Exhibit 10.4
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
LEUCADIA NATIONAL CORPORATION
AND
THE SELLING SHAREHOLDERS NAMED HEREIN
DATED AS OF MAY 2, 2005
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS....................................................................................1
Section 1.1 Definitions..........................................................................1
Section 1.2 Other Definitional Provisions.......................................................10
ARTICLE II PURCHASE OF SHARES; PURCHASE PRICE............................................................10
Section 2.1 Sale and Purchase of Shares.........................................................10
Section 2.2 Consideration.......................................................................10
Section 2.3 Net Working Capital Adjustment......................................................11
Section 2.4 Escrow..............................................................................13
Section 2.5 Sales and Transfer Taxes............................................................13
Section 2.6 Further Assurances..................................................................14
ARTICLE III CLOSING; CLOSING DELIVERIES...................................................................14
Section 3.1 Closing.............................................................................14
Section 3.2 Deliveries by the Sellers at Closing................................................14
Section 3.3 Deliveries by the Purchaser at Closing..............................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................................................16
Section 4.1 Due Organization and Status.........................................................17
Section 4.2 Authority; Enforceability...........................................................17
Section 4.3 Noncontravention....................................................................17
Section 4.4 Capital Stock of the Companies; Transactions in Equity Securities..................18
Section 4.5 Subsidiaries........................................................................19
Section 4.6 Assets and Properties of the Business...............................................19
Section 4.7 Financial Statements................................................................20
Section 4.8 Absence of Changes..................................................................20
Section 4.9 Legal Compliance....................................................................21
Section 4.10 Taxes...............................................................................21
Section 4.11 Contracts...........................................................................23
Section 4.12 Related Party Agreements............................................................24
Section 4.13 Litigation..........................................................................24
Section 4.14 Employee Matters....................................................................24
Section 4.15 Customers; Suppliers................................................................25
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Section 4.16 Authorizations......................................................................26
Section 4.17 Insurance...........................................................................26
Section 4.18 Real Property.......................................................................26
Section 4.19 Environmental Matters...............................................................27
Section 4.20 Brokers' Fees.......................................................................28
Section 4.21 Intellectual Property...............................................................28
Section 4.22 Accounts Receivable.................................................................29
Section 4.23 Powers of Attorney..................................................................29
Section 4.24 Warranties..........................................................................29
Section 4.25 Bank Accounts.......................................................................29
Section 4.26 Absence of Undisclosed Liabilities..................................................29
Section 4.27 Disclaimer Regarding Estimates and Projections.....................................29
ARTICLE V REPRESENTATIONS OF THE PURCHASER..............................................................30
Section 5.1 Organization........................................................................30
Section 5.2 Authority; Enforceability...........................................................30
Section 5.3 Noncontravention....................................................................31
Section 5.4 Brokers' Fees.......................................................................31
Section 5.5 Financing...........................................................................31
Section 5.6 Investment Purpose..................................................................31
Section 5.7 Independent Investigation...........................................................32
ARTICLE VI COVENANTS OF THE PARTIES PRIOR TO CLOSING.....................................................32
Section 6.1 Consents and Filings................................................................32
Section 6.2 Operation of Business...............................................................32
Section 6.3 Access..............................................................................35
Section 6.4 Notice of Developments..............................................................35
Section 6.5 Title Insurance.....................................................................36
Section 6.6 Prepayment of Indebtedness; Release of Security Interests..........................36
Section 6.7 Prior Agreements Regarding Shares...................................................36
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS...........................................37
Section 7.1 Representations and Warranties; Performance of Obligations.........................37
Section 7.2 No Litigation.......................................................................37
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Section 7.3 Authorizations......................................................................37
Section 7.4 HSR Act.............................................................................37
Section 7.5 Additional Items....................................................................37
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER.........................................38
Section 8.1 Representations and Warranties; Performance of Obligations.........................38
Section 8.2 No Litigation.......................................................................38
Section 8.3 Authorizations......................................................................38
Section 8.4 HSR Act.............................................................................38
Section 8.5 No Material Adverse Effect..........................................................39
Section 8.6 Title Insurance Policies............................................................39
Section 8.7 No Claim Regarding Stock Ownership or Sale Proceeds................................39
Section 8.8 Additional Items....................................................................39
ARTICLE IX CONTINUING COVENANTS OF THE PURCHASER AND THE SELLERS........................................39
Section 9.1 Tax Matters.........................................................................39
Section 9.2 Proprietary Information.............................................................42
Section 9.3 Sharing of Information..............................................................43
Section 9.4 Cooperation in Litigation...........................................................43
ARTICLE X INDEMNIFICATION...............................................................................43
Section 10.1 Survival of Representations and Warranties.........................................43
Section 10.2 Indemnification Provisions for the Benefit of the Purchaser........................44
Section 10.3 Indemnification Provisions for the Benefit of the Sellers..........................45
Section 10.4 Indemnification Claims..............................................................45
Section 10.5 Determination of Adverse Consequences...............................................47
Section 10.6 Exclusive Remedy....................................................................47
Section 10.7 Special Environmental Indemnification for the Benefit of the Purchaser.............48
ARTICLE XI TERMINATION OF AGREEMENT......................................................................49
Section 11.1 Termination of Agreement............................................................49
Section 11.2 Effect of Termination...............................................................50
ARTICLE XII EMPLOYEES.....................................................................................50
Section 12.1 Employment by the Purchaser.........................................................50
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ARTICLE XIII GENERAL.......................................................................................50
Section 13.1 The Seller Representative...........................................................50
Section 13.2 Press Releases and Public Announcements.............................................51
Section 13.3 No Third-Party Beneficiaries........................................................52
Section 13.4 Entire Agreement....................................................................52
Section 13.5 Succession and Assignment...........................................................52
Section 13.6 Counterparts........................................................................52
Section 13.7 Headings............................................................................52
Section 13.8 Notices.............................................................................53
Section 13.9 Governing Law.......................................................................54
Section 13.10 Amendments and Waivers..............................................................54
Section 13.11 Severability........................................................................54
Section 13.12 Expenses............................................................................55
Section 13.13 Construction........................................................................55
Section 13.14 Incorporation of Exhibits and Schedules.............................................55
Section 13.15 Specific Performance................................................................55
Section 13.16 Waiver of Jury Trial................................................................55
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EXHIBITS AND SCHEDULES
Exhibit A List of Sellers
Exhibit B Current Ownership of Companies
Exhibit C Sample Net Working Capital Calculation
Exhibit D Relative Value
Exhibit E Form of Escrow Agreement
Exhibit F-1 Form of Opinion of Sellers' Counsel
Exhibit F-2 Form of Opinion of Sellers' Counsel
Exhibit G-1 Form of Non-Competition Agreement
Exhibit G-2 Form of Non-Competition Agreement
Exhibit H Term Sheet for Incentive Plan
Schedule 2.2 Adjustments to Proceeds
Schedule 2.3 Methodologies for Balance Sheet
Schedule 3.2(g) List of Non-Competition and Non-Solicitation
Agreements
Schedule 4.3 Noncontravention
Schedule 4.4(a) Capital Stock
Schedule 4.4(c) Voting or Shareholder Agreements
Schedule 4.5(b) Operations of Administrators, Inc.
Schedule 4.6 Exceptions to Title
Schedule 4.7 Financial Statements
Schedule 4.8 Absence of Changes
Schedule 4.10 Taxes
Schedule 4.11 Contracts
Schedule 4.12 Related Party Agreements
Schedule 4.13 Litigation
Schedule 4.14(a) Employees and Multiemployer Plans
Schedule 4.14(b) Company Plans
Schedule 4.14(c) Accelerated Payments
Schedule 4.15(a) Customer Agreements
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Schedule 4.15(b) Significant Customers and Suppliers
Schedule 4.16 Authorizations
Schedule 4.17 Insurance
Schedule 4.18 Real Property
Schedule 4.19 Environmental Matters
Schedule 4.20 Brokers' Fees
Schedule 4.21(a) Intellectual Property
Schedule 4.21(b) Exceptions to Intellectual Property Ownership
Schedule 4.21(d) Licenses
Schedule 4.24 Terms and Conditions of Sale
Schedule 4.25 Bank Accounts
Schedule 4.26 Undisclosed Liabilities
Schedule 5.3 Required Purchaser Filings
Schedule 10.7 Environmental Conditions
Schedule 12.1 Non-continuing Employees
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made and entered
into as of May 2, 2005, by and among Leucadia National Corporation, a New York
corporation (the "PURCHASER"), and each of the individuals listed on Exhibit A
attached hereto (each, a "SELLER" and collectively referred to as the
"SELLERS"). The Purchaser and the Sellers are referred to collectively as the
"PARTIES."
RECITALS:
WHEREAS, each of the Sellers owns the number of shares (and
applicable percentages) set forth on the ownership schedule attached as Exhibit
B, which shares, collectively, constitute all of the outstanding capital stock
(collectively, the "SHARES") of: (i) Idaho Timber Corporation, an Idaho
corporation ("ITC"), (ii) Idaho Timber Corporation of Boise, Inc., an Idaho
corporation, (iii) Idaho Timber Corporation of Texas, Inc., an Idaho
corporation, (iv) Alumni Forest Products, Inc., a Georgia corporation, (v) Idaho
Timber Corporation of Kansas, Inc., an Idaho corporation, (vi) Idaho Timber
Corporation of North Carolina, Inc., an Idaho corporation, (vii) Idaho Timber
Corporation of Albuquerque, Inc., an Idaho corporation, (viii) Idaho Timber
Corporation of Montana, Inc., an Idaho corporation, (ix) Idaho Timber
Corporation of Idaho, Inc., an Idaho corporation, (x) Idaho Timber Corporation
of Mountain Home, Inc., an Idaho corporation ("ITC MOUNTAIN"), (xi) Idaho Timber
Corporation of Carthage, Inc., an Idaho corporation and (xii) Idaho Cedar Sales,
Inc., an Idaho corporation (the companies listed in clauses (i) through (xii)
above are hereinafter referred to collectively as the "COMPANIES");
WHEREAS, the Companies are, collectively, engaged in the business of
manufacturing, remanufacturing, truss fabrication and selling of lumber products
(the "BUSINESS") at various locations throughout the United States; and
WHEREAS, the Purchaser desires to purchase, and each of the Sellers
desires to sell, all of the Shares held by such Seller as set forth on Exhibit
B, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, to induce the Purchaser to purchase the Shares, and
to induce the Sellers to sell the Shares, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
In addition to capitalized terms defined elsewhere in this Agreement,
the following capitalized terms used in this Agreement have the following
meanings for all purposes of this Agreement:
"ADJUSTMENT REPORT" has the meaning set forth in Section 2.3(c)
below.
"ADVERSE CONSEQUENCES" shall mean any and all debts, obligations and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, Taxes, liens, interest obligations,
deficiencies, losses and expenses (including amounts paid in settlement,
interest, court costs, reasonable costs of investigators, reasonable fees and
expenses of attorneys, accountants, financial advisors and other experts, and
other expenses of litigation or alternative dispute resolution).
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AGREED AMOUNT" shall mean part, but not all, of the Claimed Amount.
"AGREEMENT" has the meaning set forth in the preface above.
"AS IF CONSOLIDATED BASIS" has the meaning set forth in Section
2.3(b) below.
"AUTHORIZATION" shall mean any approval, authorization, certificate,
certification, consent, order, variance, permission, license or permit to or
from, or filing, notice or recordings to or with, any Governmental Body.
"AUTHORIZED ACTION" has the meaning set forth in Section 13.1(c)
below.
"BUSINESS DAY" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and are
not required or authorized to close.
"CAP" has the meaning set forth in Section 10.2 below.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
"CLAIM NOTICE" shall mean written notification which contains (i) a
description of the Adverse Consequences incurred or reasonably expected to be
incurred by the Indemnified Party and the Claimed Amount of such Adverse
Consequences, to the extent then known, (ii) a statement that the Indemnified
Party is entitled to indemnification under Article X for such Adverse
Consequences and a reasonable explanation of the basis therefor, and (iii) a
demand for payment in the amount of such Adverse Consequences.
"CLAIMED AMOUNT" shall mean the amount of any Adverse Consequences
incurred or reasonably expected to be incurred by the Indemnified Party.
"CLOSING" has the meaning set forth in Section 3.1 below.
"CLOSING DATE" has the meaning set forth in Section 3.1 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
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"COMPANIES" has the meaning set forth in the recitals above.
"COMPANY EMPLOYEE" has the meaning set forth in Section 4.14(a)
below.
"COMPANY PLAN" has the meaning set forth in Section 4.14(b) below.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 6.3
below.
"CONTROLLING PARTY" shall mean the party controlling the defense of
any Third Party Claim.
"DEBT" means any amount or other obligation payable by any of the
Companies under the Business Loan Agreement, dated as of September 18, 2003,
between Bank of America, N.A., as lender, and Idaho Timber Corporation and the
other parties thereto listed as borrowers, or any other document or instrument
evidencing indebtedness for borrowed money of any of the Companies, including,
without limitation, the aggregate principal amount of and accrued but unpaid
interest on any outstanding borrowings thereunder.
"DEBT HOLDER" means any holder of notes or other instruments
evidencing any Debt.
"DOJ" has the meaning set forth in Section 6.1.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution or defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan, or (c) Employee Welfare Benefit Plan or material
fringe benefit or other retirement, bonus, severance, incentive, change in
control, equity or equity-based compensation, salary continuation for
disability, or vacation or other paid time off plan, program, agreement or
arrangement (whether written or otherwise).
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2) (excluding any Multiemployer Plan).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(l) (excluding any Multiemployer Plan).
"ENVIRONMENTAL CAP" has the meaning set forth in Section 10.7(e).
"ENVIRONMENTAL CONDITIONS" has the meaning set forth in Section
10.7(a).
"ENVIRONMENTAL DEDUCTIBLE" has the meaning set forth in Section
10.7(d).
"ENVIRONMENTAL LAWS" means any applicable statute, code, ordinance,
regulation, permit, judgment, Order, decree or injunction, or other legal
requirement, whether local, state, or national, and the common law, relating to
pollution or the protection of the environment, natural resources or exposure of
Persons or property to Hazardous Materials, including any statute, regulation,
administrative decision or order pertaining to (i) treatment, storage, disposal,
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generation and transportation of toxic or hazardous substances or solid or
hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the Release or threatened Release into the environment of
toxic or hazardous substances, or solid or hazardous waste, including without
limitation emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants or chemicals; (v) the protection of wild life, marine
sanctuaries and wetlands, including without limitation all endangered and
threatened species; (vi) storage tanks, vessels and containers; (vii)
underground and other storage tanks or vessels, abandoned, disposed or discarded
barrels, containers and other closed receptacles; and (viii) manufacture,
processing, use, distribution, treatment, storage, disposal, transportation or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or oil or petroleum products, radioactive materials,
asbestos or asbestos-containing material, or solid or hazardous waste. As used
above, the term "environment" shall have the meaning set forth in CERCLA.
"ENVIRONMENTAL MATTERS" means any liability or obligation arising
under Environmental Law, whether arising under theories of contract, tort,
negligence, successor or enterprise liability, strict liability or other legal
or equitable theory, including (i) any failure to comply with an applicable
Environmental Law and (ii) any liability or obligation arising from the presence
of, Release or threatened Release of, or exposure of persons or property to,
Hazardous Materials at the locations where the Companies are conducting or have
conducted operations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer with any Company under
Section 414(b), (c), (m) or (o) of the Code.
"ESCROW AGENT" means Wilmington Trust Company.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.4 below.
"ESCROW AMOUNT" means the aggregate of the Indemnification Escrow
Amount and the Working Capital Escrow Amount.
"ESTIMATED NET WORKING CAPITAL" has the meaning set forth in Section
2.3(a) below.
"EXCLUDED LIABILITIES" has the meaning set forth in Section 10.7(f).
"EXPECTED CLAIM NOTICE" shall mean a notice stating (i) that, as a
result of a legal Proceeding instituted by or written claim made by a third
party, an Indemnified Party reasonably expects to incur Adverse Consequences for
which it is entitled to indemnification under Article X, (ii) the reasonable
explanation concerning this expected basis for indemnification and (iii) the
estimated amount of Adverse Consequences based on facts available to the
Indemnified Party.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.7
below.
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"FTC" has the meaning set forth in Section 6.1.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time; provided, that as and where indicated by this
Agreement GAAP shall be applied on an "as if consolidated basis" among the
Companies.
"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"HAZARDOUS MATERIALS" means any pollutants, contaminants or hazardous
substances (as such terms are defined under CERCLA or any Environmental Law),
pesticides, solid wastes and hazardous wastes (as such terms are defined under
the federal Resources Conservation and Recovery Act or any Environmental Law),
chemicals, other hazardous, radioactive or toxic materials, oil, petroleum and
petroleum products (and fractions thereof), asbestos or any other material (or
article or mixture containing such material), substance or waste listed or
subject to regulation under any Environmental Law.
"HSR ACT" has the meaning set forth in Section 6.1 below.
"INCOME TAX" or "INCOME TAXES" means any Taxes imposed on or measured
by net income.
"INCOME TAX RETURN" means any Tax Return relating to Income Taxes,
including any schedule or attachment thereto.
"INDEMNIFICATION ESCROW ACCOUNT" has the meaning set forth in Section
2.4 below.
"INDEMNIFICATION ESCROW AMOUNT" means $15,000,000.
"INDEMNIFIED PARTY" means a party entitled, or seeking to assert
rights, to indemnification under Article X of this Agreement.
"INDEMNIFYING PARTY" means the party from whom indemnification is
sought by the Indemnified Party.
"INDEPENDENT AUDITORS" has the meaning set forth in Section 2.3(d)
below.
"INTELLECTUAL PROPERTY" shall mean all (a) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations; (b) trademarks, service marks, trade dress,
Internet domain names, logos, trade names and corporate names and registrations
and applications for registration thereof; (c) copyrights and registrations and
applications for registration thereof; (d) computer software, data and
documentation; (e) inventions, trade secrets and confidential business
information, whether patentable or nonpatentable and whether or not reduced to
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practice, know-how, manufacturing and product processes and techniques, research
and development information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information; (f) other proprietary rights
relating to any of the foregoing (including remedies against infringements
thereof and rights of protection of interest therein under the laws of all
jurisdictions); and (g) copies and tangible embodiments thereof.
"INTERNAL SYSTEMS" shall mean the internal computer hardware systems,
software applications and embedded systems of the Companies that are used in its
business or operations.
"IRS" has the meaning set forth in Section 4.10(i) below.
"ITC" has the meaning set forth in the recitals above.
"KNOWLEDGE OF THE SELLERS" or "SELLERS' KNOWLEDGE" means the actual
knowledge (after due inquiry of appropriate personnel of the Companies) of any
of Xxxxx Xxxxxxxx, Xxx Xxxxx, Xxxxxx Xxxx, Xxxxx Xxxxxxx, Xxx Xxxx, Xxxxxx Xxxx,
Xxxx Beverage, Xxxxx Xxxxxxxxxx, Xxxx Xxxxxxx or Xxxxx Xxxxx.
"LATEST BALANCE SHEET" means the audited balance sheet prepared for
the Companies on an "as if consolidated basis" as of March 26, 2004.
"LAW" means any foreign, federal, state or local law (including
common law), statute, code, ordinance, rule, regulation or other requirement.
"LEASED REAL PROPERTY" has the meaning set forth in Section 4.18
below.
"MATERIAL ADVERSE EFFECT" means a material adverse change, event,
circumstance or development with respect to, or material adverse effect on, (i)
the business, assets, liabilities, operations or condition (financial or
otherwise) of the Companies taken as a whole (other than any adverse change,
event, circumstance, development or effect arising from or relating to (1)
general business or economic conditions, except for such conditions specifically
related to the industry in which the Companies conduct their business, (2)
national or international political or social conditions, including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war or the occurrence of any military or
terrorist attack upon the United States or any of its territories, possessions
or diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States, or (3) changes in GAAP or any other
accounting requirement), or (ii) the ability of the Sellers to consummate the
transactions contemplated by this Agreement. For the avoidance of any doubt, the
Parties agree that the terms "material", "materially" or "materiality" as used
in this Agreement with an initial lower case "m" shall have their respective
customary and ordinary meanings, without regard to the meaning ascribed to
Material Adverse Effect.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section
3(37).
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"NET WORKING CAPITAL" means an amount equal to (A) all "current
assets" of the Companies (taken as a whole), minus (B) all liabilities of the
Companies (taken as a whole) that are classified as "current liabilities"
(which, for purposes hereof, shall exclude accrued interest on Debt, accrued
corporate income Taxes, bonus and profit sharing amounts accrued (or for which
checks have been issued and remain outstanding as of the Closing Date) by any of
the Companies during the fiscal year ended March 25, 2005, and any checks
outstanding for dividends or other equity-related distributions to any of the
Sellers), each as determined as of the Closing Date in accordance with GAAP in a
manner consistent with prior practices, methodologies and procedures and the
application of the accounting principles applied in preparing the Financial
Statements (to the extent such principles are consistent with GAAP). The
determination of Net Working Capital shall in any event be consistent with
Exhibit C and shall use the methodologies and treatment for certain items as set
forth on Schedule 2.3 attached hereto.
"NET WORKING CAPITAL BALANCE SHEET" has the meaning set forth in
Section 2.3(b) below.
"NET WORKING CAPITAL CALCULATION" has the meaning set forth in
Section 2.3(b) below.
"NON-CONTROLLING PARTY" shall mean the party not controlling the
defense of any Third Party Claim.
"NORMALIZED WORKING CAPITAL AMOUNT" means $44,115,758.00. The
Normalized Working Capital Amount shall be prepared consistent with Exhibit C
(which shows an example of the determination of such Normalized Working Capital
Amount) and shall use the methodologies and treatment for certain items as set
forth on Schedule 2.3 and shall in any event be calculated in accordance with
the principles and adjustments used in the determination of Net Working Capital
as set forth in the definition thereof.
"ORDER" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award of a Governmental Body.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice.
"OWNED REAL PROPERTY" has the meaning set forth in Section 4.18
below.
"PARTIES" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a Governmental Body.
"PROCEEDING" has the meaning set forth in Section 9.4 below.
"PURCHASE PRICE" has the meaning set forth in Section 2.2 below.
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"PURCHASER" has the meaning set forth in the preface above.
"PURCHASER'S INVESTIGATIONS" has the meaning set forth in Section
10.7(b).
"REAL ESTATE LEASES" has the meaning set forth in Section 4.18 below.
"REAL PROPERTY" has the meaning set forth in Section 4.18 below.
"RELATIVE VALUE" means, as applied to any Seller, the ratio of the
value of such Seller's Shares to the value of all Shares being sold by the
Sellers in the aggregate, with the agreed upon percentages to be determined as
set forth on Exhibit D attached hereto.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injections, escaping, leaching, dumping, disposing of or
migrating into or through the environment or any natural or man-made structure.
"REMEDIAL ACTION" has the meaning set forth in Section 10.7(f).
"REMEDIAL LIABILITIES" has the meaning set forth in Section 10.7(f).
"RESPONSE" shall mean a written response containing the information
provided for in Section 10.4(b) below.
"SECTION 338(H)(10) ELECTIONS" has the meaning set forth in Section
9.1(e)(i) below.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SECURITY INTEREST" means any mortgage, pledge, charge, lien or other
encumbrance (whether arising by contract or operation of Law), other than (a)
liens for Taxes or assessments not yet due and payable, (b) mechanics'
materialmen's, carriers', workers', repairers', landlords' and other similar
liens arising or incurred in the Ordinary Course of Business relating to
obligations as to which there is no material default on the part of any of the
Companies or the validity of which are being contested in good faith, (c)
zoning, entitlement, conservation restriction and other land use and
environmental regulations imposed by a Governmental Body (provided that such
regulations have not been violated) or under the terms of leases of Real
Property, and (d) such other liens, imperfections in title, easements, leases,
licenses, restrictions, activity and use limitations, conservation easements,
encumbrances and encroachments that currently exist and which would be disclosed
by a survey or inspection of the Real Property leased or owned by the Companies
and which do not materially detract from the value or marketability of or
materially interfere with the present use of any Real Property subject thereto
or affected thereby.
"SELLER REPRESENTATIVE" has the meaning set forth in Section 13.1(a)
below.
"SELLER REPRESENTATIVE ACCOUNT" has the meaning set forth in Section
2.2 below.
"SELLERS" has the meaning set forth in the preface above.
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"SETTLEMENT DATE" has the meaning set forth in Section 2.3(e) below.
"SHARES" has the meaning set forth in the recitals above.
"SUBSIDIARY" means any Person with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or other
equity interests or has the direct power to vote or direct the voting of
sufficient securities to elect a majority of the directors or managers.
"TAX" or "TAXES" means (i) any and all taxes, charges, fees, levies
or other similar assessments or liabilities in the nature of a tax, including,
without limitation, income, gross receipts, ad valorem, premium, value-added,
net worth, capital stock, capital gains, documentary, recapture, alternative or
add-on minimum, disability, estimated, registration, recording, excise, real
property, personal property, sales, use, license, lease, service, service use,
transfer, withholding, employment, unemployment, insurance, social security,
business license, business organization, environmental, workers compensation,
payroll, profits, severance, stamp, occupation, windfall profits, customs,
duties, franchise and other taxes of any kind whatsoever imposed by the United
States of America or any state, local or foreign government, or any agency or
political subdivision thereof, (ii) any interest, fines, penalties, assessments
or additions to tax imposed with respect to such items or any contest or dispute
thereof and (iii) any liability in respect of the items described in (i) and
(ii) by reason of contract, assumption, transferee liability, operation of law,
Treasury regulation Section 1.1502-6(a) (or any predecessor or successor thereof
or any analogous or similar provision of state or local law) or otherwise.
"TAX RETURNS" shall mean any and all reports, returns, declarations,
or statements relating to Taxes, including any schedule or attachment thereto
and any related or supporting workpapers or information with respect to any of
the foregoing, including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 10.4(a)
below.
"TITLE COMMITMENTS" has the meaning set forth in Section 6.5 below.
"TITLE COMPANIES" has the meaning set forth in Section 6.5 below.
"TITLE POLICIES" has the meaning set forth in Section 8.6 below.
"TRANSACTION DOCUMENTS" has the meaning set forth in Section 4.2
below.
"WORKING CAPITAL ESCROW ACCOUNT" has the meaning set forth in Section
2.4 below.
"WORKING CAPITAL ESCROW AMOUNT" means $5,000,000.
9
Section 1.2 Other Definitional Provisions.
All accounting terms not otherwise defined herein shall have the
meaning ascribed thereto by GAAP. All terms defined in this Agreement in the
singular shall have comparable meanings when used in the plural and vice-versa.
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Underlined references to Articles,
Sections, Schedules and Exhibits shall refer to those portions of this
Agreement. The use of the masculine, feminine or neuter gender herein shall not
limit any provision of this Agreement. The use of the terms "including" or
"include" shall in all cases herein mean "including, without limitation" or
"include, without limitation," respectively.
ARTICLE II
PURCHASE OF SHARES; PURCHASE PRICE
Section 2.1 Sale and Purchase of Shares.
Subject to the terms and conditions hereof, and in reliance upon the
representations, warranties, covenants and agreements made herein by the Sellers
and the Purchaser, the Purchaser shall purchase and accept from the Sellers, and
the Sellers shall sell, transfer, convey, assign and deliver to the Purchaser,
on the Closing Date, the Shares in the amounts, as applicable to each of the
Sellers and the Companies, set forth on Exhibit B.
Section 2.2 Consideration.
The aggregate purchase price payable by the Purchaser for the Shares
shall be an amount equal to One Hundred Thirty-Two Million Dollars
($132,000,000), subject to adjustment pursuant to Section 2.3 below (the
"PURCHASE PRICE"). At the Closing, the Purchaser shall pay (i) the Purchase
Price less (A) the Escrow Amount, (B) the amounts set forth on Schedule 2.2
hereto, (C) the aggregate amount of all outstanding loans by any of the
Companies to Affiliates of the Companies as set forth on Schedule 4.12 hereto,
and (D) any other amounts which the Purchaser and the Seller Representative
agree shall be paid directly by the Purchaser at the Closing in respect of
costs, expenses and other amounts which are the obligation of the Sellers
hereunder, to the Seller Representative by wire transfer of immediately
available federal funds to an account designated by the Seller Representative in
writing to the Purchaser at least two (2) Business Days prior to the Closing
Date (the "SELLER REPRESENTATIVE ACCOUNT") and (ii) the Escrow Amount to the
Escrow Agent in accordance with the terms of Section 2.4. In accordance with the
authority granted to the Seller Representative described in Section 13.1 hereof,
the Seller Representative shall be solely responsible for distributing any
payments from the Seller Representative Account on account of the Purchase
Price, including any payment, if applicable, made pursuant to Section 2.3(f)
below, to the Sellers. Seller Representative agrees to cause all such amounts to
be distributed from the Seller Representative Account to the Sellers based upon
the Relative Value (except to the extent otherwise agreed among the Sellers).
10
Section 2.3 Net Working Capital Adjustment.
The Purchase Price shall be subject to adjustment as follows:
(a) At least two (2) Business Days prior to the Closing Date, the
Seller Representative shall estimate the Net Working Capital of the Companies
(taken as a whole) as of the close of business on March 25, 2005 (the "ESTIMATED
NET WORKING CAPITAL"); provided that, in the event Purchaser disagrees, in good
faith, with the Seller Representative's estimate, the Parties shall mutually
determine such estimate. The Estimated Net Working Capital shall be prepared
consistent with Exhibit C and shall use the methodologies and treatment for
certain items as set forth on Schedule 2.3 and shall in any event be calculated
in accordance with the principles and adjustments used in the determination of
Net Working Capital as set forth in the definition thereof. The cash
consideration payable at Closing by Purchaser to the Seller Representative
Account pursuant to Section 2.2 shall be (i) increased by the amount, if any, by
which the Estimated Net Working Capital exceeds the Normalized Working Capital
Amount or (ii) decreased by the amount, if any, by which the Normalized Working
Capital Amount exceeds the Estimated Net Working Capital.
(b) Within forty-five (45) days following the Closing, the Purchaser
shall have prepared and delivered to the Seller Representative (i) a balance
sheet of the Companies (prepared as if the Companies reported on a consolidated
basis with each other (an "AS IF CONSOLIDATED BASIS") as of the Closing Date
(the "NET WORKING CAPITAL BALANCE SHEET"), using the methodologies and treatment
for certain items as set forth on Schedule 2.3, and (ii) a calculation of the
Net Working Capital of the Companies as of the Closing Date, prepared on the
basis of the Net Working Capital Balance Sheet, which shall (A) be prepared
consistent with Exhibit C, (B) use the methodologies and treatment for certain
items as set forth on Schedule 2.3, (C) be calculated in accordance with the
principles and adjustments used in the determination of Net Working Capital as
set forth in the definition thereof, and (D) notwithstanding anything else in
the definition of Net Working Capital to the contrary, include as "current
liabilities" of the Companies any costs incurred by, or attributable to, the
Sellers that are obligations of any of the Companies, including, without
limitation, any amounts reflected in the Net Working Capital Balance Sheet in
respect of the items set forth on Schedule 2.2 hereto that are in excess of such
amounts set forth on Schedule 2.2 hereto (the "NET WORKING CAPITAL
CALCULATION"). The Net Working Capital Balance Sheet and Net Working Capital
Calculation shall be prepared in a manner consistent with the application of the
accounting principles applied in preparing the Estimated Net Working Capital. In
connection with the preparation of the Net Working Capital Balance Sheet, the
Seller Representative and Purchaser shall jointly cause to be performed a
physical inventory of all raw materials, work-in-process and finished goods
normally reflected as "inventory" on the financial statements of the Companies,
except with respect to consigned goods (for which actual March 25, 2005 figures
will be adjusted to the Closing Date based on the Companies' records) and
rolling stock.
(c) Within forty-five (45) days after the Net Working Capital Balance
Sheet and the Net Working Capital Calculation are delivered to the Seller
Representative pursuant to Section 2.3(b) hereof, the Seller Representative
shall complete its examination thereof and shall deliver to the Purchaser either
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(i) a written acknowledgment accepting the Net Working Capital Balance Sheet and
the Net Working Capital Calculation; or (ii) a written report setting forth in
reasonable detail any proposed adjustments to the Net Working Capital Balance
Sheet and the Net Working Capital Calculation (the "ADJUSTMENT REPORT"). If the
Seller Representative fails to respond to the Purchaser within such forty-five
(45) day period, the Seller Representative shall be deemed to have accepted and
agreed to the Net Working Capital Balance Sheet and the Net Working Capital
Calculation as delivered pursuant to Section 2.3(b) hereof. In the event of the
delivery of an Adjustment Report, the Purchaser and the Seller Representative
shall attempt to resolve the adjustments proposed therein within thirty (30)
days after delivery of the Adjustment Report, and the Seller Representative
shall be deemed to have accepted and agreed to the Net Working Capital Balance
Sheet and the Net Working Capital Calculation except as to the proposed
adjustments set forth in the Adjustment Report.
(d) In the event the Seller Representative and the Purchaser fail to
agree on any of the Seller Representative's proposed adjustments contained in
the Adjustment Report within thirty (30) days after the Purchaser receives the
Adjustment Report, then the Seller Representative and the Purchaser mutually
agree to jointly engage KPMG LLP, certified public accountants (the "INDEPENDENT
AUDITORS"), to resolve such dispute(s). As promptly as practicable thereafter,
the Seller Representative and the Purchaser shall each prepare and submit a
presentation to the Independent Auditors and shall cause the Independent
Auditors to make a determination as to each disputed item based upon the
presentations by the Seller Representative and the Purchaser and in light of the
terms and provisions of this Agreement; provided that the Independent Auditors
shall not make a final determination as to any particular item which is higher
than the highest position set forth by either of the Parties or lower than the
lowest position set forth by either of the Parties. The fees and expenses of the
Independent Auditors shall be apportioned between the Seller Representative and
the Purchaser in inverse proportion to the aggregate amounts reflected in the
determinations made by the Independent Auditors on all disputes in relation to
the respective positions of the Seller Representative and the Purchaser. All
determinations made by the Independent Auditors will be final, conclusive and
binding on the Parties.
(e) The Net Working Capital Calculation shall be determined based on
the Net Working Capital Balance Sheet delivered pursuant to Section 2.3(b), as
adjusted, if at all, pursuant to this Section 2.3. The date on which the Net
Working Capital Calculation is finally determined pursuant to this Section 2.3
shall hereinafter be referred to as the "SETTLEMENT DATE."
(f) In the event the Net Working Capital Calculation is less than the
Estimated Net Working Capital, the Seller Representative (on behalf of the
Sellers) shall (i) deliver written instructions signed by the Seller
Representative to the Escrow Agent directing the Escrow Agent to release to the
Purchaser from the Working Capital Escrow Account an amount equal to such
deficiency (with the remainder of such Working Capital Escrow Amount, if any,
being concurrently delivered to the Seller Representative), and (ii) to the
extent that the Working Capital Escrow Amount is less than such deficiency, pay
to the Purchaser within three (3) Business Days after the Settlement Date an
amount equal to the difference between (A) such deficiency and (B) the Working
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Capital Escrow Amount. In the event the Net Working Capital Calculation is
greater than the Estimated Net Working Capital, the Purchaser shall, within
three (3) Business Days after the Settlement Date (i) deliver written
instructions signed by the Purchaser to the Escrow Agent directing the Escrow
Agent to release the entire Working Capital Escrow Amount to the Seller
Representative and (ii) pay to the Seller Representative an amount equal to the
difference between (A) the Net Working Capital Calculation and (B) the Estimated
Net Working Capital. Any payment required pursuant to this Section 2.3(f) shall
be deemed to be an adjustment to the Purchase Price, and shall be made by the
wire transfer of immediately available federal funds for credit to the
recipient, at a bank account designated by such recipient in writing (or, if
amounts are owed to the Sellers, to the Seller Representative Account).
Section 2.4 Escrow.
In order to partially secure the indemnity obligations of the Sellers
as set forth herein (including the indemnities set forth in Article X and the
obligation to pay any deficiency owed pursuant to Section 2.3(f)), Purchaser and
the Seller Representative (on behalf of the Sellers) shall execute at the
Closing an escrow agreement in the form attached hereto as Exhibit E (the
"ESCROW AGREEMENT") with the Escrow Agent whereby each of the Indemnification
Escrow Amount and the Working Capital Escrow Amount shall be held in separate
interest-bearing escrow accounts (such accounts, the "INDEMNIFICATION ESCROW
ACCOUNT" and the "WORKING CAPITAL ESCROW ACCOUNT", respectively). The
Indemnification Escrow Amount shall be used to satisfy amounts payable by the
Sellers to the Purchaser pursuant to Article X hereof; provided that any
remaining amounts in the Indemnification Escrow Account shall be paid to the
Seller Representative on December 31, 2006, less the amount equal to any
unresolved claim or claims for indemnification against the Sellers pursuant to
Article X hereof, all as more fully described in the Escrow Agreement. The
Working Capital Escrow Amount shall be used to satisfy the Sellers' obligation
to pay any deficiency owed pursuant to Section 2.3(f) hereof and shall be paid
to the Purchaser and/or the Seller Representative, as the case may be, within
three (3) Business Days after the Settlement Date in accordance with Section
2.3(f) hereof and as more fully described in the Escrow Agreement. The Purchaser
and the Sellers agree that the Escrow Amount shall be treated as owned for all
Tax purposes by the Sellers and all income earned with respect to the Escrow
Amount shall be owned by Sellers and allocated to the Sellers for all Tax
purposes.
Section 2.5 Sales and Transfer Taxes.
The Sellers shall pay the cost of any and all stamp, transfer, goods
and services, sales, purchase, use, filing, value added, excise and similar
Taxes and fees which arise out of the transactions contemplated by this
Agreement, including, without limitation, any stamp or transfer Tax or filing
fee relating to the transfer of the Shares, whether now in effect or hereafter
adopted and regardless of upon whom said Tax or fee is imposed. The Purchaser
and the Sellers shall take all commercially reasonable steps to eliminate, to
the extent possible, all such Taxes arising out of the transactions effected
pursuant to this Agreement.
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Section 2.6 Further Assurances.
At any time and from time to time after the Closing, at the request
of the Purchaser and without further consideration, the Sellers shall execute
and deliver such other instruments of sale, transfer, conveyance and assignment
and take such actions as the Purchaser may reasonably request to more
effectively transfer, convey and assign to the Purchaser, and to confirm the
Purchaser's rights to, title in and ownership of, the Shares and to place the
Purchaser in actual possession and operating control of the Business to the
extent purchased hereunder. Notwithstanding the foregoing, the Sellers shall be
entitled to reimbursement from the Purchaser of all costs and expenses related
to any non-routine instruments or extraordinary actions requested by the
Purchaser.
ARTICLE III
CLOSING; CLOSING DELIVERIES
Section 3.1 Closing.
The consummation of the transactions contemplated by this Agreement
(the "CLOSING") shall take place on the date on which the conditions set forth
in Articles VII and VIII are satisfied or waived (the "CLOSING DATE") or at such
other time and date as the Parties may agree. The Closing shall be held at 10:00
a.m. at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, or such other place as the parties may agree.
Section 3.2 Deliveries by the Sellers at Closing.
At Closing, the Sellers will deliver or cause to be delivered to the
Purchaser the following:
(a) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers) with signatures notarized, together
with any other documents reasonably required for the sale, conveyance, transfer
and delivery of the Shares to Purchaser;
(b) a certificate, dated the Closing Date and signed by the Seller
Representative, certifying the fulfillment of the matters set forth in Sections
8.1, 8.2 (insofar as it relates to Proceedings involving the Sellers or the
Companies) and 8.3;
(c) a certificate, dated the Closing Date and signed by the Secretary
or an Assistant Secretary of each of the Companies, certifying as to (i) the
completeness and correctness of attached copies of such Company's certificate of
incorporation and bylaws (including amendments thereto), (ii) resolutions of the
stockholders of the Companies approving the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby,
and (iii) the incumbency and signatures of the officers of the Companies
executing this Agreement and any other certificate or document delivered in
connection herewith;
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(d) the resignation of such officers and directors of the Companies
as the Purchaser shall have previously requested in writing;
(e) certificates, dated as of a date not more than twenty (20) days
prior to the Closing Date, duly issued by the appropriate Governmental Body for
each of the Companies in the states of their respective organization, showing
the Companies are in good standing and authorized to do business in such
jurisdictions;
(f) the original minute books, stock books, ledgers and registers and
other similar corporate records of the Companies;
(g) each of the persons listed on Schedule 3.2(g) shall have entered
into a non-competition and non-solicitation agreement on terms substantially
similar to those contained in Exhibit G-1 (for any Seller who will be an
employee of the Companies following the Closing) or Exhibit G-2 (for any Seller
who will not be an employee of the Companies following the Closing), as
applicable, and such non-competition and non-solicitation agreements shall be in
full force and effect;
(h) a signed counterpart to the Escrow Agreement;
(i) evidence of all consents and Authorizations required to be
obtained under Schedule 4.3;
(j) evidence reasonably satisfactory to Purchaser that the prepayment
of all Debt, the release of all Security Interests in favor of any Debt Holder
(including obtaining authorization for the filing of all necessary termination
statements), and the release from any and all guarantees under the Debt, in each
case, as required by Section 6.6 hereof, has occurred or will occur concurrently
with the Closing;
(k) opinions of legal counsel to the Sellers in substantially the
form of Exhibits F-1 and F-2 hereto;
(l) certificates of non-foreign status for each Seller that comply
with Section 1445 of the Code;
(m) such customary affidavits and GAP undertakings as are reasonably
required by the Title Companies for the issuance of the Title Policies as
contemplated by Section 8.6 hereof;
(n) a copy of the amendment to the Idaho Timber Corporation Profit
Sharing and 401(k) Plan, containing provisions to permit special deferral
elections of quarterly bonus payments, which amendment shall have been executed
by the appropriate officers of ITC and shall be in full force and effect, in
form and substance reasonably acceptable to the Purchaser;
(o) an IRS Form 8023 for each Seller, executed by such Seller; and
15
(p) such additional documents, instruments or items reasonably
requested by Purchaser to evidence the transactions contemplated hereby or to
transfer to the Purchaser access to and control over the Business, properties
and assets of the Companies.
Section 3.3 Deliveries by the Purchaser at Closing.
At the Closing, the Purchaser will deliver or cause to be delivered
to the Sellers the following:
(a) payment of the Purchase Price in accordance with Section 2.2
hereof;
(b) a certificate, dated the Closing Date and signed by an officer of
the Purchaser, certifying the fulfillment of the matters set forth in Sections
7.1, 7.2 (insofar as it relates to Proceedings involving the Purchaser) and 7.3;
(c) a certificate, dated as of a date not more than twenty (20) days
prior to the Closing Date, duly issued by the appropriate Governmental Body in
its state of organization, showing the Purchaser is in good standing and
authorized to do business in such jurisdiction;
(d) a certificate, dated the Closing Date and signed by the Secretary
or an Assistant Secretary of the Purchaser, certifying as to the completeness
and correctness of attached copies of the Purchaser's charter, by-laws and
resolutions of the board of directors approving the Purchaser entering into this
Agreement and the consummation of the transactions contemplated hereby;
(e) counterpart signatures to each of the non-competition and
non-solicitation agreements described in Section 3.2(g);
(f) a signed counterpart to the Escrow Agreement;
(g) a summary of the terms of an equity-like incentive plan in the
form of Exhibit H hereto, outlining certain incentive rights to be granted to
management employees of the Companies following the Closing Date; and
(h) such additional documents, instruments or items reasonably
requested by the Seller Representative to evidence the transactions contemplated
hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As an inducement to the Purchaser to enter into and perform its
obligations under this Agreement, and in consideration of the covenants of the
Purchaser contained herein, the Sellers jointly and severally (except for the
representations made in Sections 4.2 and 4.4(b) below, which are made on a
several and not a joint basis) represent and warrant to the Purchaser that the
statements contained in this Article IV are true and correct as of the date
hereof and will be true and correct as of the Closing as though made as of the
Closing, except to the extent such representations and warranties are
16
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date).
Section 4.1 Due Organization and Status.
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the Laws of the state of its organization.
Each of the Companies is duly authorized to conduct business and is in good
standing under the Laws of each jurisdiction where such qualification is
required, except where the lack of such qualification has not had and would not
reasonably be expected to have a Material Adverse Effect. Each of the Companies
has full power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Sellers have
furnished to the Purchaser complete and accurate copies of the certificate of
incorporation and bylaws of each of the Companies. None of the Companies is in
default under or in violation of any provision of its certificate of
incorporation, bylaws or other organizational documents.
Section 4.2 Authority; Enforceability.
Each Seller warrants and represents that such Seller has the
requisite power, authority and capacity to execute and deliver this Agreement
and the other documents, instruments and agreements (such other documents,
instruments and agreements referred to as the "TRANSACTION DOCUMENTS") entered
into by such Seller in connection with this Agreement and to perform its
obligations hereunder and thereunder. Each Seller warrants and represents that
this Agreement has been duly and validly executed and delivered by such Seller
and constitutes, and each other Transaction Document to be executed and
delivered by each such Seller in connection herewith, upon its execution and
delivery by a Seller, will constitute, a valid and legally binding obligation of
such Seller, enforceable against such Seller in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a Proceeding at law or in equity).
Section 4.3 Noncontravention.
Except as set forth on Schedule 4.3, neither the execution, delivery
and performance of this Agreement or any other Transaction Document, nor the
consummation of the transactions contemplated hereby or thereby, will (a) result
in any violation of or default (with or without notice or lapse of time, or
both) under (i) any statute, regulation, rule, injunction, judgment, Order,
Authorization or other restriction of any Governmental Body applicable to any
Seller or any Company or by which any of the properties or assets of any Seller
or any Company are bound or (ii) the certificate of incorporation and bylaws or
comparable organizational documents of any Company, or (b) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
require any consent under, create in any party the right to accelerate,
terminate, modify, or cancel any agreement, contract, lease, license,
instrument, Authorization or other arrangement to which any Seller or any
Company is a party or by which any of them is bound or to which any of their
17
respective assets is subject, except where such violation, conflict, breach,
default, acceleration, termination, modification or cancellation would not
reasonably be expected to have a Material Adverse Effect. Except as contemplated
by Section 6.1(a) or as set forth on Schedule 4.3, none of the Sellers nor any
of the Companies needs to give any notice to, make any filing or registration
with, or obtain any Authorization of any Governmental Body in connection with
the execution, delivery and performance by the Sellers of this Agreement or in
order for the Sellers to consummate the transactions contemplated by this
Agreement, except pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), or where the failure to give notice, to
file, or to obtain any Authorization would not reasonably be expected to have a
Material Adverse Effect.
Section 4.4 Capital Stock of the Companies; Transactions in Equity
Securities.
(a) Schedule 4.4(a) sets forth the authorized capital stock of each
of the Companies. The Shares are the only issued and outstanding equity in any
of the Companies. The Shares have been duly authorized and validly issued, are
fully paid and nonassessable and were offered, issued, sold and delivered by the
Companies in compliance with exemptions from registration under applicable state
and federal laws concerning the issuance of securities. The certificate number
ten (10) representing three hundred (300) shares of common stock, par value
$1.00 per share, of ITC, originally issued to Xxxxx Xxxxxx and subsequently
redeemed by ITC, has been cancelled in the books and records of ITC.
(b) Each Seller owns beneficially and of record all of the Shares
owned by such Seller as set forth opposite such Seller's name on Exhibit B. Each
Seller owns, and at the Closing will own, his or her Shares free and clear of
all Security Interests, voting trusts, restrictions and claims of every kind
(subject only to agreements existing immediately prior to the date hereof, all
of which shall be deemed to be terminated immediately prior to the Closing).
Each Seller represents that the Shares being sold by him or her are freely
assignable to the Purchaser. No Seller has granted any Person (other than the
Purchaser) the right or option to acquire any of his or her Shares. No Seller
has, and each Seller hereby waives, any preemptive or other right to acquire
equity interests in any of the Companies that such Seller has or may have had.
Each Seller hereby agrees to, and grants its consent and waives any claim
whether under contract, applicable Law or otherwise with respect to (i) the
termination at or prior to the Closing of any existing agreements or
arrangements with respect to (A) the Companies, (B) the transfer, sale, pledge
or other disposition by such Seller of such Seller's Shares and (C) the
transfer, sale, pledge or other disposition by any other Seller of the Shares
held by such other Seller, with termination of all such agreements or
arrangements to be effective without further action of any of the Sellers upon
satisfaction or waiver of all other conditions to Closing, (ii) each transfer of
Shares by each other Seller pursuant to the terms of this Agreement and (iii)
any other transaction which is required or reasonably requested to occur in
accordance with this Agreement or the transactions contemplated hereby.
(c) No subscription, option, warrant, call, conversion right or
commitment of any kind exists which obligates any of the Companies to issue any
of its authorized but unissued equity securities or to grant any right to
18
acquire such equity securities. No Company has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Companies. Except as set
forth on Schedule 4.4(c), no Seller is a party to any agreement, voting trust or
proxy with respect to the voting, registration, redemption, sale, transfer or
other disposition of the Shares.
Section 4.5 Subsidiaries.
(a) All of the outstanding Shares are owned beneficially and of
record by the Sellers in the amounts set forth on Exhibit B. Except for (a) the
overlapping ownership of the Companies among the Sellers consistent with the
preceding sentence and (b) Administrators, Inc., an Idaho corporation, which is
a wholly-owned Subsidiary of ITC, none of the Companies has any Subsidiaries.
ITC is the sole owner of all of the outstanding capital stock of Administrators,
Inc., free and clear of all Security Interests, voting trusts, restrictions,
claims, options, warrants, rights, contracts, calls, commitments, equities and
demands. Each Subsidiary has all requisite corporate or entity power and
authority to own its properties and carry on its business as presently
conducted. All of the issued and outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. There are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Company or any
Subsidiary is a party or which are binding on any of them providing for the
issuance, disposition or acquisition of any capital stock of any Subsidiary.
There are no voting trusts, proxies or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary. None of the
Companies has any obligation to acquire equity or to make any capital investment
in any other Person.
(b) Except as set forth on Schedule 4.5(b), Administrators, Inc. (i)
owns no assets and is not subject to any liabilities of any kind (whether known
or unknown, contingent or otherwise, except for payment of wages to employees of
the Companies) and (ii) conducts no business or operations other than in
connection with effecting payroll transactions on behalf of ITC.
Section 4.6 Assets and Properties of the Business.
Except as set forth on Schedule 4.6, the Companies collectively own,
and have good and marketable title to, all of the operating assets, properties
and rights used or held for use in connection with the conduct of the Business,
free and clear of all Security Interests. All such tangible assets of the
Companies which, individually or in the aggregate, are material to the operation
of the Business are in operating condition and in a state of good maintenance
and repair (ordinary wear and tear excepted) and are suitable for the purposes
for which they presently are used and are sufficient for the Purchaser to
conduct the Business in the Ordinary Course of Business as it has been conducted
by the Sellers from and after the Closing Date without interruption.
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Section 4.7 Financial Statements.
The Seller Representative has provided to the Purchaser (i) the
audited consolidated balance sheet of the Companies, their Subsidiaries and
certain other Affiliates on an "as if consolidated basis" as at March 26, 2004
and the related audited consolidated statements of income and of cash flows of
the Companies, their Subsidiaries and certain other Affiliates for the year then
ended and (ii) the unaudited consolidated balance sheet of the Companies and
their Subsidiaries on an "as if consolidated basis" as at March 25, 2005 and the
related consolidated statement of income of the Companies and their Subsidiaries
for the twelve month period then ended (such audited and unaudited statements,
including the related notes and schedules thereto, are referred to herein as the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis, are correct and complete and
fairly present in all material respects the financial condition of the Business
now being conducted by the Companies as of such dates and the results of
operations of the Business for such periods and are consistent with the books
and records of the Companies, subject, in the case of interim financial
statements, to normal and recurring year end adjustments and, in the case of the
unaudited financial statements, the absence of notes.
Section 4.8 Absence of Changes.
Except as set forth on Schedule 4.8, since Xxxxx 00, 0000, xxxx of
the Companies, individually or in the aggregate, has:
(a) suffered any Material Adverse Effect;
(b) canceled any material indebtedness owing to any of the Companies
or waived any material claims or rights, except in the Ordinary Course of
Business;
(c) acquired, sold, transferred, leased or otherwise acquired or
disposed of any material assets or properties except in the Ordinary Course of
Business;
(d) made any material change in any method of accounting or
accounting practice except to the extent required by GAAP;
(e) made any single capital expenditure (other than with respect to
timber) in excess of $150,000 or made any such capital expenditures in excess of
$500,000 in the aggregate;
(f) borrowed or agreed to borrow any funds, assumed, guaranteed or
otherwise become liable or responsible for the obligations of any Person (other
than by endorsement of checks for collection in the Ordinary Course of Business)
or made any loans, advances or capital contributions to, or investments in, any
Person other than any of the Companies;
(g) issued or sold any stock, equity interests or other securities or
any options, warrants or other rights to acquire any such stock, equity
interests or other securities;
20
(h) entered into, adopted or materially amended any Employee Benefit
Plan relating to the Business (except for matters required by Law or otherwise
in the Ordinary Course of Business) or materially modified the employment terms
of its directors, officers or executive employees, generally or individually,
or, except in the Ordinary Course of Business, hired any new officers or any new
executive employees;
(i) instituted or settled any Proceeding before any court,
arbitrational tribunal, administrative agency or commission or other
Governmental Body; or
(j) committed in writing to do any of the foregoing.
Section 4.9 Legal Compliance.
Each of the Companies is in compliance in all material respects with
all applicable Laws of any Governmental Body applicable to its business,
operations or assets. None of the Companies has received any notice or
communication of, or been charged with the violation of any Laws or Orders that
remain uncured. To the Knowledge of the Sellers, (i) none of the Companies is
under investigation with respect to the violation of any Laws and (ii) there are
no facts or circumstances which could reasonably be expected to form the basis
for any such violation.
Section 4.10 Taxes.
Except as provided in Schedule 4.10:
(a) The Sellers, on behalf of the Companies, have timely filed all
Income Tax Returns and all franchise and other material Tax Returns that were
required to be filed by or with respect to the Companies and Administrators,
Inc. for all taxable years and periods in which any such Tax Returns were due.
All Taxes payable by or with respect to the Companies and Administrators, Inc.
either have been paid in full or are being contested in good faith and adequate
reserves in respect thereof have been established in accordance with GAAP on the
March 25, 2005 portion of the Financial Statements. All material Taxes not yet
due and payable have been fully accrued on the March 25, 2005 portion of the
Financial Statements.
(b) No federal, state, local or foreign Tax audits or other
administrative proceedings, discussions or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Companies and to the
Knowledge of Sellers no such proceedings or discussions have been threatened.
Sellers have made available to Purchaser complete copies of any audit report
issued within the last three years relating to Taxes due from or in respect of
any Company or Administrators, Inc. None of the Companies or Administrators,
Inc. has executed or filed with any taxing authority any agreement or other
document extending or having the effect of extending the period for assessment,
reassessment or collection of any Taxes.
(c) No Company nor Administrators, Inc. has distributed to its
stockholders stock or securities of a controlled corporation, nor has stock of
any of the Companies or Administrators, Inc. been distributed, in a transaction
21
to which Section 355 or Section 361 of the Code applied or was purported to
apply in the two years prior to the date of this Agreement.
(d) None of the Companies or Administrators, Inc. has made any
payments, is obligated to make any payments, or is a party to any agreement,
arrangement or understanding that could obligate it to make any payments that
may be treated as an "excess parachute payment" under Section 280G of the Code.
(e) None of the Companies or Administrators, Inc. owns any interest
in an entity that is characterized as a partnership for federal income Tax
purposes.
(f) Schedule 4.10 sets forth each jurisdiction (other than United
States federal) in which each of the Companies and Administrators, Inc. files or
has previously filed any Income Tax Return or any franchise or material Tax
Return. No claim has been made by a taxing authority in which a Company or
Administrators, Inc. does not file Tax Returns that such Company is required to
file Tax Returns in such jurisdiction.
(g) None of the Companies or Administrators, Inc. has been a member
of an affiliated group filing a consolidated federal Income Tax Return. None of
the Companies is a party to any tax allocation or tax sharing agreement with any
Person.
(h) Schedule 4.10 sets forth each Company that is treated as an
S-Corporation (within the meaning of Section 1361(a)(1) of the Code). Each of
the Companies which is currently an S-Corporation has been a validly electing
S-Corporation (within the meaning of Code Section 1361 and 1362) at all times
since the date of the applicable election, which in each case was made upon its
formation or more than 10 years prior to the date hereof.
(i) None of the Companies nor Administrators, Inc., directly or
through an authorized agent (i) has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
law by reason of a change in accounting method initiated by any Company or
Administrators, Inc., (ii) has any knowledge that the Internal Revenue Service
("IRS") or any other taxing authority has proposed any such adjustment or change
in accounting method, (iii) has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of any Company or Administrators, Inc. or
(iv) executed or entered into a closing agreement pursuant to Section 7121 of
the Code or any predecessor provision thereof or any similar provision of law in
respect of any Company or Administrators, Inc. None of the Companies nor
Administrators, Inc. is the subject of any private letter ruling from the IRS or
any similar ruling from any other taxing authority.
(j) No Company nor Administrators, Inc. has engaged in any
"reportable transaction" within the meaning of Treasury regulation ss. 1.6011-4.
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Section 4.11 Contracts.
(a) Schedule 4.11 lists all of the following written agreements
(other than agreements specifically described on the other disclosure schedules
to this Agreement) to which any of the Companies is a party:
(i) any agreement for the lease of real property, or the
lease of personal property from or to another Person that involves
consideration in excess of $25,000 per year or that is not terminable
without penalty by such Company within six months after Closing;
(ii) any agreement for the purchase or sale of products or
the furnishing of services in excess of $75,000 (excluding purchase
orders in the Ordinary Course of Business);
(iii) any agreement for the purchase of raw materials
(including, without limitation, timber deeds and timber purchase and
sale agreements) with a value in excess of $100,000;
(iv) any agreement for the disposition of the assets or
business of any of the Companies or any agreement for the acquisition
of the assets or business of any other Person (other than
acquisitions and dispositions of inventory in the Ordinary Course of
Business);
(v) any agreement concerning a partnership or joint
venture;
(vi) any agreement (or group of related agreements) under
which any of the Companies has created, incurred, assumed, or
guaranteed (or may create, incur, assume or guarantee) any
indebtedness (including capitalized lease obligations) in excess of
$10,000;
(vii) any agreement under which any of the Companies has
agreed not to compete in any territory;
(viii) any written employment or consulting agreement;
(ix) any agreement with an Affiliate, other than another
of the Companies;
(x) any agreement that contains any provisions requiring a
Company to indemnify any other Person; or
(xi) any agreement not disclosed in clauses (i) through
(ix) above for the performance of which will involve annual
consideration in excess of $75,000.
(b) The Sellers have previously made available to the Purchaser a
correct and complete copy of each agreement listed on Schedule 4.11, together
with all material amendments, modifications or supplements thereto. Each
agreement listed on Schedule 4.11, to the extent such agreement is executed and
has not expired by its terms, is the legal, valid, binding and enforceable
obligation of the Company party thereto and is in full force and effect. Neither
the applicable Company or Companies, nor, to the Knowledge of the Sellers, is
23
any other party thereto, in breach or violation of, or default under, any such
agreement and, to Seller's Knowledge, no event has occurred, is pending or is
threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach or default by any of the Companies or any other party
under such agreement. No party to any such agreement has, to the Knowledge of
the Sellers, exercised any termination rights with respect thereto.
Section 4.12 Related Party Agreements.
Except as set forth on Schedule 4.12, none of the Companies is a
party to or otherwise bound by any agreement with any of the Sellers or any
Affiliate of any of the Sellers, other than another of the Companies. Except as
set forth on Schedule 4.12, none of the Sellers (a) owns any property or right,
tangible or intangible, which is primarily used in, or is material to the
operation of, the Business, (b) has any claim or cause of action against the
Companies, or (c) owes any money to, or is owed any money by the Companies,
other than normal compensation (including accrued incentive compensation
reflected on the Latest Balance Sheet).
Section 4.13 Litigation.
Schedule 4.13 sets forth each instance in which any of the Companies
(i) is subject to any outstanding Order or (ii) is a party to any Proceeding in,
or before any Governmental Body. There is no Proceeding in, or before any
Governmental Body that, to the Sellers' Knowledge, has been threatened in
writing with respect to the Business or the Companies.
Section 4.14 Employee Matters.
(a) Schedule 4.14(a) sets forth the name and title of each current
employee of the Companies as of the date hereof (the "COMPANY EMPLOYEES"). The
Companies are not a party to any collective bargaining agreement, the Companies
have never been obligated to contribute to a Multiemployer Plan (except as set
forth on Schedule 4.14(a)), and to the Sellers' Knowledge, no attempt has been
made or threatened, either currently or in the past two years, to organize any
of the Company Employees. Neither any of the Companies nor any of their ERISA
Affiliates has any obligation or liability (contingent or otherwise) under a
Multiemployer Plan or an Employee Pension Benefit Plan that could reasonably be
expected to become an obligation of any of the Companies after the Closing. The
Companies are in material compliance with all applicable employment Laws, rules
and regulations, except for any non-compliance that would not reasonably be
expected to have a Material Adverse Effect.
(b) Schedule 4.14(b) sets forth a list of each Employee Benefit Plan
maintained by or contributed to by any of the Companies or another Affiliate for
the benefit of the Company Employees or former employees of the Companies (the
"COMPANY PLANS"). Schedule 4.14(b) separately sets forth a list of all employee
pension benefit plans (as defined in Section 3(2) of ERISA) that are currently
or have ever been maintained by or contributed to by any of the Companies. No
Company Plan provides post-employment welfare benefits or coverage, except as
required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
24
amended. Each Company Plan has been operated in compliance with its terms and
the applicable provisions of applicable Law, except for any non-compliance that
would not reasonably be expected to have a Material Adverse Effect. Each Company
Plan intended to be Tax qualified under Section 401 of the Code is so qualified
and all trusts intended to be exempt from federal income taxation under Section
501 of the Code are so exempt. Each of the Companies (and its ERISA Affiliates,
as applicable) has made all required contributions to each applicable Company
Plan. Except as disclosed on Schedule 4.14(b), none of the Companies (nor any
applicable ERISA Affiliate) has incurred any material liability under Title IV
of ERISA. Except as disclosed on Schedule 4.14(b), there are no material pending
or to the Seller's Knowledge, threatened claims involving the plans disclosed on
Schedule 4.14(b) (other than routine claims for benefits).
(c) Except as set forth on Schedule 4.14(c), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment becoming due to any Company
Employee, (ii) increase any benefits otherwise payable under any Company Plan or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits under any Company Plan.
Section 4.15 Customers; Suppliers.
(a) Schedule 4.15(a) lists all agreements between any of the
Companies and any of the customers or suppliers of the Business. The Sellers
have made available to the Purchaser a correct and complete copy of each
agreement listed on Schedule 4.15(a), together with all material amendments,
modifications or supplements thereto. None of the customers or suppliers listed
on Schedule 4.15(a) has canceled or, to the Sellers' Knowledge, threatened to
cancel, any of the agreements listed on Schedule 4.15(a). Each agreement listed
on Schedule 4.15(a), to the extent such agreement is executed and has not
expired by its terms, is legal, valid, binding and enforceable and in full force
and effect and will continue to be legal, valid, binding and enforceable and in
full force and effect immediately following the Closing. None of the Companies
nor, to the Sellers' Knowledge, any other party is in breach or violation of, or
default under, any such agreement and no event has occurred, is pending or, to
Sellers' Knowledge, is threatened, which, after the giving of notice, with lapse
of time, or otherwise, would constitute a material breach or default by the
applicable Companies or any other party under such agreement.
(b) Schedule 4.15(b) sets forth a list of (i) each customer that
accounted for more than five percent (5%) of the revenues of the Business (on a
consolidated basis) during the last full fiscal year and the amount of revenues
accounted for by such customer during such period, (ii) the ten (10) largest
customers at each plant that is operated as part of the Business, as measured by
the dollar amount of purchases thereby, during the last full fiscal year,
showing the approximate total sales by the Companies to each such customer, and
(iii) the ten (10) largest suppliers for the Business, as measured by the dollar
amount of purchases therefrom, during the eleven (11) month period ending
February 25, 2005, showing the approximate total purchases by the Companies from
each such supplier. No such customer or supplier has indicated in writing within
25
the past year that it will stop, or decrease in any material respect the rate
of, buying or supplying products or services, as applicable, to the Companies.
Section 4.16 Authorizations.
Schedule 4.16 sets forth a true, accurate and complete list of all
Authorizations held by the Companies which are necessary to operate the Business
as presently conducted (including permits related to any Environmental Law). The
Authorizations listed on Schedule 4.16 are in full force and effect, will
continue in full force and effect immediately following the Closing, and neither
the Sellers nor the Companies have received any notice that any Governmental
Body intends to cancel, terminate or not renew any such Authorization.
Section 4.17 Insurance.
Each of the Companies has insurance policies in full force and effect
for such amounts as are sufficient for applicable requirements of Law and all
agreements to which any such Company is a party or by which it is bound.
Schedule 4.17 sets forth the policies of insurance maintained by the Companies
with respect to the Business setting forth, in respect of each such policy, the
policy name, policy number, carrier, term, type and amount of coverage and
annual premium. All premiums due and owing under such policies have been paid,
and no written notice of cancellation of any such policies has been received by
the Sellers or the Companies. There is no material claim pending under any such
policy as to which coverage has been denied or disputed.
Section 4.18 Real Property.
(a) Schedule 4.18 describes and lists (i) the address and record
owner of all real property owned by any of the Companies (the "OWNED REAL
PROPERTY") or (ii) the name of the landlord of any real property leased for use
by any of the Companies (the "LEASED REAL PROPERTY" and together with the Owned
Real Property, the "REAL PROPERTY"). The Leased Real Property is leased pursuant
to the leases described on Schedule 4.18 (the "REAL ESTATE LEASES"). Except as
set forth on Schedule 4.18, the applicable Companies (i) have good, marketable
and insurable fee simple title to all of the Owned Real Property and (ii) have a
valid leasehold interest in, and enjoy peaceful and undisturbed possession
(consistent with historical use) of, all Leased Real Property, in each case free
and clear of all Security Interests. Except as set forth on Schedule 4.18, there
are no leases, subleases, licenses, occupancy agreements, options, rights,
concessions or other agreements or arrangements to which any Company is a party,
granting to any Person the right to use, occupy or purchase the Owned Real
Property, or the right to use or occupy any of the Real Property. Except as set
forth on Schedule 4.18, the Real Property constitutes all interests in real
property currently used or currently held for use in connection with the
Business.
(b) All buildings, improvements and fixtures owned, leased, or used
by any of the Companies on the Real Property are in operating condition and in a
state of good repair (normal wear and tear excepted) for the continued use on
such Real Property in the Ordinary Course of Business, and such buildings,
26
improvements and fixtures are, to the Sellers' Knowledge, free from material
structural defects.
(c) The Real Property and the improvements are sufficiently supplied
in all material respects with utilities and other services as necessary for the
operation of such Real Property and improvements as currently operated.
(d) There are no pending or, to the Sellers' Knowledge, threatened
condemnation or eminent domain proceedings with respect to any of the Real
Property.
(e) None of the Sellers has received any notice which remains uncured
that the Real Property violates any Law, zoning or restriction of a Governmental
Body applicable to the Real Property.
(f) With respect to each parcel of Owned Real Property, (i) there are
no leases, subleases, licenses, concessions or other agreements, written or
oral, granted by the Companies to any party or parties (other than any of the
Companies) which grant to any such party or parties the right of use or
occupancy of any portion of the Owned Real Property, (ii) there are no
outstanding options or rights of first refusal to purchase any such parcel of
Owned Real Property, or any portion thereof or interest therein granted by the
Companies, and (iii) the Companies have made available to Purchaser copies of
each deed for such Owned Real Property and all title insurance policies and
surveys relating thereto.
Section 4.19 Environmental Matters.
Except as disclosed in Schedule 4.19:
(a) Each of the Companies is and has been in compliance in all
material respects with all Environmental Laws, which compliance includes
obtaining, maintaining and materially complying with all permits, licenses,
approvals or similar Authorizations required under or pursuant to Environmental
Laws. There is no pending, or to the Sellers' Knowledge threatened, civil or
criminal litigation, written notice of violation, administrative proceeding, or
investigation, inquiry or information request by any Person, relating to any
Environmental Law involving the Companies. None of the Companies is a party to
or bound by any Order, administrative order, consent order or other agreement
entered into with any Person in connection with any Environmental Matters.
(b) No real property currently owned or, to the Knowledge of the
Sellers, currently or previously leased or previously owned or operated by any
of the Companies, or by the Sellers with respect to the Companies, is listed,
and none of the Companies has received notice that any such real property is
proposed for listing, on the National Priorities List under CERCLA or any
analogous state list and, to the Knowledge of the Sellers, no conditions exist
at any property currently or formerly owned, operated or leased by any of the
Companies that would reasonably be expected to result in any Company incurring
material liabilities under Environmental Laws.
27
(c) Neither the Companies nor any of the Sellers with respect to the
Companies, has received a written information request or notice of potential
responsible party status regarding any location that is listed or to the
Knowledge of Sellers proposed for listing on the National Priorities List under
CERCLA or any analogous state list.
(d) The Sellers have provided the Purchaser with copies of all
material environmental, health or safety reports, audits, assessments,
inspections or similar documentation relating to the Companies or any
liabilities of the Companies under Environmental Laws.
Section 4.20 Brokers' Fees.
Except as set forth on Schedule 4.20, neither the Sellers nor the
Companies have any liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which the Purchaser could become liable or obligated following the
Closing.
Section 4.21 Intellectual Property.
(a) Schedule 4.21(a) lists each patent, trademark, service xxxx,
trade dress, Internet domain name, logo, trade name and corporate name,
copyright and any registration or application for registration with respect to
any of the foregoing, of any of the Companies.
(b) Except as set forth on Schedule 4.21(b), each of the Companies
owns or has the right to use all Intellectual Property necessary to operate the
Business as presently conducted. Each Company, as appropriate, has taken all
reasonable measures to protect the proprietary nature of each item of
Intellectual Property owned by it, and to maintain in confidence all trade
secrets and confidential information that it owns or uses. No other person or
entity has any rights to any of the Intellectual Property owned by the Companies
(except pursuant to agreements or licenses specified in Schedule 4.21(d)), and,
to the Knowledge of the Sellers, no other person or entity is infringing,
violating or misappropriating any of the Companies' Intellectual Property.
(c) To the Sellers' Knowledge, none of the Internal Systems, or the
use thereof, infringes or violates, or constitutes a misappropriation of, any
Intellectual Property rights of any person or entity.
(d) Schedule 4.21(d) identifies (i) each license or other agreement
pursuant to which any of the Companies has licensed, distributed or otherwise
granted any rights to any third party with respect to, any Intellectual Property
owned by the Companies, and (ii) each item of the Companies' Intellectual
Property that is owned by a party other than the Companies, and the license or
agreement pursuant to which such Company uses it (excluding off-the-shelf
software programs licensed by the Company pursuant to "shrink wrap" licenses).
28
Section 4.22 Accounts Receivable.
All accounts receivable of the Companies reflected on their balance
sheets included in the Financial Statements (other than those paid since the
date of such Financial Statements) are valid receivables and are current and
collectible at rates consistent with historical collections and subject to the
reserve for bad debts reflected on the Financial Statements. None of the
Companies has received any written notice from an account debtor stating that
any account receivable is subject to any contest, claim or setoff by such
account debtor.
Section 4.23 Powers of Attorney.
There are no outstanding powers of attorney executed on behalf of any
of the Companies. There are no outstanding powers of attorney executed on behalf
of any Seller with respect to such Seller's Shares.
Section 4.24 Warranties.
No product or service manufactured, sold, leased, licensed or
delivered by the Companies is subject to any guaranty, warranty, or other
indemnity other than the applicable standard terms and conditions of the
appropriate Companies which are set forth in Schedule 4.24.
Section 4.25 Bank Accounts.
Schedule 4.25 contains a list of all bank accounts and safe deposit
boxes of the Companies and the names of persons having signature authority with
respect thereto or access thereto.
Section 4.26 Absence of Undisclosed Liabilities.
Except as set forth on Schedule 4.26, none of the Companies has any
liabilities, obligations or indebtedness of any kind other than (a) liabilities,
obligations or indebtedness fully reflected in, reserved against or otherwise
described in the Latest Balance Sheet or the notes thereto, (b) liabilities,
obligations or indebtedness which have arisen after the date of the Latest
Balance Sheet in the Ordinary Course of Business either under purchase orders
which are consistent with past practice or which are immaterial to the
Companies, taken as a whole, (c) liabilities, obligations or indebtedness
clearly and specifically reflected on the March 25, 2005 portion of the
Financial Statements or (d) as reflected in the other Schedules to this
Agreement.
Section 4.27 Disclaimer Regarding Estimates and Projections.
In connection with the Purchaser's investigation of the Companies,
the Purchaser has received from or on behalf of the Sellers and the Companies
certain estimates, forecasts, plans and financial projections, which were
prepared by the Sellers in good faith using the best information available to
management of the Companies. The Purchaser acknowledges that there are
uncertainties inherent in attempting to make such estimates, forecasts, plans
29
and projections, that the Purchaser is familiar with such uncertainties, that
the Purchaser is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all estimates, forecasts, plans and projections so
furnished to it, and no Seller makes any representation or warranty with respect
thereto other than Sellers' good faith in preparing such estimates, forecasts,
plans and financial projections using the information available to management of
the Companies at the time of preparation thereof.
ARTICLE V
REPRESENTATIONS OF THE PURCHASER
As an inducement to the Sellers to enter into and perform its
obligations under this Agreement, and in consideration of the covenants of the
Sellers contained herein, the Purchaser represents and warrants to the Sellers
that the statements contained in this Article V are true and correct as of the
date hereof and will be true and correct as of the Closing as though made as of
the Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date).
Section 5.1 Organization.
The Purchaser is a corporation duly organized, validly existing and
in good standing under the Laws of the State of New York. The Purchaser is duly
authorized to conduct business and is in good standing under the Laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not materially adversely affect the ability of the Purchaser
to consummate the transactions contemplated by this Agreement. The Purchaser has
full legal power and authority to carry on the businesses in which it engages or
proposes by virtue of the transactions contemplated by this Agreement to engage
and to own and use the properties owned and used or so proposed to be owned and
used by it.
Section 5.2 Authority; Enforceability.
The Purchaser has the full legal power and authority to execute and
deliver this Agreement and the other documents, instruments and agreements
entered into by it in connection with this Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery by the
Purchaser of this Agreement and each other document, instrument and agreement
executed and delivered by the Purchaser in connection herewith and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Purchaser. This Agreement has been duly and validly executed
and delivered by the Purchaser and constitutes, and each other document,
instrument and agreement to be executed and delivered by the Purchaser in
connection herewith, upon its execution and delivery by the Purchaser, will
constitute, a valid and legally binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
30
general principles of equity (regardless of whether enforcement is sought in a
Proceeding at law or in equity).
Section 5.3 Noncontravention.
Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (a) result in any
violation of or default (with or without notice or lapse of time, or both) under
(i) any statute, regulation, rule, injunction, judgment, Order, Authorization or
other restriction of any Governmental Body applicable to Purchaser or by which
any of the properties or assets of Purchaser are bound or (ii) the certificate
of incorporation and bylaws or comparable organizational documents of Purchaser,
or (b) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, require any consent under, create in any party the right
to accelerate, terminate, modify, or cancel any agreement, contract, lease,
license, instrument, Authorization or other arrangement to which Purchaser is a
party or by which it is bound or to which any of its assets is subject, except
where such violation, conflict, breach, default, acceleration, termination,
modification or cancellation would not reasonably be expected to materially
adversely affect the ability of Purchaser to consummate the transactions
contemplated hereby. Except as contemplated by Section 6.1(a) or as set forth on
Schedule 5.3, the Purchaser does not need to give any notice to, make any filing
with, or obtain any Authorization of any Government Body in connection with the
execution, delivery and performance by the Purchaser of this Agreement or in
order for the Purchaser to consummate the transactions contemplated by this
Agreement, except pursuant to the HSR Act or where the failure to give notice,
to file, or to obtain any Authorization would not materially adversely affect
the ability of the Purchaser to consummate the transactions contemplated by this
Agreement.
Section 5.4 Brokers' Fees.
The Purchaser has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any of the Sellers or the Companies
could become liable or obligated.
Section 5.5 Financing.
The Purchaser has sufficient funds to permit it to pay the Purchase
Price at the Closing and to consummate the transactions contemplated by this
Agreement.
Section 5.6 Investment Purpose.
The Purchaser confirms that it is acquiring the Shares for investment
for its own account and not with a view to the sale or distribution of any part
thereof, and that the Purchaser has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
Securities Act of 1933, as amended, or any state securities laws. Purchaser
31
further acknowledges that the Shares have not been registered for sale or resale
pursuant to the Securities Act of 1933, as amended, or the "blue sky" Laws of
any state.
Section 5.7 Independent Investigation.
The Purchaser acknowledges that it has conducted an independent
investigation of the financial condition, assets, liabilities, properties and
projected operations of the Companies.
ARTICLE VI
COVENANTS OF THE PARTIES PRIOR TO CLOSING
Section 6.1 Consents and Filings.
(a) The Sellers and the Purchaser covenant and agree with each other
to:
(i) (A) make, or cause to be made, the filings required of
such Party under the HSR Act with respect to the transactions
contemplated by this Agreement within ten (10) Business Days of the
date of this Agreement, provided that the Purchaser, on the one hand,
and the Sellers, on the other hand, shall each pay half of any filing
or application fee required under the HSR Act, (B) comply at the
earliest practicable date with any formal or informal request for
information, documents or other materials received by such party or
its Affiliates from the United States Federal Trade Commission (the
"FTC") or the Antitrust Division of the United States Department of
Justice (the "DOJ") with respect to such filings or the antitrust
aspects of such transactions, (C) cooperate with one another in
connection with any such filings and in connection with resolving any
investigation or other inquiry of the FTC or DOJ with respect to any
such filings or any such transactions and (D) use all commercially
reasonable efforts to take such actions as may be required to cause
the expiration of the applicable waiting periods under the HSR Act;
and
(ii) promptly file, or cause to be promptly filed, with
any United States agency or any state or local Governmental Body or
agency not described in clause (i) above, all other notices,
applications or other documents as may be necessary to consummate the
transactions contemplated hereby, and to thereafter diligently pursue
all consents or approvals from any such Governmental Body as may be
necessary to consummate the transactions contemplated hereby.
(b) The Sellers shall use commercially reasonable efforts to obtain
all such waivers, consents or approvals from third parties, and to give all such
notices to third parties, as are required to be obtained pursuant to this
Agreement. Each of the Parties shall use its commercially reasonable efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement.
Section 6.2 Operation of Business.
The Sellers will cause the Companies to conduct the Business in the
Ordinary Course of Business and in compliance in all material respects with all
applicable Laws and regulations and, to the extent consistent therewith, use
their commercially reasonable efforts to preserve intact the current business
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organization and preserve existing relationships with customers, suppliers,
employees and others having business dealings with it to the end that its
goodwill and ongoing business shall not be impaired in any material respect.. In
addition, the Sellers will cause the Companies to (a) maintain their assets in
operating condition and repair comparable to that in effect on the date hereof
(normal wear and tear excepted), (b) maintain insurance comparable to that in
effect on the date hereof, (c) maintain inventory at customary and adequate
operating levels consistent with past practice, (d) continue to collect accounts
receivable and pay accounts payable utilizing normal procedures in the Ordinary
Course of Business and without discounting or accelerating payment of such
accounts (other than as has been customary in the Ordinary Course of Business),
(e) comply in all material respects with all contractual and other obligations
applicable to the operation of the Companies, and (f) maintain their books,
accounts and records in accordance with past custom and practice as used in the
preparation of the Latest Balance Sheet and the Financial Statements described
in Section 4.7 hereof. Without limiting the generality of the foregoing, prior
to the Closing, the Sellers shall cause the Companies and Administrators, Inc.
not to, without the prior written consent of the Purchaser:
(i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase,
or otherwise acquire any of its capital stock, other than for tax
distributions in accordance with the Companies' past practices or for
other distributions with respect to its capital stock of cash on hand
at the Closing following the repayment of all Debt in accordance with
Section 6.6 hereof;
(ii) transfer, issue, sell or dispose of any shares of
capital stock or other securities of any of the Companies or grant
options, warrants, calls or other rights to purchase or otherwise
acquire shares of the capital stock or other securities of any of the
Companies;
(iii) effect any recapitalization, reclassification, stock
split or like change in the capitalization of any of the Companies;
(iv) amend the certificate of incorporation or by-laws of
any of the Companies;
(v) (A) materially increase the annual level of
compensation of any employee of any of the Companies, (B) except as
previously disclosed to the Purchaser prior to the date hereof,
increase the annual level of compensation payable or to become
payable by any of the Companies to any of their respective executive
officers, (C) grant any unusual or extraordinary bonus, benefit or
other direct or indirect compensation to any employee, director or
consultant (provided that the Companies shall be permitted to pay any
amount previously granted in accordance with the terms of the grant),
(D) increase the coverage or benefits available under any (or create
any new) severance pay, termination pay, vacation pay, company
awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance,
pension or other employee benefit plan or arrangement made to, for,
or with any of the directors, officers, employees, agents or
representatives of any of the Companies or otherwise modify or amend
or terminate any such plan or (E) enter into any employment, deferred
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compensation, severance, consulting, non-competition or similar
agreement (or amend any such agreement) to which any of the Companies
is a party or involving a director, officer or employee of any of the
Companies in his or her capacity as a director, officer or employee
of any of the Companies;
(vi) incur or assume any indebtedness other than in the
Ordinary Course of Business;
(vii) acquire any material properties or assets or sell,
assign, license, transfer, convey, lease or otherwise dispose of any
of the material properties or assets (except for sales in the
Ordinary Course of Business) of any of the Companies;
(viii) enter into or agree to enter into any merger or
consolidation with, any corporation or other entity, and not engage
in any new business or invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities of any other
Person;
(ix) cancel or compromise any debt or claim or waive or
release any material right of any of the Companies except in the
Ordinary Course of Business;
(x) enter into any commitment for capital expenditures of
any of the Companies in excess of $100,000 for any individual
commitment and $300,000 for all commitments in the aggregate;
(xi) enter into, modify or terminate any labor or
collective bargaining agreement of any of the Companies or, through
negotiation or otherwise, make any commitment or incur any liability
to any labor organization with respect to any of the Companies;
(xii) introduce any material change with respect to the
operation of any of the Companies or, other than in the Ordinary
Course of Business, make any change in product specifications or
prices or terms of distributions of the products of the Companies;
(xiii) make a change in its accounting or Tax reporting
methods;
(xiv) make or rescind any election relating to Taxes, or
settle or compromise any claim or proceeding relating to Taxes;
(xv) enter into any contract, arrangement, understanding
or commitment that restrains, restricts, limits or impedes the
ability of any of the Companies to compete with or conduct any
business or line of business in any geographic area; or
(xvi) agree to do anything prohibited by this Section 6.2
or anything which would make (A) any of the representations and
warranties of the Sellers set forth in this Agreement untrue or
incorrect in any material respect (B) any of the conditions set forth
in Article VIII incapable of being satisfied.
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Section 6.3 Access.
(a) The Sellers will cause the Companies to permit representatives of
the Purchaser to have access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of the Companies, to the
premises, properties, personnel, books, records, contracts, and documents of or
pertaining to the Companies and to make extracts and copies of such books and
records. The Purchaser shall not have direct access to the principal suppliers
and customers of the Business without the express prior written consent of the
Seller Representative or the President of ITC. In order that the Purchaser may
have full opportunity to make such physical, business, accounting and legal
review, examination or investigation as it may reasonably request of the affairs
of the Companies, the Sellers shall cause the officers, employees, consultants,
agents, accountants, attorneys and other representatives of the Companies to
cooperate fully (subject to the first sentence of this Section 6.3) in
connection with such review and examination by the Purchaser. The Purchaser will
treat and hold as confidential material any nonpublic information it receives
from the Sellers or the Companies in the course of the reviews contemplated by
this Section 6.3, will not use any of such confidential material except as
permitted under this Agreement, and, if this Agreement is terminated for any
reason whatsoever, will return to the Seller Representative all tangible
embodiments (and all copies), and will delete or otherwise destroy all
electronic copies, of such confidential material which are in its possession.
The Purchaser acknowledges that the terms of this Section 6.3 are in addition
to, and not in lieu of, the terms of that certain Confidentiality Agreement
between Purchaser and Banc of America Securities (on behalf of the Companies)
dated as of January 27, 2005 (the "CONFIDENTIALITY AGREEMENT").
Section 6.4 Notice of Developments.
(a) From the date of this Agreement until the Closing, the Sellers
shall promptly deliver to the Purchaser supplemental information concerning
events or circumstances occurring subsequent to the date hereof which would
render any representation, warranty or statement in this Agreement or the
schedules hereto inaccurate or incomplete at any time after the date of this
Agreement until the Closing. If the parties are unable to mutually agree on
appropriate treatment of such supplemental information, then upon the disclosure
to Purchaser of any such supplemental information which constitutes a material
breach of any representation, warranty or statement in this Agreement or the
schedules hereto, Purchaser shall be entitled to elect either not to close the
transaction or to proceed with a closing in which case such supplemental
information shall constitute an amendment of the applicable representation,
warranty or statement in this Agreement or the schedules hereto. Any
supplemental information disclosed prior to Closing which is not a material
breach of a representation, warranty or statement in this Agreement, shall
constitute an amendment of the applicable representation, warranty or statement
in this Agreement or the schedules hereto; provided, however, that any Adverse
Consequences arising from such disclosure may be included for purposes of the
threshold amount in Section 10.2.
(b) From the date of this Agreement until the Closing, Purchaser
shall promptly deliver to the Sellers supplemental information concerning events
or circumstances occurring subsequent to the date hereof which would render any
35
representation or warranty in this Agreement inaccurate or incomplete at any
time after the date of this Agreement until the Closing. If the parties are
unable to mutually agree on appropriate treatment of such supplemental
information, then upon the disclosure to Sellers of any such supplemental
information which constitutes a material breach of any representation, warranty
or statement in this Agreement or the schedules hereto, Sellers shall be
entitled to elect either not to close the transaction or to proceed with a
closing in which case such supplemental information shall constitute an
amendment of the applicable representation, warranty or statement in this
Agreement or the schedules hereto; provided, however, that any Adverse
Consequences arising from such disclosure may be included for purposes of the
threshold amount in Section 10.3.
Section 6.5 Title Insurance.
As soon as practicable following the execution of this Agreement, the
Sellers shall obtain commitments (the "TITLE COMMITMENTS") for A.L.T.A. title
insurance policies to insure fee simple marketable title to the Purchaser of the
Owned Real Property prepared by one or more national title insurance companies
acceptable to Purchaser (the "TITLE COMPANIES") together with true, legible
copies of all instruments referred to therein. The cost of obtaining the Title
Commitments and copies of all instruments referred to therein shall be borne
equally by the Sellers, on the one hand, and the Purchaser on the other hand.
Section 6.6 Prepayment of Indebtedness; Release of Security Interests.
At or prior to the Closing, the Sellers will cause each of the
Companies to prepay and extinguish all Debt outstanding immediately prior to the
Closing. The Sellers shall use their respective commercially reasonable efforts
to cause (a) all Security Interests on the assets and properties of any of the
Companies in favor of any Debt Holder to be released and (b) each of the
Companies to be released from any and all guarantees under the Debt, in each
case, as of the Closing Date, and in connection therewith to obtain all
necessary documents required to be delivered to Purchaser pursuant to Section
3.2(j). The Sellers shall file, or cause to be filed, termination statements and
obtain, or cause to be obtained, any other releases, consents, waivers or
similar documents necessary to effect the release of Security Interests or
guarantees contemplated by this Section 6.6.
Section 6.7 Prior Agreements Regarding Shares.
Each Seller hereby agrees to execute and deliver any documents or
instruments requested by the Seller Representative or the Purchaser necessary or
appropriate to effectuate the terminations, consents and waivers referred to in
the last sentence of Section 4.4(b) hereof.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligation of the Sellers to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The Seller
Representative, on behalf of the Sellers, shall have the right to waive any
condition not so satisfied.
Section 7.1 Representations and Warranties; Performance of Obligations.
Any representations and warranties of Purchaser set forth in this
Agreement that are qualified as to materiality shall be true and correct in all
respects, and all other representations and warranties of Purchaser set forth in
this Agreement shall be true and correct in all material respects, in each case,
as of the date of this Agreement and as of the Closing as though such
representations and warranties had been made on and as of the Closing, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct as of such date). All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Purchaser on or before the
Closing shall have been duly complied with or performed in all material
respects.
Section 7.2 No Litigation.
There shall not be in effect any Order by a Governmental Body of
competent jurisdiction restraining, enjoining, seeking to recover substantial
damages upon or otherwise prohibiting the consummation of the transactions
contemplated hereby.
Section 7.3 Authorizations.
All Authorizations of and filings with any Governmental Body relating
to the consummation of the transaction contemplated herein shall have been
obtained and made.
Section 7.4 HSR Act.
The applicable waiting period under the HSR Act shall have expired or
been terminated.
Section 7.5 Additional Items.
The Purchaser shall have delivered to the Sellers the documents,
certificates and items required to be delivered by the Purchaser pursuant to
Section 3.3.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The Purchaser
shall have the right to waive any condition not so satisfied.
Section 8.1 Representations and Warranties; Performance of Obligations.
Any representations and warranties of the Sellers set forth in this
Agreement that are qualified as to materiality shall be true and correct in all
respects, and all other representations and warranties of the Sellers set forth
in this Agreement shall be true and correct in all material respects, in each
case, as of the date of this Agreement and as of the Closing as though such
representations and warranties had been made on and as of the Closing, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct as of such date). All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Sellers on or before the
Closing shall have been duly complied with or performed in all material
respects.
Section 8.2 No Litigation.
No Proceeding shall have been instituted or threatened by any
Governmental Body which seeks to restrain or prohibit the transactions
contemplated by this Agreement, which seeks to cause the transactions
contemplated by this Agreement to be rescinded following consummation, which
would affect adversely the right of the Purchaser to own, operate or control the
Business, or which seeks to recover substantial damages relating to the
transactions contemplated by this Agreement, and there shall not be in effect
any Order by a Governmental Body of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby.
Section 8.3 Authorizations.
All necessary Authorizations of and filings with any Governmental
Body relating to the consummation of the transaction contemplated herein shall
have been obtained and made. All Authorizations, including qualifications to
conduct business, set forth in Schedule 4.3 shall have been obtained. The
Sellers shall have obtained, at their expense, all of the waivers, permits,
consents, approvals or other Authorizations, and effected all of the
registrations, filings and notices referred to in Schedule 4.3 which are
required on the part of the Sellers or the Companies.
Section 8.4 HSR Act.
The applicable waiting period under the HSR Act shall have expired or
been terminated.
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Section 8.5 No Material Adverse Effect.
No Material Adverse Effect shall have occurred.
Section 8.6 Title Insurance Policies.
The Purchaser shall have procured an Owner's ALTA form of Fee Policy
of Title Insurance (with riders and endorsements thereto) issued by the Title
Company in a form approved by the Purchaser in its reasonable discretion in an
amount equal to the fair market value of each parcel of the Owned Real Property
(the "TITLE POLICIES") insuring good, marketable and insurable fee simple title
in the Purchaser to each parcel of Owned Real Property free and clear of all
Security Interests. The cost of all premiums and similar fees and charges
required in connection with the issuance of the Title Policies shall be borne
equally by the Sellers, on the one hand, and Purchaser on the other hand.
Section 8.7 No Claim Regarding Stock Ownership or Sale Proceeds.
There must not have been made by any Person any claim asserting that
such Person (other than a Seller with respect to such Seller's Shares) (a) is
the holder or beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any Shares or any stock of, or any other voting,
equity, or ownership interest in, any of the Companies, or (b) is entitled to
all or any portion of the Purchase Price payable for the Shares.
Section 8.8 Additional Items.
The Sellers shall have delivered to the Purchaser the documents,
certificates and items required to be delivered by the Sellers pursuant to
Section 3.2.
ARTICLE IX
CONTINUING COVENANTS OF THE PURCHASER AND THE SELLERS
Section 9.1 Tax Matters.
(a) The Sellers shall cause the Companies and Administrators, Inc. to
timely file all Tax Returns due on or before the Closing Date. The Sellers shall
file, or cause to be filed, all Tax Returns which relate exclusively to taxable
periods that end on or before the Closing Date, whether or not such Tax Returns
are due before or after the Closing Date. It is acknowledged that any applicable
S-Corporation status of the Companies shall be deemed terminated as of the day
prior to the Closing Date. The Sellers and Purchaser shall, unless prohibited by
applicable law, cause each Company and Administrators, Inc. to close their
taxable year as of the end of the day prior to the Closing Date. The Purchaser
shall file, or cause to be filed all other Tax Returns for the Companies. The
Sellers shall make or cause to be made all payments required with respect to any
Tax Returns they are required to file pursuant to this Section 9.1(a). The
Purchaser shall make all payments required with respect to any Tax Returns it is
required to file pursuant to this Section 9.1(a), except to the extent reflected
as a liability on the Net Working Capital Balance Sheet.
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(b) In the event that the Sellers and the Purchaser are unable to
close the taxable year of any Company or of Administrators, Inc. as of the end
of the day prior to the Closing Date, and any Taxes for a taxable period
beginning on or before and ending after the day prior to the Closing Date shall
be paid with the appropriate Tax Return pursuant to Section 9.1(a) hereof by the
Purchaser, a portion of any such Taxes shall be allocated to, and paid by, the
Sellers to the Purchaser, to the extent attributable to the portion of such
period ending on the day prior to the Closing Date, which portion shall equal
(i) in the case of Taxes that (x) are based upon or related to income or
receipts or (y) imposed in connection with any sale or other transfer or
assignment of property, the amount which would be payable if the taxable year
ended on the day prior to the Closing Date, and (ii) in the case of other Taxes
imposed on a periodic basis (including property Taxes), the amount of such Taxes
for the entire period multiplied by a fraction the numerator of which is the
number of calendar days in the period ending on the day prior to the Closing
Date and the denominator of which is the number of calendar days in the entire
period; provided that exemptions, allowances or deductions that are calculated
on an annual basis and cannot otherwise be properly matched against specific
income or gains (including, but not limited to, depreciation and amortization
deductions) shall be allocated between the period ending on the day prior to the
Closing Date and the period beginning on the Closing Date in proportion to the
number of days in each such period. Unless such amounts are reflected as a
liability on the Net Working Capital Balance Sheet, the Seller Representative
shall pay to Purchaser amounts allocable to the Sellers pursuant to this Section
9.1(b) no later than five (5) Business Days prior to the date on which the Tax
Return to which such allocated amount relates is due.
(c) The Purchaser, the Companies and the Sellers shall provide each
other with such assistance as may reasonably be requested by the others in
connection with the preparation of any Tax Return or report of Taxes, any audit
or other examination by any taxing authority, or any judicial or administrative
proceedings relating to liabilities for Taxes. Such assistance shall include
making employees available on a mutually convenient basis to provide additional
information or explanation of material provided hereunder and shall include
providing copies of relevant Tax Returns and supporting material. The party
requesting assistance hereunder shall reimburse the assisting party for
reasonable out-of-pocket expenses incurred in providing assistance, and shall
pay for the reasonable costs of obtaining the services of any non-continuing
employee in connection with such assistance following the Closing.
(d) All refunds, plus interest thereon, for Taxes for taxable periods
ending (or deemed pursuant to Section 9.1(b) to end) on or before the day prior
to the Closing Date, shall be property of the Sellers to the extent not included
in the Net Working Capital Calculation, and such refunds, plus any interest
earned in connection with such refunds, shall be paid to the Seller
Representative (on behalf of the Sellers) by the applicable Company promptly
upon receipt. All refunds, plus interest thereon, for Taxes for taxable periods
beginning (or deemed pursuant to Section 9.1(b) to begin) on the Closing Date or
included in the Net Working Capital Calculation, shall be property of the
Purchaser and such refunds, plus any interest earned in connection with the
refund, shall be paid to the Purchaser by the Seller Representative (on behalf
of the Sellers) promptly upon receipt.
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(e) (i) Upon the request of the Purchaser, the Sellers shall join
with the Purchaser in making elections under Section 338(h)(10) of the Code and
the Treasury regulations and any corresponding or similar elections under state
or local tax law (collectively, the "SECTION 338(H)(10) ELECTIONS") with respect
to each of the Companies other than ITC and ITC Mountain. Any such request shall
be made by the Purchaser in writing no later than ninety (90) days after the
Closing Date. For the purpose of making the Section 338(h)(10) Elections for
federal income tax purposes, on or prior to the Closing Date, each Seller shall
deliver to the Purchaser an executed original IRS Form 8023 (or successor form)
for each such Company. At any time prior to the actual filing of the Section
338(h)(10) Elections, the Purchaser may choose not to make such elections, in
which case no Section 338(h)(10) Elections will be made. If no Section
338(h)(10) Election is to be made, the Form 8023 will be returned to the Seller
Representative within 120 days of the Closing Date. If a Section 338(h)(10)
Election is to be made, the Purchaser will file the Form 8023 with the IRS prior
to the due date of such form, and the Purchaser will provide the Seller
Representative a copy of such filing.
(ii) The Purchaser shall be responsible for the
preparation and filing of all forms and documents required to
effectuate the Section 338(h)(10) Elections and the Sellers shall
cooperate with the Purchaser in connection therewith. In addition to
the Form 8023, each Seller shall execute (or cause to be executed)
and deliver to the Purchaser such additional documents or forms as
are reasonably requested to complete properly the Section 338(h)(10)
Elections, which delivery shall be timely, in any event no later than
ten (10) days after the Purchaser provides such additional documents
or forms to the Seller Representative. The Purchaser and each Seller
shall file all Tax Returns in a manner consistent with the Section
338(h)(10) Elections and shall take no position contrary thereto
unless required to do so by applicable tax laws.
(iii) Within sixty (60) days of notifying the Seller
Representative of its intent to make any Section 338(h)(10) Election,
the Purchaser shall provide the Seller Representative a statement
(the "ALLOCATION STATEMENT") allocating the portion of the Purchase
Price allocable to each such Company (which shall be consistent with
and based on the final Relative Values, as reflected in Exhibit D)
and any other items that are treated as additional Purchase Price for
tax purposes among the different items of assets of each such
Company. The Purchaser and each Seller shall allocate the Purchase
Price in accordance with the Allocation Statement and all Tax Returns
and reports filed by the Purchaser and each Seller shall be prepared
consistently with such allocation.
(iv) The Purchaser shall pay to each Seller, in cash, the
amount of additional consideration necessary to cause such Seller's
after-Tax net proceeds from the sale of the Shares with the Section
338(h)(10) Election to be equal to the after-Tax net proceeds that
such Seller would have received had the Section 338(h)(10) Election
not been made, taking into account all appropriate federal, state and
local Tax implications, and taking into account any incremental
accountant or other fees and expenses, including without limitation
the fees and expenses of the Seller Tax Representatives (as defined
below), incurred as a result of the Section 338(h)(10) Election (the
"Tax Adjustment"). The Sellers or the Seller Representative shall
designate one or more accounting firms or other independent third
41
parties (the "Seller Tax Representatives") that shall provide the
Purchaser with a schedule tentatively computing the amount of the Tax
Adjustment for each Seller after the Purchaser delivers the
Allocation Statement (the "Initial Tax Adjustment"). In making such
calculations, the highest individual federal, state and local Tax
rates to which the Sellers are subject shall be used and all other
items of income, deduction, gain, loss or credits of the Sellers
shall be taken into account. The amount of the Initial Tax Adjustment
shall be promptly paid to the appropriate Seller after the Parties
agree on the calculation of the Initial Tax Adjustment. Promptly
following the preparation of the final 2005 tax returns of each
Seller reflecting the Section 338(h)(10) elections, the Seller Tax
Representatives shall provide the Purchaser with a final schedule
reflecting the final Tax Adjustment (the "Final Tax Adjustment").. To
the extent of any discrepancy between the Final Tax Adjustment and
the Initial Tax Adjustment, payment shall be made to the appropriate
Party promptly after the Parties agree on the calculation of the
Final Tax Adjustment. The determination and resolution of the Initial
Tax Adjustment and the Final Tax Adjustment shall be made by the
Purchaser and the Seller Tax Representatives. In the event that there
is a dispute between one or more of the Seller Tax Representatives
and the Purchaser regarding the proper amount of a Tax Adjustment,
the dispute shall be resolved by the Independent Auditors using
principles similar to those provided for in Section 2.3(d).
(f) Any claim by any Party relating to a breach by another Party of
its obligations under this Section 9.1 shall be pursued in accordance with the
procedures for indemnification claims, and shall otherwise be subject to the
terms and conditions, set forth in Article X; provided, however, that any Third
Party Claim for Taxes that relates to a taxable period that begins on or before
the day prior to the Closing Date and ends after the day prior to the Closing
Date shall be controlled by both the Purchaser and the Seller Representative.
Notwithstanding the foregoing or any other term or condition of Article X, (i)
claims for a breach of an obligation under this Section 9.1 may be made by a
Party at any time prior to the expiration of the statute of limitations
applicable to the Tax matter to which the claim relates and (ii) to the extent
there is any inconsistency between the terms of Article X and this Section 9.1
with respect to the allocation of responsibility between the Seller and the
Purchaser for Taxes relating to the Companies or Administrators, Inc., the
provisions of this Section 9.1 shall govern. For the avoidance of doubt and
notwithstanding anything contained herein to the contrary, any claim for
indemnity under Article X in respect of an obligation under Section 9.1(e)(iv)
shall not be subject to and shall be paid without regard to the $500,000 "floor"
and the 25% of Purchase Price "cap" provided in Section 10.2(a)(i) and (ii) and
in Section 10.3(a)(x) and (y).
Section 9.2 Proprietary Information.
From and after the Closing, the Sellers shall not disclose or make
use of (except to pursue their rights under this Agreement), and the Sellers
shall cause their Affiliates not to disclose or make use of, any knowledge,
information or documents of a confidential nature or not generally known to the
public with respect to the Companies, the Business or the Purchaser or its
business (including the financial information, technical information or data
relating to the services and names of customers of the Companies, as well as
filings and testimony (if any) presented in the course of any indemnification
42
claim under this Agreement, except to the extent that such knowledge,
information or documents shall have become public knowledge other than through
improper disclosure by the Sellers or any Affiliate of the Sellers.
Section 9.3 Sharing of Information.
The Purchaser will, and will cause the Companies to, cooperate with
the Sellers and their Affiliates and provide to the Sellers and their
Affiliates, at the Sellers' expense, reasonable access and all information
relating to the Companies which may be required for the purpose of preparing
financial statements for periods that include a period prior to the Closing
Date. The Purchaser shall maintain all books and records related to operation of
the Business prior to the Closing, whether in paper, digital or other format,
for a period of the greater of (i) three (3) years after the Closing Date or
(ii) such greater period as may be required by applicable Law. Upon request by
the Seller Representative, the Purchaser shall make such books and records
available to the Seller Representative for review and copying; provided, that
the Seller Representative shall reimburse the Purchaser for its reasonable
out-of-pocket expenses incurred in connection therewith.
Section 9.4 Cooperation in Litigation.
In connection with any legal action, claim, arbitration, audit,
hearing, investigation, dispute, inquiry, litigation, suit (whether civil,
criminal, administrative, investigative, or informal), formal review or other
proceeding (any of the foregoing, a "PROCEEDING") relating to the Business or
any of the Companies involving third parties including, without limitation, any
Third Party Claims subject to Section 10.4, and any Proceeding relating to or
arising out of the conduct of the Business or any of the Companies prior to the
Closing (other than litigation among the Parties and/or their Affiliates arising
out the transactions contemplated by this Agreement) which could result in
indemnifiable Adverse Consequences for the Sellers, upon request by the Party
responsible for such matter, the other Party hereto shall make available its
employees and other personnel and cooperate with other requests of the
responsible Party for assistance in connection with resolution of such
Proceeding (including, without limitation, depositions and preparation for any
formal proceedings related to such Proceeding).
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties.
All of the representations and warranties contained in this Agreement
shall survive the Closing and continue in full force and effect until December
31, 2006, provided that (a) the representations of the Sellers in Sections 4.2
and 4.4 shall survive the Closing without limitation and (b) the representations
of the Sellers in Sections 4.10 and 4.14(b) shall survive the Closing until the
expiration of all applicable statutory periods of limitation applicable to the
matters referred to therein. If an Indemnified Party delivers to an Indemnifying
Party, before expiration of a representation or warranty, either a Claim Notice
or an Expected Claim Notice based upon a breach of such representation or
43
warranty, then the applicable representation or warranty shall survive until,
but only for purposes of, the resolution of the matter covered by such notice.
If the legal Proceeding or written claim with respect to which an Expected Claim
Notice has been given is definitively withdrawn or resolved in favor of the
Indemnified Party, the Indemnified Party shall promptly so notify the
Indemnifying Party.
Section 10.2 Indemnification Provisions for the Benefit of the
Purchaser.
(a) In the (a) event of a breach of any representation, warranty,
covenant, obligation or agreement of the Sellers contained in this Agreement
(other than the representations and warranties set forth in Section 4.19 hereof,
for which Seller's indemnification obligations are set forth in Section 10.7
hereof) or any agreement or instrument furnished by (or on behalf of) the
Sellers to the Purchaser pursuant to this Agreement or (b) case of Taxes for
taxable periods (or portions thereof, determined in accordance with Section
9.1(b)) ending on or before the day prior to the Closing Date (except to the
extent such amount was actually taken into account, and decreased, the final
calculation of Net Working Capital), the Sellers jointly and severally (except
for the representations and warranties made by each Seller in Sections 4.2 and
4.4(b), which are made on a several and not a joint basis) agree to indemnify
and hold harmless the Purchaser and its Affiliates from and against the entirety
of any Adverse Consequences the Purchaser and its Affiliates shall incur or
suffer resulting from or relating to any such breach or Taxes. Notwithstanding
the foregoing, no Seller shall have any obligation to indemnify the Purchaser or
any Affiliate from and against any Adverse Consequences caused by any breach of
a representation or warranty (i) until the Purchaser has suffered Adverse
Consequences by reason of all such breaches in excess of an aggregate threshold
amount equal to $500,000, at which point the Sellers will be liable for the
aggregate amount of all Adverse Consequences suffered under this Section 10.2 or
(ii) for any amount by which the aggregate Adverse Consequences the Purchaser
has suffered by reason of all such breaches of representations and warranties
exceeds 25% of the Purchase Price (the "CAP"); provided, that the limitations
set forth in clauses (i) and (ii) shall not apply to a claim relating to (and
the Sellers shall be obligated to indemnify the Purchaser or any Affiliate from
and against all Adverse Consequences resulting from or relating to) a breach of
(A) the representations and warranties set forth in Sections 4.2, 4.4 and 4..10
or (B) any covenant, obligation or agreement of the Sellers contained in this
Agreement or any agreement or instrument furnished by (or on behalf of) the
Sellers to the Purchaser pursuant to this Agreement. Any claim by Purchaser for
Adverse Consequences under this Section 10.2, if the Sellers have an obligation
to indemnify Purchaser for such Adverse Consequences hereunder, shall first be
made against the Indemnification Escrow Amount under the terms of the Escrow
Agreement except to the extent that the existing Indemnification Escrow Amount
is not sufficient to cover such claim.
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Section 10.3 Indemnification Provisions for the Benefit of the Sellers.
(a) In the event of (i) a breach of any representation, warranty,
covenant, obligation or agreement of the Purchaser contained in this Agreement
or any agreement or instrument furnished by the Purchaser to the Sellers
pursuant to this Agreement, or (ii) any Adverse Consequences incurred by the
Sellers on account of any matter, action or fact arising after the Closing
(other than to the extent such Adverse Consequences relate to a breach by the
Sellers of their representations under Article IV above), then the Purchaser
agrees to indemnify and hold harmless the Sellers and their Affiliates from and
against the entirety of any Adverse Consequences the Sellers and their
Affiliates shall incur or suffer resulting from or relating to any such breach,
matter, action or fact. Notwithstanding the foregoing, the Purchaser shall not
have any obligation to indemnify the Sellers from and against any Adverse
Consequences caused by any breach of a representation or warranty under clause
(i) above (x) until the Sellers have suffered Adverse Consequences by reason of
all such breaches in excess of $500,000, at which point the Purchaser will be
liable for the aggregate amount of all Adverse Consequences suffered under this
Section 10.3 or (y) for any amount by which the aggregate Adverse Consequences
the Sellers have suffered by reason of all such breaches of representations and
warranties exceeds the Cap.
Section 10.4 Indemnification Claims.
(a) Subject to Section 9.1 hereof, if any third party shall commence
any Proceeding for which indemnification may be sought by a Party under this
Article X (a "THIRD PARTY CLAIM"), then the Indemnified Party shall promptly
(and in any event within fifteen (15) Business Days after receiving notice of
the Third Party Claim) notify the Indemnifying Party thereof in writing;
provided, however, that no delay or failure on the part of the Indemnified Party
in so notifying the Indemnifying Party shall relieve the Indemnifying Party of
any liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within fifteen (15) Business
Days after delivery of such notification, the Indemnifying Party may, upon
written notice thereof to the Indemnified Party, assume control of the defense
of such Third Party Claim with counsel reasonably satisfactory to the
Indemnified Party; provided that (i) the Indemnifying Party may only assume
control of such defense if (A) it acknowledges in writing to the Indemnified
Party that any damages, fines, costs or other liabilities that may be assessed
against the Indemnified Party in connection with such Third Party Claim
constitute Adverse Consequences for which the Indemnified Party shall be
indemnified pursuant to this Article X and (B) the ad damnum is less than or
equal to the amount of Adverse Consequences for which the Indemnifying Party is
liable under this Article X and (ii) the Indemnifying Party may not assume
control of the defense of Third Party Claim involving criminal liability or in
which equitable relief is sought against the Indemnified Party. If the
Indemnifying Party does not, or is not permitted under the terms hereof to, so
assume control of the defense of a Third Party Claim, the Indemnified Party
shall control such defense. The Non-controlling Party may participate in such
defense at its own expense. The Controlling Party shall keep the Non-controlling
Party advised of the status of such Third Party Claim and the defense thereof
and shall consider in good faith recommendations made by the Non-controlling
Party with respect thereto. The Non-controlling Party shall furnish the
45
Controlling Party with such information as it may have with respect to such
Third Party Claim (including copies of any summons, complaint or other pleading
which may have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) and shall otherwise
cooperate with and assist the Controlling Party in the defense of such Third
Party Claim. The reasonable fees and expenses of counsel to the Indemnified
Party with respect to a Third Party Claim shall be considered Adverse
Consequences for purposes of this Agreement if (i) the Indemnified Party
controls the defense of such Third Party Claim pursuant to the terms of this
Section 10.4(a) or (ii) the Indemnifying Party assumes control of such defense
and the Indemnified Party could not effectively be represented by the same
counsel due to conflicting interests with respect to such Third Party Claim. The
Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any Third Party Claim without the prior written consent
of the Indemnified Party, which shall not be unreasonably withheld, conditioned
or delayed; provided that the consent of the Indemnified Party shall not be
required if the Indemnifying Party agrees in writing to pay any amounts payable
pursuant to such settlement or judgment and such settlement or judgment includes
a complete release of the Indemnified Party from further liability and has no
other material adverse effect on the Indemnified Party. The Indemnified Party
shall not agree to any settlement of, or the entry of any judgment arising from,
any such Third Party Claim without the prior written consent of the Indemnifying
Party, which shall not be unreasonably withheld, conditioned or delayed.
(b) In order to seek indemnification under this Article X, an
Indemnified Party shall deliver a Claim Notice to the Indemnifying Party. Within
thirty (30) days after delivery of a Claim Notice, the Indemnifying Party shall
deliver to the Indemnified Party a Response, in which the Indemnifying Party
shall:
(i) if the claim has been made under Sections 10.2 or
10.7, either (A) agree that the Indemnified Party is entitled to
receive all of the Claimed Amount (in which case the Response shall
be accompanied by either (1) instructions signed by the Seller
Representative to the Escrow Agent directing the Escrow Agent to
release the Claimed Amount to the Purchaser or (2) to the extent that
the existing Escrow Amount is not sufficient to cover the Claimed
Amount, a payment by the Indemnifying Party to the Indemnified Party
of the difference between the Claimed Amount and the Escrow Amount,
by check or by wire transfer), (B) agree that the Indemnified Party
is entitled to receive the Agreed Amount (in which case the Response
shall be accompanied by either (1) instructions signed by the Seller
Representative to the Escrow Agent directing the Escrow Agent to
release the Agreed Amount to the Purchaser or (2) to the extent that
the existing Escrow Amount is not sufficient to cover the Agreed
Amount, a payment by the Indemnifying Party to the Indemnified Party
of the difference between the Agreed Amount and the Escrow Amount, by
check or by wire transfer and the Claimed Amount which is in excess
of the Agreed Amount shall be deemed disputed) or (C) dispute that
the Indemnified Party is entitled to receive any of the Claimed
Amount.
(ii) if the claim has been made under Section 10.3, either
(A) agree that the Indemnified Party is entitled to receive all of
the Claimed Amount (in which case the Response shall be accompanied
by a payment by the Indemnifying Party to the Indemnified Party of
the Claimed Amount, by check or by wire transfer), (B) agree that the
46
Indemnified Party is entitled to receive the Agreed Amount (in which
case the Response shall be accompanied by a payment by the
Indemnifying Party to the Indemnified Party of the Agreed Amount, by
check or by wire transfer and the Claimed Amount which is in excess
of the Agreed Amount shall be deemed disputed) or (C) dispute that
the Indemnified Party is entitled to receive any of the Claimed
Amount.
During the thirty (30) day period following the delivery of a Response that
reflects a dispute, the Indemnifying Party and the Indemnified Party shall use
good faith efforts to resolve the dispute. If the dispute is not resolved within
such thirty (30) day period, the Indemnified Party will be free to pursue all
remedies available to it under this Agreement or otherwise in law or in equity.
Section 10.5 Determination of Adverse Consequences.
(a) The amount of Adverse Consequences recoverable by an Indemnified
Party under this Article X with respect to an indemnity claim shall be reduced
by (i) any proceeds received by such Indemnified Party or its Affiliates, with
respect to the Adverse Consequences to which such indemnity claim relates, from
an insurance carrier, (ii) the amount of any tax savings actually realized by
such Indemnified Party or an Affiliate for the tax year in which such Adverse
Consequences are incurred, which are attributable to the Adverse Consequences to
which such indemnity claim relates, and shall be increased by any increased tax
liability which may result from the receipt of the indemnity payment or any
insurance proceeds relating to such Adverse Consequences, and (iii) any amounts
taken into account as a downward adjustment in the Net Working Capital
Calculation. All indemnification payments made to an Indemnified Party under
this Article X shall be deemed adjustments to the Purchase Price.
(b) For purposes of Article X, any Adverse Consequences suffered or
incurred by any of the Companies arising from a breach of any representation,
warranty, covenant, agreement or obligation by a Seller shall be deemed suffered
or incurred by the Purchaser, and the Purchaser shall be entitled to seek
indemnification under this Article X against the Sellers for any such Adverse
Consequences without any liability of the Companies. Each Seller waives any and
all rights of contribution, cost recovery or other payment from the Companies,
whether arising by agreement or operation of Law, to the extent of any liability
of the Companies owed to any of the Sellers under this Agreement.
Section 10.6 Exclusive Remedy.
Except in the case of fraud, the Purchaser and the Sellers
acknowledge and agree that, after the Closing, the foregoing indemnification
provisions in this Article X shall be the exclusive remedy of the Purchaser and
the Sellers with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform or fulfill any
covenant, obligation or agreement contained in this Agreement.
47
Section 10.7 Special Environmental Indemnification for the Benefit of
the Purchaser.
(a) In addition to the Sellers' obligations pursuant to Section 10.2
hereof, subject to the limitations set forth in Sections 10.7(c) through (e)
hereof, Sellers jointly and severally shall indemnify and hold harmless
Purchaser and its Affiliates, including any of the Companies, from and against
the entirety of (i) Excluded Liabilities, (ii) Environmental Matters, including,
without limitation, Remedial Liabilities, arising out of or related to any
condition identified on Schedule 10.7 hereto ("Environmental Conditions"), and
(iii) breaches of the representations and warranties of the Sellers set forth in
Section 4.19 hereof (and breaches of other representations and warranties of the
Sellers to the extent such breaches specifically and solely relate to
Environmental Matters). Any claim by Purchaser for any amounts in respect of the
items set forth in clauses (i), (ii) or (iii) of this Section 10.7(a), if the
Sellers have an obligation to indemnify Purchaser for such amounts hereunder,
shall first be made against the Indemnification Escrow Amount under the terms of
the Escrow Agreement, except to the extent that the existing Indemnification
Escrow Amount is not sufficient to cover such claim.
(b) Purchaser shall have the right to undertake any investigation it
determines, in its sole discretion, is necessary into any or all Environmental
Conditions, including the right to undertake soil and groundwater investigations
("Purchaser's Investigations"). If Purchaser's Investigations reveal violations
of Environmental Laws or the presence of Hazardous Materials in concentrations
in excess of those allowed by Environmental Laws, Purchaser shall have the right
to undertake necessary Remedial Action. Purchaser shall control any Remedial
Actions of Environmental Matters; provided that such Remedial Actions shall be
conducted in a reasonable and cost effective manner. The cost of any such
Remedial Actions shall constitute Remedial Liabilities.
(c) The Purchaser's right to indemnification pursuant to clauses
(a)(ii) and (a)(iii) of this Section 10.7 shall survive until December 31, 2006,
and the Sellers shall have no obligations for claims by the Purchaser for
indemnification arising out of or related to Environmental Conditions if the
Purchaser does not deliver a Claim Notice with respect to such claims on or
before December 31, 2006. The Parties acknowledge and agree that all
Environmental Conditions shall be deemed disclosed under and scheduled as
exceptions to Section 4.19 hereof. Notwithstanding any other provisions of this
Agreement to the contrary, the Purchaser's right to indemnification pursuant to
clause (a)(i) of this Section 10.7, with respect to indemnification for Excluded
Liabilities, shall not expire.
(d) The Sellers shall have no obligation under clauses (a)(ii) or
(a)(iii) of this Section 10.7 to indemnify the Purchaser until the aggregate of
all (i) Remedial Liabilities associated with the Environmental Conditions and
(ii) Adverse Consequences resulting from breaches of the representations and
warranties of the Sellers set forth in Section 4.19 hereof, exceed One Million
Dollars ($1,000,000) (the "Environmental Deductible"). The Environmental
Deductible shall not apply to any claim by Purchaser for indemnification for
Excluded Liabilities under clause (a)(i) of this Section 10.7. For the
48
elimination of doubt, the Deductible in Section 10.2 hereof shall not apply to
indemnification pursuant to this Section 10.7.
(e) Claims for indemnification pursuant to this Section 10.7 shall
not be subject to the Cap in Section 10.2 hereof; provided that Sellers shall
have no liability pursuant to clause (a)(ii) of this Section 10.7 for any
Remedial Liabilities associated with Environmental Conditions or pursuant to
clause (a)(iii) of this Section 10.7, in the aggregate, in excess of Four
Million Dollars ($4,000,000) over and above the Environmental Deductible paid by
the Purchaser (the "Environmental Cap"). Claims for indemnification pursuant to
clauses (a)(ii) or (a)(iii) of this Section 10.7 shall apply towards the Cap set
forth in Section 10.2. Claims made with respect to Excluded Liabilities shall
not be subject to, and shall not apply towards, the Cap or the Environmental
Cap.
(f) For purposes of this Agreement, the following terms have the
following definitions: (i) "Excluded Liabilities" means Remedial Liabilities
arising from or associated with any real property formerly owned, leased,
operated or occupied by any of the Companies or any of their respective
predecessors and not included in the Real Property. Real property formerly
owned, leased, operated or occupied includes, without limitation, real property
formerly owned or operated in Montrose, Colorado; Mountain Home, Idaho; and
Missoula, Montana; (ii) "Remedial Action" includes any and all actions to
respond to a Release or threatened Release of Hazardous Materials into the
environment, to prevent or minimize the Release of Hazardous Materials so that
they do not migrate to cause substantial danger to present or future public
health or welfare or the environment, and to remedy a violation of Environmental
Laws. The term includes, but is not limited to, actions and costs listed in the
definition of "Remedial Action" in CERCLA; and (iii) "Remedial Liabilities"
means all Adverse Consequences arising from Remedial Action, including, but not
limited to, fees and expenses of experts and the costs of investigation,
including, without limitation, Purchaser's Investigations, assessment, testing,
remedial design, implementation of a remedy, and monitoring.
ARTICLE XI
TERMINATION OF AGREEMENT
Section 11.1 Termination of Agreement.
The Parties may terminate this Agreement as provided below:
(a) the Purchaser and the Seller Representative (on behalf of the
Sellers) may terminate this Agreement by mutual written consent at any time
prior to the Closing;
(b) the Purchaser may terminate this Agreement by giving written
notice to the Seller Representative at any time prior to the Closing (i) in the
event the Sellers have breached any representation, warranty, or covenant
contained in this Agreement, such breach would cause the conditions set forth in
Section 8.1 not to be satisfied, the Purchaser has notified the Seller
Representative of the breach, and the breach has continued without cure for a
period of thirty (30) days after the notice of breach was delivered by the
49
Purchaser to the Seller Representative or (ii) if the Closing shall not have
occurred on or before June 1, 2005 by reason of the failure of any condition
precedent under Article VIII hereof (unless such failure results from the
Purchaser breaching any representation, warranty, or covenant contained in this
Agreement); and
(c) the Seller Representative (on behalf of the Sellers) may
terminate this Agreement by giving written notice to the Purchaser at any time
prior to the Closing (i) in the event the Purchaser has breached any
representation, warranty, or covenant contained in this Agreement, such breach
would cause the conditions set forth in Section 7.1 not to be satisfied, the
Seller Representative has notified the Purchaser of the breach, and the breach
has continued without cure for a period of thirty (30) days after the notice of
breach was delivered by the Seller Representative to the Purchaser or (ii) if
the Closing shall not have occurred on or before June 1, 2005 by reason of the
failure of any condition precedent under Article VII hereof (unless such failure
results from the Sellers breaching any representation, warranty, or covenant
contained in this Agreement).
Section 11.2 Effect of Termination.
If any Party terminates this Agreement pursuant to Section 11.1, all
obligations of the Parties hereunder shall terminate without any liability of
any Party to the other Party (except for any liability of any Party whose
willful breach resulted in such termination); provided, however, that the
confidentiality provisions contained in Section 6.4 and the provisions of
Article XIII shall survive termination.
ARTICLE XII
EMPLOYEES
Section 12.1 Employment by the Purchaser.
The Purchaser shall cause the Companies to continue the employment of
all of the Company Employees (other than those employees that the Purchaser
designates on Schedule 12.1 not later than ten (10) Business Days prior to
Closing); it being understood that any such employment that is "at will"
employment prior to Closing may continue to be so after the Closing. The initial
terms of employment of such employees shall be the same, including with respect
to benefits, as such employees enjoy prior to Closing. The Sellers shall be
responsible for any and all (i) bonuses and profit sharing accrued by any of the
Companies during the fiscal year ended March 25, 2005 under any Company Plans in
accordance with their terms (and any such accruals shall be disregarded for
purposes of the adjustment to the Purchase Price set forth in Section 2.3
hereof) and (ii) any other payments to Company Employees set forth on Schedule
4.14(c).
50
ARTICLE XIII
GENERAL
Section 13.1 The Seller Representative.
(a) Each Seller irrevocably constitutes and appoints Xxxxx X.
Xxxxxxxx (the "SELLER REPRESENTATIVE") as such Seller's true and lawful
attorney-in-fact and agent and authorizes him acting for such Seller and in such
Seller's name, place and stead, in any and all capacities to do and perform
every act and thing required or permitted to be done in connection with the
transactions contemplated by this Agreement and the other Transaction Documents
contemplated hereby, as fully to all intents and purposes as such Seller might
or could do in person, including without limitation resolution of any adjustment
or proposed adjustment to the Purchase Price pursuant to Section 2.3 and
resolution of any claim made by the Purchaser under Article X. Each Seller
grants unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing necessary or desirable to be done in
connection with the transactions contemplated by the Transaction Documents, as
fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all that the Seller Representative may
lawfully do or cause to be done by virtue hereof. Each Seller acknowledges and
agrees that upon execution of this Agreement, upon any delivery by the Seller
Representative of any waiver, amendment, agreement, opinion, certificate or
other document executed by the Seller Representative, such Seller shall be bound
by such documents as fully as if such Seller had executed and delivered such
documents. The Seller Representative acknowledges that he shall cause all
receipts obtained and/or disbursements required to be paid on a pro rata basis
(determined according to Relative Value) among the Sellers, except, as
applicable, with regard to any amounts owed to the Purchaser due to the breach
of a representation made under Sections 4.2 or 4.4(b) on a several basis, in
which case any amounts payable shall be solely attributed to the breaching
Seller.
(b) Upon the death, disability or incapacity of the initial Seller
Representative appointed pursuant to Section 13.1(a) above, each Seller
acknowledges and agrees that the Seller Representative's executor, guardian or
legal representative, as the case may be, shall appoint a replacement reasonably
believed by such Person as capable of carrying out the duties and performing the
obligations of the Seller Representative hereunder within thirty (30) days of
such death, disability or incapacity. Each Seller agrees to pay, in proportion
to such Seller's Relative Value, such Seller's share of any and all costs
incurred or payable by Seller Representative in its capacity as such under this
Agreement or any of the Transaction Agreements, including with regard to any
costs covered under Section 13.12.
(c) Each Seller agrees that Purchaser shall be entitled to rely on
any action taken by the Seller Representative on behalf of the Sellers pursuant
to Section 13.1(a) above (each, an "AUTHORIZED ACTION"), and that each
Authorized Action shall be binding on each Seller as fully as if such Seller had
taken such Authorized Action. The Sellers agree to pay, and to indemnify and
hold harmless Purchaser, its Affiliates (including the Companies after the
Closing), and their respective officers, directors and representatives from and
against any Adverse Consequences which they may suffer, sustain, or become
51
subject to, as the result of any claim by any Seller that an Authorized Action
is not binding on, or enforceable against, any of the Sellers.
Section 13.2 Press Releases and Public Announcements.
No Party shall issue any press release or make any other public
announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of the other Party, which approval
shall not be unreasonably withheld or delayed, unless, in the sole judgment of
Purchaser or the Seller Representative, disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange on which the
Purchaser lists securities.
Section 13.3 No Third-Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
assigns.
Section 13.4 Entire Agreement.
This Agreement, together with the Confidentiality Agreement, the
Transaction Documents and the other documents referred to herein, constitute the
entire agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
Section 13.5 Succession and Assignment.
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Party;
provided, however, that Purchaser may assign this Agreement and any or all of
its rights or obligations hereunder (including, without limitation, Purchaser's
rights to purchase the Shares and Purchaser's rights to seek indemnification
hereunder) to any Affiliate of Purchaser; provided, further, however, that no
assignment of any obligations hereunder shall relieve the Parties hereto of any
such obligations. Upon any such permitted assignment, the references in this
Agreement to Purchaser shall also apply to any such assignee unless the context
otherwise requires.
Section 13.6 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.
52
Section 13.7 Headings.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement. The Recitals are a part of this Agreement and reflect the
intent of the Parties.
Section 13.8 Notices.
All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two (2) Business
Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, or if (and then one Business Day after) it is sent
by reputable nationwide overnight courier service, in each case, addressed to
the intended recipient as set forth below:
if to the Sellers:
Xxxxx X. Xxxxxxxx, as Seller Representative
X.X. Xxx 0000
Xxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
with copies to:
Xxxxxx X. Black, Esq.
Goldberg, Kohn, Bell, Black, Xxxxxxxxxx & Xxxxxx, Ltd.
00 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
and to:
Xxxxx X. Xxxxxx, Esq.
Xxxxx Xxxxx, LLP
0000 Xxxx Xxxx Xxxxxx
X.X. Xxx 000
Xxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
if to the Purchaser:
Leucadia National Corporation
000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Attention: Xxx X. Xxxxxxx
Telecopier: (000) 000-0000
53
and
Chartwell Investments
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopier: (000) 000-0000
with copies to:
Leucadia National Corporation
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
and to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
Section 13.9 Governing Law.
This Agreement shall be governed by and shall be construed and
enforced in accordance with the internal Laws of the state of Delaware, without
regard to conflicts of law principles.
Section 13.10 Amendments and Waivers.
No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by the Purchaser and the Seller
Representative (on behalf of the Sellers). No waiver by any Party of any right
or remedy hereunder shall be valid unless the same shall be in writing and
signed by the Party giving such waiver. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder shall be deemed
54
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
Section 13.11 Severability.
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
Section 13.12 Expenses.
Except as set forth in Article IX and Article X, each of the Sellers
and the Purchaser will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
Section 13.13 Construction.
The Parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement 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. 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.
Section 13.14 Incorporation of Exhibits and Schedules.
The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
Section 13.15 Specific Performance.
Each Party acknowledges and agrees that the other Party would be
damaged irreparably in the event any of the provisions of this Agreement
(including Section 9.2) are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each Party agrees that the other
Party shall be entitled to an injunction or other equitable relief to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
55
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
Section 13.16 Waiver of Jury Trial.
EACH OF THE PARTIES HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. EACH OF THE PARTIES ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN ITS RELATED FUTURE DEALINGS. EACH OF THE PARTIES WARRANTS AND
REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS.
* * * * * *
56
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the day and year first above written.
LEUCADIA NATIONAL CORPORATION
By:
----------------------------------
Name:
Title:
--------------------------------- --------------------------------------
XXXXX XXXXXXXX XXXXXXXX XXXXXXXX
--------------------------------- --------------------------------------
XXXX XXXXXXXX XXXX XXXXXXXX
--------------------------------- --------------------------------------
XXXX XXXXXX XXXX XXXXXXX
--------------------------------- --------------------------------------
XXXX XXXXXXXX XXXXXXX XXXXXX
--------------------------------- --------------------------------------
XXX XXXXX XXXXXX XXXX
--------------------------------- --------------------------------------
XXXXXX XXXX XXXX BEVERAGE
--------------------------------- --------------------------------------
XXX XXXX XXXX XXXXX
--------------------------------- --------------------------------------
XXXX XXXXXXXXX XXXXX XXXXX
--------------------------------- --------------------------------------
XXXXX XXXXXXXXXX XXXXX XXXXXX
--------------------------------- --------------------------------------
XXXXX XXXXX XXXX TRAIL
--------------------------------- --------------------------------------
ROMNEY XXXXX XXXXX TEVOGH
---------------------------------
XXXX XXXXXX
