagreements (other than environmental claims as to which Section 3.23
applies). As of the date hereof, neither the Sellers nor the Company nor any
Subsidiary has received notice of any investigation threatened by any
Governmental Entity. As of the date hereof, except as
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set forth in Schedule 3.22, neither the Company nor any Subsidiary is subject to
any judgment, order, writ, injunction, stipulation or decree of any court or any
Governmental Entity or any arbitrator.
3.23 Environmental Matters. Except as set forth in Schedule 3.23:
(a) Neither Sellers nor the Company nor any Subsidiary have received
written notice from any Governmental Entity that the Company or any Subsidiary
is not in compliance in all material respects with all applicable federal and
state laws and regulations in effect on the date hereof relating to pollution or
the environment under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C.A. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C.A. Section 6901 et seq., the Clean Water
Act, 33 U.S.C.A. Section 1251 et seq., the Clean Air Act, 42 U.S.C.A. Section
7401 et seq., and laws and regulations relating to emissions, spills, leaks,
discharges, releases or threatened releases of any "hazardous substance," or
"hazardous waste," as defined therein, petroleum and petroleum products, natural
gas or synthetic gas, special nuclear or by-product material, as defined by the
Atomic Energy Act of 1954, 42 U.S.C.A. Section 3011 et seq., and the regulations
promulgated thereto and "hazardous chemical," as defined in 29 C.F.R. Part 1910
or otherwise relating to the manufacture, possession, distribution, use,
treatment, storage, disposal, transport or handling of such material (such laws
and regulations being hereinafter referred to as "Environmental Laws");
(b) Neither the Company nor any Subsidiary is and has not in the past
5 years been, in violation of, or charged with, convicted of, or to Sellers'
Knowledge investigated for any violation of any federal, state or local
Environmental Law or regulation by any court, governmental body or agency with
respect to the Real Estate or in the Company's or such Subsidiary's operations,
except as set forth in Schedule 3.23. Except as disclosed in Schedule 3.23, no
environmental condition created by the Company or its Subsidiaries or by any
third party that has used the Real Estate with the permission of the Company or
its Subsidiaries exists on any portion of the Real Estate, on the real property
leased under the Real Estate Leases, or on any real property previously owned or
leased by the Company or its Subsidiaries ("Previously Owned/Leased Real
Property") that would likely give rise to a material claim that the Company or
any Subsidiary is in violation of any Environmental Laws; and there have been no
disposals, releases of hazardous substances, materials or wastes, or pollutants
or contaminants by the Company or its Subsidiaries or any such third party from,
in or under any of the Real Estate or Previously Owned/Leased Real Property
during the past 5 years (or to Seller's knowledge, prior thereto) in violation
of any Environmental Laws except as disclosed in Schedule 3.23. Except as set
forth on Schedule 3.23, there:
(i) are presently no tanks in excess of 55 gallons for storage of
petroleum products or other hazardous material (other than
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propane inventory) that were placed on the Real Estate, or the real
property leased under the Real Estate Leases, by the Company or its
Subsidiaries;
(ii) is no contamination of soil, ground water or surface water
on or under the Real Estate or Previously Owned/Leased Real Property, or
the real property leased under the Real Estate Leases, that was caused by
the Company or its Subsidiaries (or any such third party) in violation of
any Environmental Laws;
(iii) is no portion of the Real Estate, or the real property
leased under the Real Estate Leases, that is or during the past 5 years has
been on any list prepared by any federal, state or local governmental body
or agency and provided to the Company or its Subsidiaries or published in
official governmental records as requiring remedial environmental action;
or
(iv) are no environmental studies or reports in the Company's or
its Subsidiary's control or possession referring or relating to the Real
Estate, or the real property leased under the Real Estate Leases, except
those that have been provided or made available to Buyer.
(c) All material permits and other material governmental
authorizations required under Environmental Laws currently held by the Company
or a Subsidiary are identified on Schedule 3.23, and, as of the date hereof, the
Company and each Subsidiary is in compliance in all material respects with the
terms and conditions of such permits and authorizations.
3.24 Compliance with Law. Except as described in Schedule 3.24, the Company
and each Subsidiary is in compliance, in all material respects, with all
statutes, codes, ordinances, licensing requirements, laws, rules, regulations,
decrees, awards or orders applicable to the Business to the extent necessary to
carry on the Business as currently conducted, including those relating to
employment and those relating to the sale and distribution of propane (including
the requirements of Pamphlet No. 58), except with respect to Benefit Plans and
Environmental Laws, which are covered by Sections 3.17 and 3.23, respectively,
and except where non-compliance would not have a material adverse effect on the
Company and its Subsidiaries.
3.25 Plant and Equipment. Except as set forth in Schedule 3.25 and except
for ordinary wear and tear, the plants, structures and equipment of the Company
are in good operating condition and repair in all material respects, comply in
all material respects with Pamphlet 58 and applicable state law, and are
adequate for the uses to which they are being put, except where non-compliance
would not have a material adverse effect on the Company and its Subsidiaries.
The Company has
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received no notification that it is in violation of any applicable building,
zoning or other law, ordinance or regulation in respect of its plants and or
structures or their operations and, to the Sellers' Knowledge, no such violation
exists. Except as set forth in Schedule 3.25, the Company has received no
recommendation from any insurance carrier or any consultant hired by the Company
proposing changes in its methods of operation or relating to changes with
respect to any of the Company's properties, including the Real Estate or the
properties leased under the Real Estate Leases (excluding information received
from any insurance carrier mailed to its customers or the public generally).
3.26 Capital Expenditures. Neither the Company nor any of the Subsidiaries
has outstanding commitments for capital expenditures in excess of $10,000 except
as set forth on Schedule 3.26.
3.27 Brokers. Except for Xxxxxxx Xxxxx Xxxxxx Inc. ("SSB") (whose fees
shall be borne by the Sellers), neither the Sellers nor the Company has retained
any broker, finder or agent or incurred any liability or obligation for any
brokerage fees, commissions or finders' fees with respect to this Agreement or
the transactions contemplated hereby.
3.28 Transactions with Related Parties. Except as set forth in Schedule
3.28, and except for employment agreements and arrangements described on
Schedule 3.15, the Company is not party to any agreement, arrangement or
transaction, oral or written, with any officer, director, employee or
shareholder of the Company or any member of their immediate families.
3.29 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED IN THIS
ARTICLE III OR ANY OTHER PROVISION OF THIS AGREEMENT, THE SELLERS ARE NOT MAKING
ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE
EXPRESSLY GIVEN BY THE SELLERS IN THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO,
ANY IMPLIED WARRANTY OR REPRESENTATION AS TO THE VALUE, CONDITION,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR SUITABILITY OF ANY OF THE
ASSETS, PROPERTIES, RIGHTS OR CLAIMS OF THE SELLERS, THE COMPANY, ANY SUBSIDIARY
OR THE BUSINESS, OR ANY DOCUMENTS MADE AVAILABLE OR MANAGEMENT PRESENTATION TO
THE BUYER OR ITS REPRESENTATIVES, ALL OF WHICH ARE HEREBY DISCLAIMED.
3.30 Disclosure Schedule Supplements. Promptly after the Sellers become
aware of the same, the Sellers shall supplement or amend the Schedules delivered
by them in connection herewith with respect to any matter hereafter arising
which, if existing, occurring or known by them at the date of this Agreement,
would have been required to be set forth or described in such Schedules or which
is necessary
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27
to correct any information in such Schedules that has been rendered inaccurate
in any material respect thereby, and shall provide prompt written notice to the
Buyer regarding the same. Except for purposes of Section 7.1 herein, the
disclosure in any such supplement or amendment shall be treated for all purposes
as having been included in the original Schedules at the time of the execution
of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Sellers as set forth below:
4.1 Authority. The Buyer has full right, power and authority and has taken
all corporate action, including obtaining approval and consent of its Board of
Directors, necessary to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Buyer and constitutes a valid and legally binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general principles or equity.
4.2 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full power and authority to own, lease and operate its assets and to carry on
the business in which it is engaged.
4.3 No Conflicts. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
creation of any Lien or the termination or acceleration of any indebtedness or
other obligation of the Buyer and are not prohibited by, do not violate or
conflict with any provision of, and do not result in a default under or a breach
of (a) the Certificate of Incorporation, By-Laws or any other organizational
documents of the Buyer, (b) any contract, agreement, permit, license or other
instrument to which the Buyer is a party or by which it is bound, (c) any order,
writ, injunction, decree or judgment of any court or Governmental Entity, or (d)
any law, rule or regulation applicable to the Buyer. No approval, authorization,
consent or other order or action of or filing with any Governmental Entity is
required for the execution and delivery of this Agreement by the Buyer or the
consummation by the Buyer of the transactions contemplated hereby.
4.4 Buyer's Investment Intent. The Buyer is purchasing the Stock for its
own account and not with a view to, or present intention of, sale or
distribution thereof in violation of the 1933 Act or any applicable state
securities' laws, and such shares of Stock will not be disposed of in
contravention of the 1933 Act or such laws.
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The Buyer acknowledges that such shares are not and have not been registered
with the Securities and Exchange Commission or any securities commission or
agency of any state, and may not be transferred or disposed of without
registration under the 1933 Act and applicable state securities laws, or an
exemption from such registration.
4.5 Buyer's Business Investigation. The Buyer has conducted such
investigation of the Business of the Company and its Subsidiaries and related
matters as it has deemed necessary in order to make an informed decision
concerning the transactions contemplated hereby. As of the date hereof, with
respect to information furnished by the Sellers or the Company and without
limiting the effect of Section 3.29, the Buyer has relied only upon information
set forth herein, made available in the data room or supplementally requested by
Buyer, or set forth in a Schedule attached hereto and has not relied upon any
other information or statement, oral or written, not described herein or in a
Schedule attached hereto, notwithstanding the delivery or disclosure to the
Buyer by the Sellers or the Company or any representative of the Sellers
(including SSB) of other information with respect to any of the foregoing. The
Buyer acknowledges that the Sellers have made no representation to the Buyer as
to the future business or prospects of the Company or the Subsidiaries. The
Buyer has been given the opportunity to ask questions of and receive answers
from the Sellers and the Company concerning the Company and its Subsidiaries and
their respective businesses and operations, and all of its questions have been
satisfactorily answered. The Buyer acknowledges that it has been given access to
and has been given the opportunity to visit and examine the Real Estate of the
Company, and the property leased by the Company under the Real Estate Leases,
and the other assets of the Company and the Subsidiaries, and is familiar with
the condition thereof. The Buyer does not know of any breach of any
representation or warranty set forth in Article III hereof.
4.6 Disputes or Proceedings. There is no action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) pending or, to the Buyer's
knowledge, threatened that challenges or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, the consummation of the
transactions contemplated hereby.
4.7 Financing. The Buyer acknowledges that its obligations under this
Agreement are not in any way contingent upon its obtaining financing for its
obligations hereunder. The Buyer has sufficient capital resources presently
available to it, and usable for the transactions contemplated hereby, in order
to consummate such transactions in a timely fashion, and the Buyer will have
such resources available at the Closing.
4.8 Brokers. The Buyer has not retained any broker, finder, advisor or
intermediary or incurred any liability or obligation for any brokerage fees,
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commissions or finders' fees with respect to this Agreement or the transactions
contemplated hereby.
ARTICLE V
COVENANTS OF SELLERS
5.1 [Intentionally deleted].
5.2 Interim Conduct of Business. From the date hereof until the Closing,
unless approved by the Buyer in writing, the Sellers shall cause the Company and
each Subsidiary to operate the Business consistent with past practice and in the
ordinary course of business and, except as permitted or contemplated by this
Agreement, will not permit the Company or any Subsidiary to:
(a) 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
sell or agree to sell all or substantially all of the assets of the Company or
any Subsidiary, or take any action or make any commitment with respect to a
possible liquidation, recapitalization, reorganization or other winding up of
the business of the Company or any Subsidiary or otherwise acquire, any
corporation, limited liability company, partnership, or other business
organization or division thereof;
(b) amend the certificate or articles of incorporation or by-laws of
any such company;
(c) make any changes in its accounting methods, principles or
practices;
(d) encumber, sell, transfer, or otherwise dispose of any assets,
except in the ordinary course of business consistent with past practices;
(e) authorize for issuance, issue, sell or deliver any additional
shares of the Company's capital stock of any class or any securities or
obligations convertible into shares of its capital stock or issue or grant any
option, warrant or other right to purchase any shares of its capital stock of
any class;
(f) declare any dividend on, or make any distribution with respect to,
the capital stock of any such company;
(g) establish, modify, amend or terminate any Benefit Plans or
Material Contracts, except as may be required under applicable law;
(h) agree, undertake or commit to make any capital expenditure in
excess of $10,000, except as set forth in Schedule 3.26;
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(i) agree, undertake, or commit to carry out any investigation,
assessment, remediation, or response action regarding the presence or possible
presence of any Hazardous Materials, unless the results are communicated to the
Buyer in writing;
(j) cause the Company to incur or assume any liabilities for borrowed
money, other than liabilities incurred in the ordinary course of business
consistent with past practices;
(k) mortgage or pledge any Stock or create any Liens thereon;
(l) cancel or waive or modify any claims or rights with a value to the
Company in excess of $10,000;
(m) promote or hire any employees of the Company or recall any
laid-off employees of the Company except in the ordinary course of business
consistent with past practices;
(n) defer making payments of any accounts payable or other obligations
of the Company unless such deferral is due to a good faith dispute as to
liability or amount or is in accordance with the Company's past practices as to
the timing of payments of such payables or other obligations;
(o) allow any of the Company's insurance coverage to lapse;
(p) purchase any securities other than investments in money market
funds or similar investments consistent with the Company's past practices;
(q) enter into or take any action, other than actions required to be
taken pursuant to agreements or arrangements entered into prior to the date of
this Agreement, in connection with xxxxxx, trades or swaps of any commodity; or
(r) authorize or enter into an agreement to do any of the foregoing.
5.3 Access; Tank Verification. The Sellers shall, and shall cause the
Company to, give the Buyer and its representatives reasonable access during
normal business hours to all properties, facilities, senior management, books,
contracts, commitments and records of the Company and the Subsidiaries. The
Sellers, the Company and the Subsidiaries shall also furnish the Buyer with all
financial and operating data and other information as to the Company, the
Subsidiaries, the Business and their respective assets, properties, rights and
claims, as the Buyer from time to time may reasonably request in furtherance of
the due diligence process. In addition, the Sellers shall permit the Buyer,
working with the Sellers' representatives, to have access, to the extent
practicable and commercially reasonable, to tanks owned and
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leased by the Company and its Subsidiaries for the purpose of verifying the
number and condition of such tanks. Notwithstanding the foregoing, the Buyer
agrees not to contact any vendors, distributors or customers or non-senior
management employees of the Company, the Subsidiaries, or the Sellers without
the prior written consent of the Sellers, such consent not to be unreasonably
withheld. The Sellers shall consult with the Buyer and keep the Buyer reasonably
apprised of material developments relating to the Business of the Company.
5.4 Sellers' Efforts. The Sellers shall use their reasonable commercial
efforts to consummate the transactions contemplated by this Agreement and shall
not take any action inconsistent with their obligations hereunder or which could
hinder or delay the consummation of the transactions contemplated hereby except
as permitted in Section 5.5. From the date hereof through the Closing Date, the
Sellers shall use their reasonable commercial efforts to fulfill the conditions
precedent to their obligations hereunder.
5.5 No Shop. Each Seller agrees not to solicit, initiate or encourage the
submission of inquiries, proposals or offers from any other Person relating to a
purchase of either the assets or capital stock of the Company or to respond to
any unsolicited inquiries; provided, however, that each Seller shall be
permitted to solicit proposals, inquiries or offers or to respond to any
unsolicited inquiries in the event (a) the transactions contemplated by this
Agreement have not closed prior to July 31, 2001, or (b) the Buyer gives written
notice to the Sellers (which notice shall be given by the Buyer immediately upon
its knowledge thereof) that a problem has come to light as a result of the
Buyer's due diligence which would reasonably be expected to result in a failure
to close the transactions contemplated hereby and such problem has not been
resolved within two (2) business days thereof.
5.6 Covenant Not To Compete. In connection with the sale of Stock by each
Seller hereunder, and without limiting the provisions of the Non-Competition
Agreement, each Seller (other than those Sellers who are party to the
Non-Competition Agreement) agrees to the restrictions contained in this Section
5.6.
(a) Subject to Section 5.6(b), each such Seller agrees that, for a
period of ten (10) years from the Closing Date in the geographical markets in
which the Business of the Company is currently conducted, such Seller will not,
directly or indirectly, alone or in association with any other Person, engage in
activities competitive with the Business of the Company.
(b) Notwithstanding Section 5.6(a), the Sellers and their affiliates
may own up to 5% of a class of equity securities of a publicly held company
engaged in the Business of the Company.
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(c) As a separate and independent covenant, each such Seller agrees
that, for a period of five (5) years from the Closing Date, such Seller will
not, directly or indirectly, for the purpose of engaging in the Business of the
Company, call upon, solicit, advise or otherwise do business with or attempt to
do business with, any customer of the Company or any Subsidiary as of the
Closing Date so as to take away or interfere with such business, or induce or
solicit any employees of the Company, any Subsidiary, or the Buyer to leave the
employ of the Company, any Subsidiary or the Buyer.
(d) Each such Seller acknowledges that the failure of such Seller to
comply with the provisions of this Section 5.6 will result in irreparable and
continuing damage to the Buyer and its affiliates for which there will be no
adequate remedy at law and that, in the event of a failure of such Seller so to
comply, the Buyer and its successors and permitted assigns shall be entitled to
injunctive relief and to such other and further relief as may be proper and
necessary to ensure compliance with the provisions of this Section 5.6.
(e) The parties acknowledge that no part of the Purchase Price is
allocable to the covenants set forth in this Section 5.6 for financial
reporting, tax or any other purpose and that the consideration for the
Non-Competition Agreement is separate and apart from this covenant.
5.7 Pay Off of Long Term Debt; Purchase of Vehicles; Intra-Company
Payables. At or prior to Closing and except as otherwise described on Schedule
5.7, Sellers shall cause the Company to pay or discharge all debts and
obligations of the Company that are properly classified as long-term liabilities
under GAAP ("Long Term Debt"), except to the extent that (i) Buyer advises
Sellers at least thirty (30) business days prior to the Closing that Buyer
wishes to assume such Long Term Debt, and (ii) Sellers are able by the Closing
to receive all necessary third party consents and approvals as to the Long Term
Debt that Buyer wishes to assume. With respect to the Company's and the
Subsidiaries' vehicle leases, the Sellers shall cause the Company to purchase
the vehicles covered by such leases prior to or on the Closing Date and cause
such leases to be canceled, except with respect to the vehicles on-order
described in Schedule 5.7. The amount of any Long Term Debt assumed by Buyer at
the Closing pursuant to this Section 5.7 ("Assumed Debt"), shall be deducted
dollar-for-dollar from the Purchase Price otherwise payable to Sellers at the
Closing. Except as set forth on Schedule 5.7, Sellers will cause the Company and
its Subsidiaries, at or prior to Closing, (i) to pay any indebtedness or account
owed by the Company and the Subsidiaries to the Retained Entities and (ii) to
collect from the Retained Entities all indebtedness and accounts owed to the
Company and the Subsidiaries by the Retained Entities.
5.8 Financial Statement Review. The Company shall permit the Buyer, at
Buyer's expense, to review the Company's and its Subsidiaries' books and
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records during normal business hours and pursuant to procedures reasonably
acceptable to the Parties, for the purpose of permitting Buyer's auditors to
confirm their ability to render an opinion with respect to the Company's
consolidated financial statements as of and for the periods ending on August 31,
1998, August 31, 1999 and August 31, 2000 and to review the Company's interim
financial statements as of and for the period ending February 29, 2000 and
February 28, 2001. All information examined and obtained by Buyer's auditors
shall be deemed to be "Confidential Information" for purposes of the
Confidentiality Agreement. The Company shall provide reasonable assistance,
cooperation and access to Company management as reasonably necessary to complete
such pre-closing review and such post-closing audit, including but not limited
to providing management representation letters and arranging for outside legal
representation letters and board of director minute representation letters.
ARTICLE VI
COVENANTS OF BUYER
6.1 [Intentionally deleted].
6.2 Records and Documents. For seven (7) years following the Closing Date,
the Buyer shall grant to the Sellers and their representatives, at the Sellers'
written request, and at the Sellers' expense, access to and the right to make
copies of those Company records and documents that relate to any period on or
before the Closing Date and as may be reasonably necessary or useful in
connection with the Sellers' affairs after the Closing, including the
preparation of Tax returns. The Buyer shall notify the Sellers within five (5)
business days after receiving notice of any Tax audits of the Company or any
Subsidiary for any period beginning prior to the Closing Date. Except as
provided in Section 6.8, the Buyer shall permit the Sellers to control such
audits and any related settlements with respect to periods beginning on or prior
to the Closing Date; provided, that the Sellers are obligated to indemnify the
Buyer under Section 9.2. The Buyer will cause the Company to promptly forward to
the Sellers all information and materials regarding Excluded Assets.
6.3 Buyer's Efforts. The Buyer shall use its reasonable commercial efforts
to consummate the transactions contemplated by this Agreement and shall not take
any action inconsistent with its obligations hereunder or which could hinder or
delay the consummation of the transactions contemplated hereby. From the date
hereof through the Closing Date, the Buyer shall use its reasonable commercial
efforts to fulfill the conditions to its obligations hereunder.
6.4 Confidentiality. The Buyer agrees to maintain strict confidentiality of
all information furnished in connection with the transactions contemplated
hereby, all in accordance with the terms and conditions of the
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Confidentiality Agreement dated as of October 18, 2000 to which the Buyer is a
party (the "Confidentiality Agreement"). In the event that the transactions
contemplated hereby are not consummated, the Buyer shall return to the Sellers
all written information furnished to it (and an executive officer shall certify
in writing as to such return) and will not thereafter use such information for
any purpose whatsoever or permit any such confidential information to be made
publicly available.
6.5 Employee Matters. Except as described in Schedule 6.5, the Buyer agrees
to continue to employ for a period of at least two (2) months after the Closing
Date those Employees of the Company who are Employees in good standing as of the
Closing Date, unless good cause exists for termination. Such employment shall be
at least at the same salaries or hourly rates as presently being paid by the
Company, and while such employment shall be on an "at will" basis, each such
Employee will be evaluated by the Buyer by standards no different than those
applied by the Buyer to its other employees performing similar job functions.
The Buyer agrees, to the fullest extent permitted by applicable law, that (i)
all Employees of the Company and the Subsidiaries shall be entitled to
participate in the employee benefit plans, including group health, life and
disability plans, presently maintained by the Buyer (true and correct copies of
which have been furnished by the Buyer to the Sellers) pursuant to the terms of
those plans, (ii) the Buyer will not amend such employee benefit plans or permit
any such plans to be amended in any way materially detrimental to the employees
of the Company and the Subsidiaries during the two month period following the
Closing Date, except for general and uniform changes applying to all employees
covered by such plans, and (iii) with respect to any "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) maintained or sponsored by Buyer,
any waiting period for eligibility will be prorated for each Employee, to the
extent such Employee was covered under a similar plan maintained or sponsored by
the Seller or any Subsidiary, as applicable, on the Closing Date. Without
limiting the foregoing, such Employees will receive credit for years of service
with the Company and the Subsidiaries in determining vacation and sick days
including credit for any accrued and unused sick and vacation time under the
Company's or any Subsidiary's sick and vacation policy, as applicable. The Buyer
shall cause the Company to comply with the WARN Act to the extent applicable and
be solely responsible for furnishing the required notice of any "plant closing"
or "mass layoff" which may occur after Closing, and the Buyer shall indemnify
and hold the Sellers harmless for any inadequacy of such notice and for any
liabilities under or relating to the WARN Act. In the event of the termination
by the Buyer of any Employees of Company or the Subsidiaries during the first
twelve (12) months following Closing, the Buyer hereby agrees to indemnify and
hold the Sellers harmless from and against any claims arising from such
terminations, unless such claims are based upon commitments, representations
made or other actions taken by Company to the terminated Employee prior to
Closing and not disclosed by the Sellers to the Buyer (but for this purpose, the
Company's severance policy heretofore provided to the Buyer shall not be deemed
to be a commitment, representation or other action taken by the
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Company). Except for accrued vacation and sick time, no other employee benefit
plan liability of the Company or its Subsidiaries is being assumed by the Buyer.
6.6 Insurance. Prior to the Closing, the Company shall use commercially
reasonable efforts to obtain tail coverages for its Officers and Directors
liability policy(s) and for its employment practices policies, each as described
on Schedule 6.6 (the "Tail Coverages"), with the cost thereof to be borne by
Sellers and paid or accrued on the Closing Balance Sheet. After the Closing, the
Buyer shall cause the Company not to cancel or amend the Tail Coverages and to
maintain such insurance at least equivalent in coverage amount, quality of
carrier, and covered claims to that for the Company and/or the Subsidiaries or
their successors as is customarily maintained by companies of the same size in
the propane industry for so long as the Sellers, or any of them, are obligated
to provide indemnification for the type of liability covered by such insurance
coverage to the Buyer or any of the Buyer's affiliates or other related Parties
under this Agreement.
6.7 Audited Financial Statements. The Buyer intends to prepare audited
financial statements of the Company for periods prior to the Closing. The Buyer
acknowledges that the preparation of such financial statements is solely the
responsibility of the Buyer and shall be at its sole cost and expense.
6.8 Post-Closing Tax Matters. Buyer acknowledges and agrees that the
Sellers shall have the exclusive power and authority (i) at the expense of the
Company, to cause the income tax returns for the last separate taxable year of
the Company ending as a result of the Buyer's purchase and immediate liquidation
of the Company through merger to be prepared and filed in accordance with
historic practices and procedures of the Company and applicable law (provided,
however, the Sellers' Representative shall follow the instructions of Buyer with
respect to determining and reporting the treatment and effects of such
liquidation through merger, which shall be solely the responsibility of the
Buyer), (ii) to control the conduct of the Company in respect of any tax audit
or examination and any administrative appeal or litigation relating thereto, to
the extent it relates to any Taxes with respect to which the Sellers have an
obligation to indemnify the Buyer if such Taxes are payable (the costs of any
such audit or examination shall be borne by the Company until the issuance of a
notice of deficiency, whereas the costs of any administrative appeal or
litigation after the issuance of a notice of deficiency shall be borne by
Sellers), (iii) subject to the provisions of this Section to determine whether
and to what extent to amend any Tax return filed before the Closing Date or
which is described in the immediately preceding clause (i), and (iv) whether and
to what extent the Company shall extend or waive any statute of limitations for
the assessment of any Tax with respect to which the Sellers have an obligation
to indemnify the Buyer if such Tax is payable. Buyer shall have the right to
participate in any such amendment, extension of limitation, tax audit,
examination, appeal or litigation (collectively, a "tax
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proceeding") at Buyer's sole expense, and, notwithstanding the immediately
preceding sentence, to jointly control with Sellers any such tax proceeding if
(i) the amount claimed by the taxing authority in a notice of deficiency would
result in a liability to the Company or its Subsidiaries that exceeds the amount
of Damages for which Sellers would be obligated to indemnify Buyer pursuant to
Article IX or (ii) the proposed tax proceeding would reasonably result in a
material tax or expense to any Controlled Entity. In no event shall Sellers
settle any such tax proceeding without Buyer's consent if such settlement would
materially adversely affect (i) the Company or any of its Subsidiaries (or a
Buyer Affiliate that is a successor in interest to the Company or any of its
Subsidiaries) with respect to any period after the Closing or result in any
material liability on the part of the Company or such successor in interest for
which the Sellers are not obligated to indemnify Buyer pursuant to Article IX or
(ii) any Controlled Entity or a Buyer Affiliate that is the successor in
interest of such Controlled Entity.
For purposes of this Section 6.8, a material effect shall be deemed to be
an expense, charge, loss or adverse change in an amount in excess of the amount
in the Escrow Fund as of the date of determination of such expense, charge, loss
or adverse change. The Buyer shall have the right to file amended income tax
returns for the Company or its Subsidiaries for any period, provided that the
result of such amended return would not affect the liability of the Sellers (i)
for Damages hereunder or for any other damages, costs, expenses or obligations
of any nature or (ii) for income taxes or other Taxes for any of the Controlled
Entities, in which event the Sellers and the Buyer (or a Buyer Affiliate that is
a successor in interest to the Company) or any of its Subsidiaries must consent
in writing to and Sellers shall jointly control with the Buyer (or its Affiliate
successor in interest to the Company and its Subsidiaries) the filing of any
such amended income tax return and all matters relating thereto.
The Buyer (or a Buyer Affiliate that is a successor in interest to the
Company) shall afford the Sellers' Representative a reasonable opportunity to
review any proposed form of income Tax Return of the Company (such as a state
income tax return) for any period that begins before and ends after the Closing
Date and shall not file any such Tax Return without the prior written consent of
the Sellers' Representative, which consent shall not be unreasonably withheld.
The Sellers' Representative and the Buyer (or a Buyer Affiliate that is a
successor in interest to the Company) shall jointly control any tax proceeding
with respect to any such income tax return.
6.9 Environmental Site Assessment. The Buyer may conduct environmental site
assessments after the Closing with respect to the Real Estate and properties
covered by the Real Estate Leases. The Buyer acknowledges that the conducting of
such environmental site assessments is solely the responsibility of the Buyer
and shall be at its sole cost and expense. For a period of three (3) years from
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the Closing or such longer period, if any, as any claims remain outstanding that
have been made by Buyer or any of the Buyer Indemnitees with respect to any
alleged breach of the representations and warranties in Section 3.23 or of any
other representations, warranties or covenants relating to environmental
matters, the Buyer agrees to provide Sellers with at least ten (10) business
days notice prior to conducting any such environmental site assessment and to
permit Sellers and/or an independent environmental consultant retained by
Sellers to have reasonable access to such Real Estate and properties and to have
access (on a current basis) to the extent reasonably practicable to data and
information collected and conclusions reached by the environmental consultants
or other environmental employees or representatives utilized by Buyer for such
environmental site assessments ("Buyer's Environmental Consultants"), including,
without limitation, raw data, boring logs, splits of all samples taken and
laboratory results obtained by Buyer's Environmental Consultants, and to contact
Buyer's Environmental Consultants directly. Buyer shall promptly provide to the
Sellers copies of all Phase I reports and other environmental reports prepared
by Buyer's Environmental Consultants.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of the Buyer to consummate the transactions contemplated by
this Agreement are subject to fulfillment or waiver of the following conditions
prior to or at the Closing:
7.1 Accuracy of Warranties and Performance of Covenants. The
representations and warranties of the Sellers contained herein shall be true and
correct in all material respects (without giving effect to any supplements or
amendments to the Disclosure Schedules by the Sellers, as described in Section
3.29, that have been disapproved by the Buyer within five (5) business days
after receipt thereof by the Buyer) on and (except where they speak of a
specific date) as of the Closing Date, except for failures to be true and
correct resulting from omissions or actions taken with the Buyer's written
consent; and the Sellers shall have performed in all material respects all of
the covenants and agreements required to be performed by the Sellers on or prior
to the Closing; provided, however, that if the Buyer is to claim that this
condition has not been satisfied as to a particular representation, warranty,
covenant or agreement, the Buyer shall have given the Sellers written notice
describing such representation, warranty, covenant or agreement and the respect
in which the same is not true or correct or has not been performed, and if the
Sellers shall have cured such noticed inaccuracy or non-performance within five
(5) business days after receipt of such notice and without any material adverse
effect to the Buyer, then this condition shall be deemed for all purposes to
have been satisfied as to such representation, warranty, covenant or agreement.
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7.2 No Pending Action. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and restrains, enjoins or otherwise
prohibits consummation of the transactions contemplated in this Agreement.
7.3 No Adverse Change. There shall have been no material adverse change
since the date of the Interim Balance Sheet, in the business, customer base,
financial condition or operations of the Company and its Subsidiaries, taken as
a whole.
7.4 No Proceeding or Litigation. No action, suit or proceeding before any
court, arbitrator or Governmental Authority shall have been commenced or
threatened against the Sellers or the Buyer or any of their respective
principals, officers or directors seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
of such transactions or seeking damages in connection with any of such
transactions.
7.5 Escrow Agreement. The Sellers' Representative shall have entered into
the Escrow Agreement, an original of which shall have been delivered to the
Buyer.
7.6 Closing of Related Transactions. The transactions contemplated by the
agreements listed on Schedule 7.6 hereto (the "Related Transactions") shall have
been consummated concurrently with the Closing of the transactions contemplated
by this Agreement.
7.7 Title Insurance. The Buyer shall have received a CLTA owner's or
leasehold owner's policy of title insurance or an unconditional commitment
therefor for the properties as indicated on Schedule 3.12:
(a) issued by a title company reasonably acceptable to Buyer;
(b) in an amount reasonably satisfactory to Buyer;
(c) insuring in the case of the Real Estate that fee simple title to
such property is vested in the Company or one of its Subsidiaries, and in the
case of properties covered by the Real Estate Leases, that a valid leasehold
estate to such property is vested in the Company or one of its Subsidiaries; and
(d) subject, in each case described in the preceding clause (c), only
to (i) the lien for current real property taxes and assessments or other
governmental charges or claims not yet delinquent, (ii) the standard printed
exceptions, (iii) easements, rights of way, restrictions, minor defects and
irregularities in and exceptions to title and other similar charges not
interfering in any material respect with the ordinary conduct of
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the business of the Company, and (iv) any other monetary or non-monetary liens
or encumbrances expressly permitted by this Agreement.
The Buyer shall make commercially reasonable efforts to obtain such title
insurance prior to the Closing.
7.8 Ability to Obtain Opinion as to Financial Statements. The Buyer,
following the review described in Section 5.8, shall have obtained from Buyer's
independent auditors assurances that are reasonably satisfactory to Buyer that
such auditors expect to be able after the Closing to render an opinion on the
financial statements of the Company described in Section 5.8.
7.9 Non-Competition Agreement. Xxxxx Xxxxxxx-Xxxxx, Xxxxxxx Xxxxxxx and
Xxxxxx Xxxxxxx shall have executed and delivered to Buyer a Non-Competition
Agreement in the form attached as Exhibit G (the "Non-Competition Agreement"),
pursuant to which such individuals shall have agreed to the non-competition and
related provisions set forth therein.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of the Sellers to consummate the transactions contemplated
by this Agreement are subject to fulfillment or waiver of the following
conditions prior to or at the Closing:
8.1 Accuracy of Warranties and Performance of Covenants. The
representations and warranties of the Buyer contained herein shall be true and
correct in all material respects as of the Closing Date except for failures to
be true and correct resulting from omissions or actions taken with the Sellers'
written consent; and the Buyer shall have performed in all material respects all
of the covenants and agreements required to be performed by the Buyer on or
prior to the Closing; provided, however, that if the Sellers are to claim that
this condition has not been satisfied as to a particular representation,
warranty, covenant or agreement, then the Sellers shall have given the Buyer
written notice describing such representation, warranty, covenant or agreement
and the respect in which the same is not true or correct or has not been
performed, and if the Buyer shall have cured such noticed inaccuracy or
non-performance within five (5) business days after receipt of such notice and
without any material adverse effect to the Sellers, then this condition shall be
deemed for all purposes to have been satisfied as to such representation,
warranty, covenant or agreement.
8.2 No Pending Action. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
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preliminary or permanent) that is in effect and restrains, enjoins or otherwise
prohibits consummation of the transactions contemplated in this Agreement.
8.3 No Proceeding or Litigation. No action, suit or proceedings before any
court, arbitrator or Governmental Authority shall have been commenced or
threatened against the Buyer or any Seller or any of their respective
principals, officers or directors seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
such transactions or seeking damages in connection with any of such
transactions.
8.4 Escrow Agreement. The Buyer shall have entered into the Escrow
Agreement, an original of which shall have been delivered to the Sellers'
Representative.
8.5 Non-Competition Agreement. The Buyer shall have executed and delivered
to Xxxxx Xxxxxxx-Xxxxx, Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx (i) the
Non-Competition Agreement described in Section 7.9, pursuant to which the Buyer
shall have agreed to make payments to such individuals as described therein, and
(ii) the security documents described in the Non-Competition Agreement, pursuant
to which such payments shall be secured.
8.6 Closing of Related Transactions. The Related Transactions shall have
been consummated concurrently with the Closing of the transactions contemplated
by this Agreement.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 Survival of Representations and Warranties. The representations and
warranties of the Sellers and the Buyer contained in this Agreement shall
survive for a period of one year from the Closing Date and shall thereafter
expire and be of no further force or effect, and all liability of the Parties
with respect thereto shall thereupon be extinguished, except with respect to
breaches theretofore specified in reasonable, written detail in the manner
provided in the Escrow Agreement to the Sellers' Representative by the Buyer or
to the Buyer by the Sellers' Representative, as the case may be, prior to the
first anniversary of the Closing Date and except for (i) the representations and
warranties contained in Sections 3.17 to the extent relating to Benefit Plans
covered by ERISA and 3.23 relating to Environmental Matters, which shall survive
for a period of three years from the Closing Date, and (ii) the representations
and warranties contained in Sections 3.1 relating to authority and good title to
the Stock and 3.20 relating to taxes, which shall survive for the applicable
statute of limitations periods with respect thereto. Notwithstanding anything to
the contrary contained herein, all claims for damages based on intentional or
fraudulent actions, or intentional misrepresentations, shall survive without
limitation.
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9.2 Indemnification of the Buyer. Subject to the terms and conditions of
this Article IX, the Sellers agree to indemnify and hold harmless the Buyer and
its affiliates, and their respective directors, officers, shareholders, agents
and employees and their respective successors and permitted assigns against and
in respect of any and all claims, demands, losses, damages, costs and reasonable
expenses, including reasonable legal fees and expenses, other than any special,
incidental, consequential, exemplary or punitive damages or damages relating to
lost profits (collectively, "Damages"), resulting from or arising out of:
(i) any breach of any representation or warranty of the Sellers
hereunder (including any information in the Disclosure Schedule referenced
in any such representation or warranty) or in any certificate or instrument
delivered to the Buyer in connection with Closing for the period such
representation and warranty survives hereunder;
(ii) any failure of the Sellers to perform or otherwise fulfill
or comply with any covenant contained in this Agreement; and
(iii) any claim against the Company by a current or former
shareholder of the Company, arising out of or in connection with any
action, event or occurrence taking place prior to or at the Closing.
9.3 Indemnification of the Sellers. Subject to the terms and conditions of
this Article IX, the Buyer agrees to indemnify and hold harmless the Sellers and
their affiliates, and their respective directors, officers, shareholders, agents
and employees and their respective successors and permitted assigns against and
in respect of any and all Damages resulting from or arising out of:
(i) any breach or violation of any representation or warranty of
the Buyer hereunder or in any certificate or instrument delivered to the
Sellers in connection with Closing for the period such representation and
warranty survives hereunder; and
(ii) any failure by the Buyer to perform or otherwise fulfill or
comply with any covenant contained in this Agreement.
9.4 Defense of Third Party Claims. If either Party hereto or such Party's
other indemnitees described in Section 9.2 or 9.3 (each an "Indemnitee")
receives notice or otherwise obtains knowledge of any third party claim or other
matter with respect to which the other Party hereto (the "Indemnifying Party")
may become obligated to hold harmless or indemnify the Indemnitee hereunder,
then the Indemnitee shall promptly deliver to the Indemnifying Party a written
notice describing such matter in reasonable detail and specifying the estimated
amount of the Damages that may be incurred by the Indemnitee in connection
therewith. The
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Indemnifying Party shall have the right, at its option, to assume the defense of
such matter at its own expense and with its own counsel, provided such counsel
is reasonably satisfactory to the Indemnitee. If the Indemnifying Party elects
to assume the defense of such matter, (i) notwithstanding anything to the
contrary contained herein, the Indemnifying Party shall not be required to pay
or otherwise indemnify the Indemnitee against any attorneys' fees or other
expenses incurred on behalf of the Indemnitee in connection with such matter
following the Indemnifying Party's election to assume the defense of such
matter, (ii) the Indemnitee shall fully cooperate as reasonably requested by the
Indemnifying Party in the defense or settlement of such matter, (iii) the
Indemnifying Party shall keep the Indemnitee informed of all material
developments and events relating to such matter and (iv) the Indemnitee shall
have the right to participate, at its own expense, in the defense of such
matter. In no event will the Indemnifying Party be liable for any settlement or
admission of liability with respect to such matter without its prior written
consent.
9.5 Liability of Sellers.
(a) The Sellers shall have no liability (for indemnification or
otherwise) under or relating to this Agreement or the transaction contemplated
hereby until the total of all Damages with respect thereto exceeds one percent
(1%) of the Purchase Price excluding from such Purchase Price any amounts paid
for the Company's cash and cash equivalents (the "Deductible Amount") and then
only for the amount by which such Damages exceed the Deductible Amount.
(b) Except for Environmental Liabilities governed by Section 9.5(c)
hereof, the Sellers' cumulative liability under this Agreement and the
Schedules, certificates and documents delivered pursuant hereto or in connection
herewith, shall in no event exceed, and the total amount of the indemnification
payments that the Sellers can be required to make under or relating to this
Agreement, shall be limited in the aggregate to, a maximum of twenty percent
(20%) of the Purchase Price excluding from such Purchase Price any amounts paid
for the Company's cash and cash equivalents, and except as provided in Section
9.5(c), the Buyer's and Buyer's other Indemnitees' sole recourse under this
Agreement or the Escrow Agreement or with respect to the transactions
contemplated hereby and thereby shall be against the Escrow Amount. Each
Seller's liability to indemnify the Buyer and Buyer's other Indemnitees for
Damages pursuant to the terms of Section 9.2 hereof shall be limited to each
Seller's Proportionate Share of the Damages. For purposes of this Section 9.5, a
Seller's Proportionate Share of Damages shall be the percentage of the Damages
calculated as the quotient, the numerator of which shall be the Seller's
Allocable Share of the Stock and the denominator of which shall be the total
number of shares of the Stock outstanding.
(c) The Sellers' cumulative liability for breaches of Section 3.23 of
this Agreement and Schedule 3.23 delivered pursuant thereto (the
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"Environmental Liabilities") shall in no event exceed, and the total amount of
indemnification payments that the Sellers can be required to make under or
relating to this Agreement with respect to Environmental Liabilities shall be
limited in the aggregate to a maximum of the Purchase Price (excluding from such
Purchase Price any amounts paid for the Company's cash and cash equivalents),
less any amounts paid or required to be paid by Sellers pursuant to Section 9.2
other than on account of breaches of Section 3.23 (the "Environmental Maximum")
, so that in no event will the Sellers' cumulative liability under this
Agreement and the Schedules, certificates and documents delivered pursuant
hereto or in connection herewith exceed, and the total amount of the
indemnification payments that the Sellers can be required to make under or
relating to this Agreement with respect to any and all matters (including
Environmental Liabilities) shall be limited in the aggregate to the Purchase
Price, excluding from such Purchase Price any amounts paid for the Company's
cash and cash equivalents. Any Environmental Liabilities shall be satisfied
first by the Company's insurance if any. To the extent any Environmental
Liability is not satisfied by the Company's insurance, the Buyer's and Buyer's
other Indemnitees' recourse shall then be against the Escrow Fund, with the
Sellers being liable only for the amount, up to the Environmental Maximum, not
satisfied by the Company's insurance and/or the Escrow Fund.
9.6 Liability of Buyer. The Buyer shall have no liability (for
indemnification or otherwise) under or relating to this Agreement or the
transaction contemplated hereby until the total of all Damages with respect
thereto exceeds the Deductible Amount and then only for the amount by which such
Damages exceed the Deductible Amount. The Buyer's cumulative liability under
this Agreement and the Schedules, certificates and documents delivered pursuant
hereto or in connection herewith shall in no event exceed, and the total amount
of the indemnification payments that the Buyer can be required to make hereunder
shall be limited in the aggregate to a maximum of twenty percent (20%) of the
Purchase Price excluding from such Purchase Price any amounts paid for the
Company's cash and cash equivalents.
9.7 Exclusivity. The right of each Party hereto and its other Indemnitees
to demand and receive indemnification payments pursuant to this Article IX shall
be the sole and exclusive remedy exercisable by such Party and its other
Indemnitees with respect to any of the matters described in Sections 9.2 or 9.3
or with respect to any other claims arising out of or relating to this Agreement
or any of the transactions contemplated hereby or any of the Related
Transactions.
9.8 Reduction for Reserves. The amount of any claim by the Buyer for
indemnification under Section 9.2(i) shall be reduced by the amount of any
reserves provided for in the Closing Financial Statements; provided that the
claim relates to the category or class for which the reserve was established.
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9.9 Reduction for Insurance Proceeds and Tax Savings. The amount of any
Damages claimed by any Indemnitee hereunder shall be reduced to the extent of
(i) any insurance proceeds, indemnification or other reimbursement or payment
recoverable by the Company or the Indemnitee in connection with such Damages or
the claim giving rise thereto; and (ii) any Tax savings or benefits realized or
to be realized by the Company or by any Indemnitee in connection with such
Damages or the claim giving rise thereto (it being acknowledged by the Parties
that there may be no such Tax savings or benefits).
9.10 Subrogation. Each Indemnifying Party shall be subrogated to any and
all defenses, claims or setoffs which the Indemnitee or the Company asserted or
could have asserted with respect to any third party claim as to which the
Indemnifying Party is required to provide indemnification pursuant to this
Article IX. The Indemnitee shall, and (in the event the Buyer is an Indemnitee)
shall cause the Company to, execute and deliver to the Indemnifying Party such
documents as may be necessary or appropriate to establish by way of subrogation
the ability and right of the Indemnifying Party to assert such defenses, claims
or setoffs. In no event shall any Party hereto be liable for special,
incidental, consequential, exemplary or punitive damages or damages relating to
lost profits, nor shall there be any double counting of any item of Damage.
ARTICLE X
TERMINATION BY THE PARTIES
10.1 Events of Termination. Without prejudice to other remedies which may
be available to the Parties by law or under this Agreement, this Agreement may
be terminated and the transactions contemplated herein may be abandoned:
(a) by mutual written consent of the Parties hereto;
(b) at the election of the Sellers' Representative, if any one or more
of the conditions to the obligations of the Sellers to close has not been
fulfilled as of July 31, 2001; or
(c) at the election of the Buyer, if any one or more of the conditions
to the obligations of the Buyer to close has not been fulfilled as of July 31,
2001.
10.2 Action Upon Termination. In the event of a termination of this
Agreement pursuant to this Article X, the Party so terminating shall give
written notice thereof to the other, and the transactions contemplated by this
Agreement shall be terminated without further action by any Party. Upon
termination of this Agreement:
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(a) The Buyer shall return to the Sellers all documents and copies and
other materials received from the Sellers relating to the transactions
contemplated hereby, the Company, the Subsidiaries, or the Business of the
Company or the Subsidiaries, whether obtained before or after the execution
hereof; and
(b) All confidential information received by the Buyer shall be
treated in accordance with the Confidentiality Agreement, which shall remain in
full force and effect notwithstanding the termination of this Agreement.
10.3 Effect of Termination. If this Agreement is terminated and the
transactions contemplated hereby are abandoned, this Agreement shall become null
and void and of no further force and effect, except for this Article X, Article
XI and the obligation of the Buyer to keep confidential certain information
concerning the Company and the Business as described in Section 12.3 and as
provided in the Confidentiality Agreement. Nothing in this Article X shall be
deemed to release any Party from any liability for any breach by such Party of
the terms and provisions of this Agreement or to impair the right of any Party
to compel specific performance by another Party of its obligations hereunder.
ARTICLE XI
SELLERS' REPRESENTATIVE
11.1 Appointment of Sellers' Representative. Sellers hereby irrevocably
appoint Xxxxxxx Xxxxxxx to act as their sole and exclusive representative (the
"Sellers' Representative") to make all decisions and determinations on behalf of
the Sellers under this Agreement and under the Escrow Agreement that the
Sellers' Representative may deem necessary or appropriate. The Sellers'
Representative shall have all of the rights, power, authority and exculpation
from liability set forth in Section 9 of the Escrow Agreement, the provisions of
which are incorporated herein. The Sellers specifically authorize the Sellers'
Representative to execute the Escrow Agreement and hereby approve all of the
terms thereof.
11.2 Sellers' Representative Escrow. As provided in Section 9 of the Escrow
Agreement, at the Closing a sum equal to one percent (1%) of the Estimated
Purchase Price out of the portion of the Purchase Price to be paid to Sellers at
Closing shall be placed into an interest-bearing escrow account (the "Sellers'
Representative Escrow") established by the Sellers' Representative. The Sellers'
Representative shall have the right to withdraw funds from the Sellers'
Representative Escrow to cover "Expenses" (as defined in the Escrow Agreement),
and Sellers hereby specifically authorize the establishment of the Sellers'
Representative Escrow and withdrawals therefrom pursuant to the provisions of
Section 9 of the Escrow Agreement.
11.3 Successor Sellers' Representative. The Sellers' Representative, or any
successor to him hereafter appointed, may resign and shall be discharged of his
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duties hereunder and under the Escrow Agreement upon the appointment of a
successor Sellers' Representative as hereinafter provided. In case of the
resignation or the death or inability to act of the Sellers' Representative
appointed by Sellers, or any of his successors, a successor shall be named by
the vote of a majority in interest of the Sellers. Each such successor Sellers'
Representative shall have the power, authority, rights and privileges hereby
conferred upon the original Sellers' Representative succeeded by him, and the
term "Sellers' Representative" as used herein and in the Escrow Agreement shall
be deemed to include a successor Sellers' Representative.
ARTICLE XII
GENERAL PROVISIONS
12.1 Amendments and Waiver. No amendment, waiver or consent with respect to
any provision of this Agreement shall in any event be effective, unless the same
shall be in writing and signed by all Parties hereto, and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. The failure of any Party at any time or times
to require performance of any provisions hereof shall in no manner affect that
Party's right at a later time to enforce the same. No waiver by any Party of the
breach of any term or covenant contained in this Agreement in any one or more
instances shall be deemed to be, or construed as, a further or continuing waiver
of any such breach, or a waiver of the breach of any other term or covenant
contained in this Agreement.
12.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be personally delivered or sent by
facsimile transmission with confirming copy sent by overnight courier (such as
Express Mail, Federal Express, etc.) and a delivery receipt obtained and
addressed to the intended recipient as follows:
(i) If to the Buyer: Heritage Holdings, Inc.
0000 X. Xxxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: H. Xxxxxxx Xxxxxxxx
with a copy to: Doerner, Saunders, Xxxxxx & Xxxxxxxx LLP
000 X. Xxxxxx Xxx., Xxxxx 000
Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxxx, Xx., Xxx.
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00
(xx) If to the Sellers: Xxxxxxx X. Xxxxxxx, Seller's Representative
000 Xxxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to: Sheppard, Mullin, Xxxxxxx & Hampton LLP
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Short, Esq.
Any Party may change its address for receiving notice by written notice
given to the others named above.
12.3 Confidentiality. All information given by any Party hereto to any
other Party shall be considered confidential and shall be used only for the
purposes intended. The provisions of the Confidentiality Agreement are
incorporated herein by reference and shall continue to apply for the benefit of
the Sellers, the Company and the Subsidiaries as if entirely set forth herein,
unless and until the Closing occurs. The provisions of this Section 12.3 and of
the Confidentiality Agreement referenced in the preceding sentence shall remain
in force and effect notwithstanding any termination of this Agreement under
Article X hereof.
12.4 No Public Announcement. Neither the Buyer nor the Sellers nor any of
the affiliates of either of them shall make any public announcement or
disclosure concerning the transactions contemplated by this Agreement without
the prior written approval of the other Party, except as required by law or as
permitted by this Section 12.4. If any Party or any of its affiliates determines
upon advice of counsel that a public announcement or disclosure is required by
applicable securities laws or regulations or stock exchange regulations, such
Party may make the announcement or disclosure provided it first consults with
the other Party hereto so that the Parties may coordinate concurrent public
announcements and/or other disclosures and review the proposed text of such
announcement. In addition, the Parties shall jointly prepare press releases
disclosing the sale of the Company to the Buyer, for release immediately upon
the execution of this Agreement and immediately after the Closing.
12.5 Expenses. Except as otherwise expressly provided herein and except to
the extent the same are paid by the Company from its cash or cash equivalents or
accrued on the Closing Balance Sheet, each Party to this Agreement shall bear
its own costs and expenses in connection with the transactions contemplated
hereby. Any sales, transfer or other taxes (other than income taxes) or fees
applicable to the conveyance and transfer from the Sellers to the Buyer of the
Stock shall be borne by the Buyer. Should the Buyer desire to liquidate the
Company after the
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Closing, whether through a merger or otherwise, the Buyer may do so at its own
expense. The Sellers shall use commercially reasonable efforts to assist in any
such liquidation upon Buyer's reasonable request, but any out-of-pocket expenses
incurred by any Seller in providing such assistance at Buyer's request shall be
promptly reimbursed by Buyer to such Seller. The provisions of this Section 12.5
shall survive any termination of this Agreement.
12.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective successors and
assigns; provided, however, that no Party shall assign any rights or delegate
any of its obligations created under this Agreement prior to Closing without the
prior written consent of the other Parties. This Agreement does not create any
rights, claims or benefits inuring to any Person that is not a party hereto nor
create or establish any third-party beneficiary hereto.
12.7 Entire Transaction. This Agreement and the documents referred to
herein contain the entire understanding among the Parties with respect to the
transactions contemplated hereby and supersede all other agreements,
understandings and undertakings among the Parties regarding the subject matter
hereof. All Schedules hereto are hereby incorporated herein by reference and
made a part of this Agreement.
12.8 Severability. In the event that any provision of this Agreement shall
be held to be invalid or unenforceable by any court of competent jurisdiction,
such holding shall in no way effect, invalidate or render unenforceable any
other provision hereof.
12.9 Governing Law and Jurisdiction. This Agreement, the Escrow Agreement
and the other documents executed pursuant hereto or in connection herewith (the
"Related Agreements") shall be governed by and construed in accordance with the
domestic laws of the State of
California without giving effect to any choice or
conflict of law provision or rule (whether of the State of
California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of
California. Subject to the provisions of
Section 12.10, and without limiting such provisions in any way, each of the
Parties submits to the jurisdiction of the United States District Court for the
Northern District of
California, sitting in San Francisco,
California, or the
Superior Court of the State of
California for the County of San Francisco, in
any action or proceeding arising out of or relating to this Agreement or the
Related Agreements and agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such court. Subject to the
provisions of Section 12.10, and without limiting such provisions in any way,
each Party also agrees not to bring any action or proceeding arising out of or
relating to this Agreement or the Related Agreements in any other court or
tribunal. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any such action or proceeding so brought. Each Party agrees to
frame any complaint brought in
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any such action or proceeding to support federal court jurisdiction if grounds
for federal jurisdiction exist, and further agrees that any of the other Parties
may require such Party to dismiss any state law case where a federal court would
have jurisdiction over the subject matter.
12.10 Dispute Resolution. Except for disputes as to the Adjustment Amount,
which shall be resolved in the manner provided in Section 1.4, all disputes
arising under or relating to this Agreement or the Related Agreements shall be
settled by final and binding arbitration in San Francisco, California, by a
mutually agreeable retired judge in the San Francisco office of the Judicial
Arbitration and Mediation Service (JAMS) selected pursuant to the procedures set
forth below (the "Arbitrator"). Judgment upon the award rendered by the
Arbitrator may be entered only in the United States District Court for the
Northern District of California or the Superior Court of San Francisco County,
California, and such judgment may be enforced in any court having jurisdiction
thereof. The arbitration shall proceed in accordance with the laws of the State
of California, except as otherwise expressly provided herein. Any Party
requesting arbitration shall serve a written demand for arbitration on the other
Parties in the manner described in this Section. The demand shall set forth in
reasonable detail a statement of the nature of the dispute, the amount involved
and the remedies sought. No later than thirty (30) calendar days after a demand
for arbitration is served, the Parties shall jointly agree upon a retired judge
to serve as Arbitrator. In the event that the Parties do not agree within said
30-day period on the selection of a retired judge, then no later than ten (10)
days after the end of such 30-day period, the San Francisco office of JAMS shall
select a retired judge located in its San Francisco office to become the
Arbitrator and to resolve the dispute.
No later than ten (10) calendar days after appointment of the Arbitrator
pursuant to the terms of this Section 12.10, the Parties shall jointly prepare
and submit to the Arbitrator a set of rules for the arbitration. In the event
that the Parties do not agree on the rules for the arbitration, the Arbitrator
shall establish the rules and procedures for any such proceedings which, unless
the Parties otherwise agree, shall be concluded within sixty (60) days after
such submission. The fees and expenses of such arbitration (including reasonable
attorneys' fees) or any action to enforce an arbitration award shall be paid by
the Party that does not prevail in such arbitration as determined by the
Arbitrator. The Arbitrator shall not have the power to amend this Agreement in
any respect, nor shall the Arbitrator have the right to award punitive damages.
The Parties agree that all facts and information relating to any arbitration
arising under this Agreement or the Related Agreements shall be kept
confidential to the extent possible. The Parties agree that all documents filed
with any court in connection with the resolution of any dispute hereunder shall
be filed under seal. The decision in the arbitration proceeding shall be final
and non-appealable.
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Any action to compel arbitration or to preserve the jurisdiction of any
arbitrator by obtaining interim relief pending arbitration shall be brought in
the United States District Court for the Northern District of California or the
Superior Court of San Francisco County, California.
12.11 Headings. The headings in this Agreement are for reference only and
shall not affect the interpretation of this Agreement.
12.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
12.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement and the Related Agreements. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement and the Related Agreements shall be construed as if drafted jointly by
the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement or the Related Agreements. Any reference to any federal, state,
local or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean "including without limitation."
12.14 Further Assurances. Subject to the terms and conditions herein
provided, each of the Parties hereto agrees to use its reasonable commercial
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, each of the Parties has executed, or caused this
Agreement to be executed on its behalf by a duly authorized officer all as of
the date first written above.
SELLERS: BUYER:
HERITAGE HOLDINGS, INC.
--------------------------------------
Xxxxxx X. Xxxxxxx, Trustee, By:
The Xxxxxx X. and Xxxxxxxx X. Xxxxxxx ---------------------------------
Revocable Trust dated 2/4/97 Name:
-------------------------------
-------------------------------------- Title:
Xxxxxxx X. Xxxxxxx, Trustee, ------------------------------
Xxxxxxx Revocable Trust dated 8/2/96
-------------------------------------
Xxxxx X. Xxxxx, Trustee,
Xxxx Xxxxxxxxxxx Xxxxxxx Trust
-------------------------------------
Xxxxx X. Xxxxx, Trustee,
The Xxxxx Family Trust dated 9/92
52
APPENDIX
DEFINITIONS
"ACCOUNTANTS" - As defined in Section 1.4(a).
"ACCOUNTING PRINCIPLES" - As defined in Section 1.3
"ACCOUNTS RECEIVABLE" - As defined in Section 1.7.
"ACCOUNTS RECEIVABLE DEFICIENCY" - As defined in Section 1.7.
"ADJUSTMENT AMOUNT" - As defined in Section 1.3.
"ALLOCABLE SHARES OF STOCK" - As defined in Section 1.2.
"ARBITRATOR" - As defined in Section 12.10.
"A/R RESERVE ESCROW" - As defined in Section 1.7.
"ASSUMED DEBT" - As defined in Section 5.7.
"BENEFIT EXPENSE PRORATION" - As defined in Section 1.3.
"BENEFIT PLANS" - As defined in Section 3.17(a).
"BUSINESS" - As defined in Recital B.
"BUYER" - As defined in the first paragraph of this Agreement.
"BUYER'S ENVIRONMENTAL CONSULTANTS" - As defined in Section 6.9.
"CERCLA" - As defined in Section 3.23(a).
"CLOSING" - As defined in Section 2.1.
"CLOSING DATE" - The date and time as of which the Closing actually takes place.
"CLOSING FINANCIAL STATEMENTS" - As defined in Section 1.4(a).
"COLLECTION PERIOD" - As defined in Section 1.7.
"COMPANY" - As defined in the Recitals of this Agreement.
"CONFIDENTIALITY AGREEMENT" - That certain Confidentiality Agreement dated as of
October 18, 2000 to which the Buyer and SSB (as agent for the Sellers) are
parties.
APPENDIX - PAGE 1
53
"CONTROLLED ENTITY" - As defined in Schedule 1.3.
"DAMAGES" - As defined in Section 9.2.
"DEDUCTIBLE AMOUNT" - As defined in Section 9.5.
"DIS PERMITS" - As defined in Section 3.18.
"DISCLOSURE SCHEDULE" - As defined in the introduction to the Schedules to this
Agreement.
"EMPLOYEES" - As defined in Section 3.15.
"EMPLOYMENT CONTRACTS" - As defined in Section 3.15.
"ENVIRONMENTAL LAWS" - As defined in Section 3.23(a).
"ENVIRONMENTAL LIABILITIES" - As defined in Section 9.5(c).
"ENVIRONMENTAL MAXIMUM" - As defined in Section 9.5(c).
"ERISA" - As defined in Section 3.17(a).
"ESCROW" - As defined in Section 2.2(a).
"ESCROW AGENT" - As defined in Section 2.2(b).
"ESCROW AGREEMENT" - As defined in Section 2.2(b).
"ESCROW AMOUNT" - As defined in Section 2.2(a).
"ESTIMATED ASSUMED DEBT" - As defined in Section 1.5.
"ESTIMATED BENEFIT EXPENSE PRORATION" - As defined in Section 1.5.
"ESTIMATED CASH AMOUNT" - As defined in Section 1.5.
"ESTIMATED NET WORKING CAPITAL" - As defined in Section 1.5.
"ESTIMATED PURCHASE PRICE" - As defined in Section 1.5.
"EXCLUDED ASSETS" - As defined in Section 1.6.
"FINAL CASH AMOUNT" - As defined in Section 1.4.
APPENDIX - PAGE 2
54
"GAAP" - Generally accepted U.S. accounting principles applied on a basis
consistent with the basis on which the Interim Balance Sheet and the other
financial statements referred to in Section 3.6 were prepared.
"GOVERNMENTAL ENTITY" - Any:
(a) nation, state, county, city, town, district or other
jurisdiction;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any nature;
or
(d) body exercising or entitled to exercise any administrative,
executive, judicial, legislative, policy, regulatory or taxing
authority or similar power.
"INDEMNIFYING PARTY" - As defined in Section 9.4.
"INDEMNITEE" - As defined in Section 9.4.
"INTELLECTUAL PROPERTY" - As defined in Section 3.14.
"INTERIM BALANCE SHEET" - As defined in Section 3.6.
"LICENSES AND PERMITS" - As defined in Section 3.18.
"LIENS" - Any lien, pledge, security interest, mortgage, deed of trust, or other
similar encumbrance, other than any of the foregoing (i) created by or through
the Buyer; (ii) with respect to property other than the Stock, relating to any
Taxes or other governmental charges or liabilities that are not yet due or
payable; (iii) with respect to property other than the Stock, that is a
statutory lien arising in the ordinary course of business securing one or more
payments not yet due and payable or, if due and payable, the validity of which
is being contested in appropriate legal proceedings; or (iv) with respect to
property other than the Stock, that does not interfere with the use of any
material asset and that, in the aggregate, involves amounts of less than
$10,000.
"LONG TERM DEBT" - As defined in Section 5.7.
"MATERIAL CONTRACTS" - As defined in Section 3.19.
"NET WORKING CAPITAL" - As defined on Schedule 1.3.
"NET WORKING CAPITAL HOLDBACK" - As defined in Schedule 2.2(a).
APPENDIX - PAGE 3
55
"NON-COMPETITION AGREEMENT" - As defined in Section 7.9.
"PAMPHLET NO. 58" - The publication prepared by the Technical Committee on
Liquefied Petroleum Gases and acted on by the National Fire Protection
Association, Inc. ("NFPA") that sets standards for the storage and handling of
liquefied petroleum gases, including, among other things, maintaining liquefied
petroleum gas equipment and appliances, installing liquefied petroleum gas
systems, storing portable containers and transporting liquefied petroleum gas.
"PARTY" AND "PARTIES" - As defined in the first paragraph of this Agreement.
"PENSION PLANS" - As defined in Section 3.17(a).
"PERSON" - An individual, a partnership, a corporation, an association, a joint
stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization or a Governmental Entity.
"PERSONAL PROPERTY LEASES" - As defined in Section 3.13.
"PREVIOUSLY OWNED/LEASED REAL PROPERTY" - As defined in Section 3.23.
"PURCHASE PRICE" - As defined in Section 1.2.
"PURCHASE PRICE SHORTFALL" - As defined in Section 1.4(b).
"REAL ESTATE" - As defined in Section 3.12(a).
"REAL ESTATE LEASES" - As defined in Section 3.12(b).
"RELATED AGREEMENTS" - As defined in Section 12.9.
"RELATED TRANSACTION" - As defined in Section 7.6.
"RETAINED ENTITIES" - Each Seller and every Seller in each of the Related
Transactions (the "Control Group") and any entity under common control with any
member of the Control Group).
"SELLERS" - As defined in the first paragraph of this Agreement.
"SELLERS' KNOWLEDGE" - "Sellers' Knowledge" or a similar phrase with respect to
Sellers shall mean the actual knowledge as of the date of this Agreement or of
any certificate delivered pursuant hereto of Xxxx Xxxxxxx, Xxxxx Xxxxxxx-Xxxxx
or Xxxxxx Xxxxxxx, or their Sellers' Representative (if other than one of such
individuals), without any duty of inquiry or investigation.
"SELLERS' REPRESENTATIVE" - As defined in Section 11.1.
APPENDIX - PAGE 4
56
"SELLERS' REPRESENTATIVE ESCROW"- As defined in Section 11.2.
"SSB" - Xxxxxxx Xxxxx Barney, Inc.
"STOCK" - As defined in Recital A.
"SUBSIDIARY" - The corporations (if any) listed on Schedule 3.5.
"TAX OR TAXES" - As defined in Section 3.20(a).
"WARN ACT" - The Workers Adjustment Restraining and Notification Act (Title 29
U.S.C., Chapter 23, Section 2101 et seq.
"1933 ACT" - The Securities Act of 1933, as Amended.
APPENDIX - PAGE 5
57
EXHIBIT A
SELLERS
Name Number of Shares
---- ----------------
Xxxxxx X. Xxxxxxx, Trustee, the Xxxxxx 62.50
R. and Xxxxxxxx X. Xxxxxxx Revocable
Trust dated 2/4/97
156.25
Xxxxxxx X. Xxxxxxx, Trustee, The Xxxxxxx
Revocable Trust dated 8/2/96
125.00
Xxxxx X. Xxxxx, Trustee, Xxxx
Xxxxxxxxxxx Xxxxxxx Trust 156.25
Xxxxx X. Xxxxx, Trustee, The Xxxxx
Family Trust Dated 9/92
A-1
58
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of
____________, 2001 (the "Closing Date"), by and among Xxxxxxx X. Xxxxxxx (the
"Sellers' Representative"), Heritage Holdings, Inc., a Delaware corporation (the
"Buyer"), and _____________________, as escrow agent ("Escrow Agent").
Buyer and Sellers' Representative are entering into this Agreement pursuant
to the terms of that certain
Stock Purchase Agreement dated _______, 2001
entered into by and among Buyer and Sellers (the "
Stock Purchase Agreement").
Capitalized terms used in this Agreement without definition shall have the
respective meanings given to them in the
Stock Purchase Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. Establishment of Escrow.
(a) Buyer is depositing with Escrow Agent (i) an amount equal to
$__________ in immediately available funds, and (ii) an amount equal to
$__________ in immediately available funds (the "A/R Reserve Escrow") to be
placed in a sub-account and be available solely to satisfy the Accounts
Receivable Deficiency pursuant to Section 1.7 of the
Stock Purchase Agreement.
(Such amounts, as increased by any earnings thereon and as reduced by any
disbursements or losses on investments, are referred to herein as the "Escrow
Fund.") Buyer is also depositing into a sub-account of the Escrow Fund with the
Escrow Agent an amount equal to $___________ in immediately available funds
representing the "Sellers' Representative Escrow" as described herein and in the
Stock Purchase Agreement, to be available only to the Sellers' Representative.
Escrow Agent acknowledges receipt of all of the foregoing amounts.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. Investment of Funds.
Except as Buyer and the Sellers' Representative may from time to time
jointly instruct Escrow Agent in writing, the Escrow Fund shall be invested from
time to time, to the extent possible, in United States Treasury Bills having a
time remaining until maturity of ninety (90) days or less and repurchase
obligations secured by such United States Treasury Bills, with any remainder
being deposited and maintained in a money market deposit account with Escrow
Agent, until disbursement of the entire Escrow
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Fund. Escrow Agent is authorized to liquidate in accordance with its customary
procedures any portion of the Escrow Fund consisting of investments to provide
for payments required to be made under this Agreement.
3. Damages.
If after Buyer has given a Notice of Damages (as defined in Section 4 of
this Agreement) to the Sellers' Representative and Escrow Agent, Damages are
finally determined under Section 4 of this Agreement to be owing to Buyer,
Escrow Agent shall pay to Buyer the dollar amount of such Damages from (and only
to the extent of) the Escrow Fund (other than the portion of the Escrow Fund
constituting the A/R Reserve Escrow, which can only be used in the manner
provided in Section 6 herein) based upon joint written instructions from Buyer
and the Sellers' Representative or a final nonappealable arbitration award
resulting from arbitration in accordance with Section 12.10 of the
Stock
Purchase Agreement. Escrow Agent shall not inquire into or consider whether the
Damages comply with the requirements of the
Stock Purchase Agreement.
4. Certification of Damages; Payment.
(a) If Buyer is of the opinion that any Damages have or will or may occur,
Buyer shall promptly so notify the Sellers' Representative and the Escrow Agent
in writing, and each such notice (a "Notice of Damages") shall specify in
reasonable detail: (i) an estimate, if practicable, of the amount of Damages
(taking into account the Deductible Amount, the reduction for insurance proceeds
and Tax savings, and the other limitations in Section 9 of the Stock Purchase
Agreement), and (ii) the circumstances of such asserted Damages.
(b) If the Sellers' Representative agrees in writing within thirty (30)
days after receipt of a Notice of Damages that payment is owed under this
Section 4 with respect to some or all of the claimed Damages or amounts set
forth in any such Notice of Damages, or if the Sellers' Representative fails to
dispute some or all of the claimed Damages or amounts set forth in such Notice
of Damages by furnishing written notice of such dispute to Buyer and the Escrow
Agent within thirty (30) days after receipt of such Notice of Damages, the
Damages not then in dispute shall be deemed finally determined under this
Section 4.
(c) In the event that the Sellers' Representative furnishes timely written
notice to Buyer, as provided in Section 4(b) hereof, of any dispute as to
whether Damages have occurred or as to the amounts set forth in a Notice of
Damages, then all Parties affected by such claim shall promptly use their best
efforts to resolve such dispute. To the extent agreement is thereafter reached
in writing by the Sellers' Representative and Buyer as to the amount of any
Damages theretofore in dispute, such Damages, in the amount agreed upon, shall
be deemed finally determined under
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this Section 4 and the Buyer and the Sellers' Representative shall jointly
furnish a copy of such written agreement to the Escrow Agent.
(d) In the event that the occurrence or amount of the Damages, or any part
thereof, set forth in a Notice of Damages, remains in dispute for more than
sixty (60) days following the giving of such notice (or for such longer period
as Buyer and the Sellers' Representative have mutually agreed upon in writing),
then whether Damages have occurred and the amount of the Damages still in
dispute and all matters relating thereto shall be arbitrated and finally
determined in accordance with Section 12.10 of the Stock Purchase Agreement.
Buyer and the Sellers' Representative shall furnish to the Escrow Agent a copy
of the document reflecting the final determination of such Damages.
5. Net Working Capital Adjustment.
The parties acknowledge that a portion of the Escrow Fund may be used as a
source of payment for that amount owing by Sellers to Buyer, if any, represented
by the positive difference between the Estimated Purchase Price and the Purchase
Price (the "Purchase Price Adjustment"), pursuant to Sections 1.3 and 1.4 of the
Stock Purchase Agreement to the extent that the Purchase Price Adjustment
exceeds the Net Working Capital Holdback. Upon final determination of the
Purchase Price Adjustment in accordance with Sections 1.3 and 1.4 of the Stock
Purchase Agreement together with interest thereon as provided in Section 1.4(b)
of the Stock Purchase Agreement, the Sellers' Representative shall have the
right to instruct Escrow Agent in writing (with a copy of such instruction to be
provided concurrently to Buyer) to pay to Buyer from the Escrow Fund an amount
equal to the excess of (i) the Purchase Price Adjustment together with interest
thereon over (ii) the Net Working Capital Holdback, as provided in Section
1.4(b)(i) of the Stock Purchase Agreement, and Escrow Agent shall comply with
such instruction.
6. Accounts Receivable.
The parties acknowledge that the A/R Reserve Escrow has been placed in a
sub-account of the Escrow as a source of payment for that amount (the "Accounts
Receivable Deficiency") owing by the Sellers to Buyer, if any, represented by
the difference between the Accounts Receivable of the Company and its
Subsidiaries and the actual collection of such Accounts Receivable at the
expiration of the period ending four (4) months following the Closing, pursuant
to Section 1.7 of the Stock Purchase Agreement. Within 25 days after the
Sellers' Representative's receipt of the Buyer's written notice of the Accounts
Receivable Deficiency, the Sellers' Representative shall instruct the Escrow
Agent in writing (with a copy of such instruction to be provided concurrently to
Buyer) to pay Buyer from the A/R Reserve Escrow the amount of the Accounts
Receivable Deficiency together with interest thereon as provided in Section 1.7
of the Stock Purchase Agreement, and Escrow
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Agent shall comply with such instruction. In the event that the amount of the
A/R Reserve Escrow exceeds the Accounts Receivable Deficiency, or if there is no
Accounts Receivable Deficiency or Buyer has not provided such written notice to
the Sellers' Representative within five (5) months following the Closing Date,
the Buyer shall instruct the Escrow Agent in writing (with a copy of such
instruction to be provided concurrently to the Sellers' Representative) to
transfer such excess to the Sellers' Representative Escrow and Buyer shall so
instruct the Escrow Agent. The A/R Reserve Escrow shall be used solely to
satisfy any Accounts Receivable Deficiency and Buyer shall have no claim against
the A/R Reserve Escrow for any other purpose or matter.
7. Termination of Escrow.
(a) On the date eighteen (18) months from the date of Closing, Escrow Agent
shall pay and distribute fifty percent (50%) of the then existing amount of this
Escrow Fund to the Sellers in the proportions set forth in Section 8 of this
Agreement, subject to Section 7(c) of this Agreement.
(b) On the date thirty-six months from the date of the Closing, Escrow
Agent shall pay and distribute one hundred percent (100%) of the then existing
amount of the Escrow Fund to the Sellers in the proportions set forth in Section
8 of this Agreement, subject to Section 7(c) of this Agreement.
(c) In the event Buyer has given a Notice of Damages as provided in Section
4 of this Agreement, an amount equal to the aggregate dollar amount of such
Damages specified in such notice shall be retained by Escrow Agent in the Escrow
Fund (and the balance paid to the Sellers) until it receives joint written
instructions of Buyer and the Sellers' Representative or a copy of a final
determination with respect to such Damages as a result of arbitration in
accordance with Section 12.10 of the Stock Purchase Agreement.
8. Allocation of Distribution to Sellers.
All payments and distributions to the Sellers by the Escrow Agent or the
Sellers' Representative pursuant to this Agreement (the "Distributions") shall
be allocated and paid to the holders of the Stock in accordance with their
Allocable Shares of Stock.
9. Installment Sale; Tax Treatment of Interest.
The parties hereto acknowledge and agree that the transactions contemplated
by the Stock Purchase Agreement shall be treated by all parties hereto as an
installment sale in accordance with Section 453 of the Internal Revenue Code of
1986, as amended (the "Code"), and all parties hereto shall make all necessary
tax filings
B-4
62
relating to the sale of stock in accordance with Section 453 of the Code. In
particular, without limitation, the parties hereto acknowledge and agree that
Buyer shall be deemed to be the owner of the assets which comprise the Escrow
Fund (including, without limitation, all interest earned thereon) until such
time as said Escrow Fund (or portion thereof) is distributed to the Sellers in
accordance with the terms of this Agreement. The parties further acknowledge and
agree that any interest income earned with respect to the Escrow Fund shall be
treated for all purposes as taxable income of the Buyer on form 1099-INT. Upon
distribution of all or a portion of the Escrow fund to the Sellers, an
applicable portion of any such payment shall be treated for income tax purposes
as original issue discount which shall be taxable as interest income to the
recipient Sellers and which shall be reported as interest expense by the Buyer
pursuant to the terms of Section 1274 of the Code.
10. Duties of Escrow Agent.
(a) Escrow Agent shall not be liable, except for its own bad faith, gross
negligence or willful misconduct and, except with respect to claims based upon
such bad faith, gross negligence or willful misconduct that are successfully
asserted against Escrow Agent, Sellers and Buyer shall jointly and severally
indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys' fees and disbursements, arising out of
and in connection with this Agreement. Without limiting the foregoing, Escrow
Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from its bad faith, gross negligence or willful misconduct) in
the investment or reinvestment of the Escrow Fund, or any loss of interest
incident to any such delays.
(b) Escrow Agent shall be entitled to rely upon any arbitration award,
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power and
authority to instruct Escrow Agent on behalf of that party unless written notice
to the contrary is delivered to Escrow Agent.
(c) Escrow Agent may act pursuant to the written advice of counsel with
respect to any matter relating to this Agreement and shall not be liable for any
action taken or omitted by it in good faith in accordance with such advice.
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(d) Escrow Agent does not have any interest in the Escrow Fund deposited
hereunder but is serving as escrow holder only and having only possession
thereof. Any payments of income from this Escrow Fund shall be subject to
withholding regulations then in force with respect to United States taxes. Upon
written request of the Escrow Agent, the parties hereto will provide Escrow
Agent with appropriate Internal Revenue Service Forms W-9 for tax identification
number certification, or non-resident alien certifications. This Section 10(d)
and Section 10(a) of this Agreement shall survive notwithstanding any
termination of this Agreement or the resignation of Escrow Agent.
(e) Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(f) Escrow Agent (and any successor Escrow Agent) may at any time resign as
such by delivering the Escrow Fund to any successor Escrow Agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon Escrow Agent shall be discharged of and from any and all
further obligations arising in connection with this Agreement. The resignation
of Escrow Agent will take effect on the earlier of (a) the appointment of a
successor (including a court of competent jurisdiction) or (b) the day which is
thirty (30) days after the date of delivery of its written notice of resignation
to the other parties hereto. If at that time Escrow Agent has not received a
designation of a successor Escrow Agent, Escrow Agent's sole responsibility
after that time shall be to retain and safeguard the Escrow Fund until receipt
of a designation of successor Escrow Agent or a joint written disposition
instruction by the other parties hereto or a final non-appealable order of a
court of competent jurisdiction.
(g) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund or in the event that Escrow Agent is in doubt as to what action it should
take hereunder, Escrow Agent shall be entitled to retain the Escrow Fund until
Escrow Agent shall have received (i) a final nonappealable arbitration award or
order of a court of competent jurisdiction directing delivery of the Escrow Fund
or (ii) a written agreement executed by all other parties hereto directing
delivery of the Escrow Fund, in which event Escrow Agent shall disburse the
Escrow Fund in accordance with such order or agreement. Any arbitration award or
court order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to Escrow Agent to the effect that such award or
order is final and non-appealable. Escrow Agent shall act on such arbitration
award or court order and legal opinion without further question.
(h) Buyer and Sellers' Representative (on behalf of the Sellers and from
the Sellers' Representative Escrow) shall each pay one half (1/2) of the Escrow
Agent's compensation for the services to be rendered by the Escrow Agent
hereunder.
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64
(i) No printed or other matter (including, without limitation,
prospectuses, notices, reports and promotional material) that mentions Escrow
Agent's name or the rights, powers, or duties of Escrow Agent shall be issued by
the other parties hereto or on such parties' behalf unless Escrow Agent shall
first have given its specific written consent thereto.
11. Limited Responsibility.
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. Escrow Agent shall not be bound
by the provisions of any agreement among the other parties hereto except this
Agreement.
12. Sellers' Representative.
(a) Sellers have irrevocably appointed Xxxxxxx X. Xxxxxxx to act as the
sole and exclusive representative (the "Sellers' Representative") to make all
decisions and determinations on behalf of the Sellers under this Agreement that
the Sellers' Representative may deem necessary or appropriate. Without limiting
the generality of the immediately preceding sentence, the Sellers'
Representative may, in his sole good faith discretion, object to, settle or
compromise any Notice of Damages made by Buyer under this Agreement or any
dispute with respect to the final Cash Amount, the Adjustment Amount, the
Purchase Price Adjustment or the Accounts Receivable Deficiency, and authorize
payments to be made with respect thereto. All action taken by the Sellers'
Representative hereunder shall be binding upon the Sellers and their successors
as if expressly confirmed and ratified in writing by each of them, and no Seller
shall have the right to object, dissent, protest or otherwise contest the same.
All actions, decisions and instructions of the Sellers' Representative shall be
conclusive and binding upon all of the Sellers and no Seller shall have any
cause of action against the Sellers' Representative for any action taken,
decision made or instruction given by such Sellers' Representative under or with
respect to this Agreement or the Stock Purchase Agreement, except for gross
negligence or willful misconduct by such Sellers' Representative.
(b) The Sellers' Representative will be entitled to reimbursement of
reasonable costs and expenses (including reasonable attorneys' fees and
arbitration costs) incurred by him or her in connection with the performance of
his or her services and functions under or relating to this Agreement and/or the
Stock Purchase Agreement (the "Expenses"). At the Closing, a sum equal to one
percent (1%) of the Estimated Purchase Price shall be placed into an
interest-bearing escrow account (the "Sellers' Representative Escrow")
established by the Sellers' Representative from which the Sellers'
Representative shall have the right to withdraw the Expenses, from time to time,
in his discretion. When all Escrow Funds have been disbursed as provided in this
Agreement and the Expenses have been paid, the Sellers' Representative shall
disburse any balance remaining in the Sellers' Representative Escrow as
additional
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Purchase Price to the Sellers, in the manner set forth in Section 8 of this
Agreement; provided, however, that if the Sellers' Representative believes, in
his discretion, that he may incur additional Expenses subsequent to such time in
connection with any potential claims that may be asserted against the Sellers'
Representative or otherwise, the Sellers' Representative shall have the right to
retain such portion of the remaining balance in the Sellers' Representative
Escrow for such period of time as he deems necessary, in his discretion, to
cover such Expenses. Upon determination by the Sellers' Representative that no
further Expenses will be incurred, the Sellers' Representative shall thereafter
disburse any balance remaining in the Sellers' Representative Escrow as provided
above.
(c) The Sellers' Representative, or any successor to him hereafter
appointed, may resign and shall be discharged of his duties hereunder upon the
appointment of a successor Sellers' Representative as hereinafter provided. In
case of the resignation or the death or inability to act of the Sellers'
Representative appointed by Sellers, or any of his successors, a successor shall
be named by the vote of a majority in interest of the Sellers. Each such
successor Sellers' Representative shall have the power, authority, rights and
privileges hereby conferred upon the original Sellers' Representative succeeded
by him, and the term "Sellers' Representative" as used herein shall be deemed to
include a successor Sellers' Representative.
13. Notices.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be, personally delivered or sent by facsimile transmission
with confirming copy sent by overnight courier (such as Express Mail, Federal
Express, etc.) and a delivery receipt obtained and addressed to the intended
recipient as follows:
If to Sellers' Representative: Xxxxxxx X. Xxxxxxx
000 Xxxxxxxx Xxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to: Sheppard, Mullin, Xxxxxxx & Hampton LLP
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Short, Esq.
If to Buyer: Heritage Holdings, Inc.
0000 X. Xxxx Xxx., Xxxxx 000
Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: H. Xxxxxxx Xxxxxxxx
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66
With a copy to: Doerner, Saunders, Xxxxxx
& Xxxxxxxx LLP
000 X. Xxxxxx Xxx., Xxxxx 000
Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxxx, Xx., Esq.
If to Escrow Agent:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
Fax:
-------------------------------------------
Attention:
-------------------------------------
14. Arbitration; Jurisdiction.
Any controversy, claim or dispute involving the parties directly or
indirectly concerning this Agreement or the subject matter hereof shall be
finally settled in accordance with Section 12.10 of the Stock Purchase
Agreement, and the parties submit to jurisdiction in the manner provided in
Section 12.9 of the Stock Purchase Agreement in any action or proceeding arising
out of or relating to this Agreement.
15. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same instrument.
16. Headings.
The headings of sections in this Agreement are provided for convenience
only and shall not affect the interpretation of this Agreement.
17. Amendments and Waiver.
No amendment, waiver or consent with respect to any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by all parties hereto, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. The failure of any party at any time or times to require
performance of any provisions hereof shall in no manner affect that party's
right at a later time to enforce the same. No waiver by any party of the breach
of any term or covenant contained in this Agreement in any one or more instances
shall be deemed to be, or construed as, a further continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
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18. Exclusive Agreement and Modification.
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the Buyer, the
Sellers' Representative and the Escrow Agent.
19. Governing Law.
This Agreement shall be governed by the laws of the State of California,
without regard to conflicts of law principles.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: HERITAGE HOLDINGS, INC.
By:
---------------------------------------
Its:
--------------------------------------
SELLERS' REPRESENTATIVE:
------------------------------------------
Xxxxxxx X. Xxxxxxx
ESCROW AGENT:
------------------------------------------
By:
---------------------------------------
Its:
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EXHIBIT C
FORM OF OPINION
OF BUYER'S COUNSEL
Unless otherwise defined below, all capitalized terms used below shall have
the meanings ascribed to such terms in the Stock Purchase Agreement dated as of
_______________, 2001 (the "Agreement") by and among Buyer and the Sellers.
1. The Buyer has been duly organized and is validly existing as a
_______________ under the laws of the State of _______________ and has all
requisite [corporate] power and [corporate] authority to enter into the
Agreement and Escrow Agreement and to consummate the transactions contemplated
hereby and thereby.
2. The execution and delivery by Buyer of the Agreement and the Escrow
Agreement, and the consummation by Buyer of the transactions contemplated by the
Agreement and the Escrow Agreement, have been duly authorized by all necessary
[corporate] action on the part of Buyer.
3. The Agreement and the Escrow Agreement have each been duly executed and
delivered by Buyer, and each constitutes a valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except as such
enforceability may be subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, fraudulent conveyance or other
laws relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4. The execution, delivery and performance of the Agreement and the Escrow
Agreement by Buyer will not constitute a violation by it of the terms of its
[Articles of Incorporation or bylaws], each as amended to date.
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EXHIBIT D
FORM OF OPINION
OF SELLERS' COUNSEL
Unless otherwise defined below, all capitalized terms used below shall have
the meanings ascribed to such terms in the Stock Purchase Agreement dated as of
_______________, 2001 (the "Agreement") by and among Buyer and the Sellers.
1 The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of California and has
all requisite corporate power and corporate authority to enter into the
Agreement and to consummate the transactions contemplated hereby.
2 The execution and delivery by the Sellers of the Agreement and the
consummation by the Sellers of the transactions described in the Agreement have
been duly authorized by all necessary action on the part of Sellers.
3 The Agreement has been duly executed and delivered by the Sellers and
constitutes a valid and binding obligation of the Sellers enforceable against
them in accordance with its terms, except as such enforceability may be subject
to the effect of (i) any applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, fraudulent conveyance or other laws relating to or
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4 In the case of any Seller that is not an individual, the execution,
delivery and performance of the Agreement by such Seller will not constitute a
violation by it of the terms of its organizational documents.
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EXHIBIT E
FORM OF OFFICER AND DIRECTOR RELEASE
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EXHIBIT F
CONSENTS
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EXHIBIT G
FORM OF NON-COMPETITION AGREEMENT
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