EXHIBIT 4.14
ASSET PURCHASE AGREEMENT
by and among
PALEX, INC.,
BROMLEY ACQUISITION COMPANY, INC.,
as Purchaser,
and
BROMLEY PALLET RECYCLERS, INC.,
BROMLEY PALLET RECYCLERS, LLC,
BROMLEY PALLET RECYCLERS OF TENNESSEE, LLC,
BROMLEY PALLET RECYCLERS OF ALABAMA, LLC,
BROMLEY PALLET RECYCLERS OF OHIO, LLC,
BROMLEY PALLET RECYCLERS OF INDIANA, LLC,
BROMLEY PALLET RECYCLERS OF ILLINOIS, LLC,
XXXXXXX XXXXXX,
XXXXXXX XXXXXX,
AND
XXXXX XXXXXX,
as Sellers
Dated as of August 25, 2000
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of the 25/th/
---------
day of August, 2000, by and among PalEx, Inc., a Delaware corporation ("PalEx"),
-----
Bromley Acquisition Company, Inc., a Delaware corporation that is a wholly owned
subsidiary of PalEx ("Newco"), Bromley Pallet Recyclers, Inc. ("Bromley Inc."),
----- ------------
a Florida corporation, Bromley Pallet Recyclers, LLC, a Delaware limited
liability company ("Bromley LLC"), Bromley Pallet Recyclers of Tennessee, LLC, a
-----------
Tennessee limited liability company ("Bromley TN"), Bromley Pallet Recyclers of
----------
Alabama, an Alabama limited liability company ("Bromley AL"), Bromley Pallet
----------
Recyclers of Ohio, LLC, an Ohio limited liability company ("Bromley OH"),
----------
Bromley Pallet Recyclers of Indiana, LLC, an Indiana limited liability company
("Bromley IN"), Bromley Pallet Recyclers of Illinois, LLC, an Illinois limited
----------
liability company ("Bromley IL" and, together with Bromley Inc., Bromley LLC,
----------
Bromley TN, Bromley AL, Bromley OH, Bromley IN, the "Companies"), Xxxxxxx
---------
Xxxxxx, Del Xxxxxx, and Xxxxx Xxxxxx (with such individuals being collectively
referred to herein, jointly and severally, as the "Stockholders"), which
------------
individuals own substantially all of the equity interests of the Companies that
are not owned by another Company.
WHEREAS, the Companies are in the businesses of buying, selling, recycling,
repairing, marketing, distributing, brokering, managing and/or transporting
pallets or pallet parts and providing other logistics services with respect
thereto; and
WHEREAS, the Companies desire to sell to Newco the Businesses (as defined
herein) and in connection therewith substantially all of the assets of the
Companies, and Newco desires to purchase such Businesses and assets and assume
certain liabilities of the Companies relating thereto, upon the terms and
conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party hereto, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement shall have the
following meanings:
"Affiliate" of, or "Affiliated" with, a specified person or entity means a
--------- ----------
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the specified person or entity.
"Agreement" has the meaning set forth in the first paragraph of this
---------
Agreement.
"Assets" has the meaning set forth in Section 2.1.
------ -----------
"Assumed Liabilities" has the meaning set forth in Section 2.4.
------------------- -----------
"Balance Sheet Date" has the meaning set forth in Section 3.4.
------------------ -----------
"Bromley AL" has the meaning set forth in the first paragraph of this
----------
Agreement.
"Bromley FL" means Bromley Pallet Recyclers of Ft. Xxxxx, LLC, a Florida
----------
limited liability company.
"Bromley IN" has the meaning set forth in the first paragraph of this
----------
Agreement.
"Bromley Inc." has the meaning set forth in the first paragraph of this
------------
Agreement.
"Bromley LLC" has the meaning set forth in the first paragraph of this
-----------
Agreement.
"Bromley OH" has the meaning set forth in the first paragraph of this
----------
Agreement.
"Bromley TN" has the meaning set forth in the first paragraph of this
----------
Agreement.
"Businesses" means the businesses of the Companies, including, without
----------
limitation, the buying, selling, recycling, repairing, marketing, distributing,
brokering, managing or transporting pallets or pallet parts and other logistics
services with respect thereto.
"Closing" has the meaning set forth in Section 2.8.
------- -----------
"Closing Date" has the meaning set forth in Section 2.8.
------------ -----------
"Code" has the meaning set forth in Section 3.14.
---- ------------
"Company" means any one of the Companies.
-------
"Companies" has the meaning set forth in the first paragraph of this
---------
Agreement.
"Company Stock" has the meaning set forth in Section 3.3.
------------- -----------
"Competitive Business" means any business that competes with the Businesses
--------------------
of any Company, including, without limitation, any business that (a)
manufactures, buys, sells, recycles, repairs, markets, distributes, brokers,
manages or transports new or used pallets or pallet parts and other logistics
services with respect thereto; or (b) competes with any Company for raw
materials (e.g., pallet lumber, pallet carcasses and fasteners).
"Employee benefit plan" has the meaning set forth in Section 3.14.
--------------------- ------------
3
"Employee pension benefit plan" has the meaning set forth in Section 3.14.
----------------------------- ------------
"Employment Agreement" has the meaning set forth in Section 5.4.
-------------------- -----------
"Encumbrances" means all liens, encumbrances, mortgages, pledges, security
------------
interests, conditional sales agreements, charges, options, rights of first
refusal, reservations, restrictions or other encumbrances or defects in title.
"Environmental Laws" means any Law or agreement with any Governmental
------------------
Authority relating to (a) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (b)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of any substance, in each case as amended and as in effect on the Closing Date.
The term "Environmental Law" includes, without limitation, (i) the Federal
-----------------
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as
amended and as in effect on the Closing Date, and similar state statutes,
regulations and local ordinances or codes, and (ii) any common law or equitable
doctrine (including, without limitation, injunctive relief and tort doctrines
such as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of, effects of or exposure to any substance.
"Equipment" has the meaning set forth in Section 2.1.
--------- -----------
"ERISA" has the meaning set forth in Section 3.14.
----- ------------
"ERISA Affiliate" has the meaning set forth in Section 3.14.
--------------- ------------
"Excluded Assets" has the meaning set forth in Section 2.2.
--------------- -----------
"Excluded Liabilities" has the meaning set forth in Section 2.4(a).
-------------------- --------------
"Expiration Date" has the meaning set forth in Section 10.7.
--------------- ------------
"Financial Statements" has the meaning set forth in Section 3.4(a)(ii).
-------------------- ------------------
"Ft. Xxxxx Facility" means the facility located at 0000 Xxxxxxxx Xxxxxx,
------------------
Ft. Xxxxx, Florida which is currently leased by Bromley Pallet Recyclers of Fort
Xxxxx, LLC.
4
"GAAP" means generally accepted accounting principles applied on a basis
----
consistent with preceding years and throughout the periods involved.
"Goodwill" has the meaning set forth in Section 2.1.
-------- -----------
"Governmental Authority" means any federal, state, local or foreign
----------------------
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or quasi-
governmental authority.
"Hazardous Substances" means any substance listed, defined, designated or
--------------------
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law. The term "Hazardous Substances"
--------------------
includes, without limitation, any substance to which exposure is regulated by
any Environmental Law including, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos or asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.
"IFCO" means IFCO Systems N.V., a Dutch public company and the parent
----
corporation of PalEx.
"IFCO Ordinary Shares" means the ordinary shares of IFCO with a nominal
--------------------
value of Euro 2.00 each.
"Indemnified Party" has the meaning set forth in Section 6.3.
----------------- -----------
"Indemnifying Party" has the meaning set forth in Section 6.3.
------------------ -----------
"Intangible Property" has the meaning set forth in Section 3.21.
------------------- ------------
"Law" or "Laws" means any and all federal, state, local or foreign
--- ----
statutes, laws, ordinances, code, regulations, licenses, permits, approvals,
consents, orders, decrees, judgments, injunctions and published rules of any
Governmental Authority, including, without limitation, those covering
environmental, Tax, energy, safety, health, transportation, bribery,
recordkeeping, zoning, discrimination, antitrust and wage and hour matters, in
each case as amended and in effect from time to time.
"Lockup Period" has the meaning set forth in Section 9.2(a).
------------- --------------
"Loss" or "Losses" means all liabilities, losses, claims, damages, actions,
---- ------
suits, proceedings, demands, assessments, fees, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation).
"Material Customers" has the meaning set forth in Section 3.8(a).
------------------ --------------
5
"Nasdaq" means The Nasdaq Stock Market.
------
"Net Working Capital" means the Companies' aggregate net working capital
-------------------
(current assets minus current liabilities, including any current indebtedness
that is not otherwise reflected in the calculation of the Purchase Price under
Section 2.3), which working capital shall be computed from the Companies books
-----------
and records in accordance with GAAP as applied in the preparation of the
Financial Statements and shall not include (a) Excluded Assets or Excluded
Liabilities, or (b) indebtedness for borrowed money included in the calculation
of the Purchase Price under Section 2.3, to the extent such items in clauses (a)
----------- -----------
and (b) would otherwise be included in such computation.
---
"Newco" has the meaning set forth in the first paragraph of this Agreement.
-----
"1934 Act"means the Securities Exchange Act of 1934, as amended.
--------
"Non-Competition Agreement" has the meaning set forth in Section 5.4.
------------------------- -----------
"1933 Act" means the Securities Act of 1933, as amended.
--------
"PalEx" has the meaning set forth in the first paragraph of this Agreement.
-----
"Permits" has the meaning set forth in Section 3.9.
------- -----------
"Permitted Encumbrances" means (a) Encumbrances for property or ad valorem
----------------------
Taxes not yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the Companies' books in accordance with GAAP, and (b) obligations under and
security interest relating to operating and capital leases described on Schedule
--------
3.7(b).
------
"Plan" has the meaning set forth in Section 3.14.
---- ------------
"Purchase Price" has the meaning set forth in Section 2.3.
-------------- -----------
"Qualified Plans" has the meaning set forth in Section 3.14(c).
--------------- ---------------
"Reference Price" means $22.00 per share of IFCO Ordinary Shares
---------------
"Restricted Shares" has the meaning set forth in Section 9.1.
----------------- -----------
"Rule 144" means Rule 144 as promulgated under the 1933 Act.
--------
"SEC" means the Securities and Exchange Commission.
---
"Stockholders" has the meaning set forth in the first paragraph of this
------------
Agreement.
6
"Subordinated Notes" has the meaning set forth in Section 2.3.
------------------ -----------
"Taxes" has the meaning set forth in Section 3.16.
----- ------------
"Territory" has the meaning set forth in Section 7.1(a)(i).
--------- -----------------
"Third Person" has the meaning set forth in Section 6.3.
------------ -----------
"Year-End Financial Statements" has the meaning set forth in Section
----------------------------- -------
3.4(a)(i).
---------
1.2. Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in Section 1.1 and elsewhere in this Agreement
-----------
include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings ascribed to them in accordance with GAAP; and
(c) the words "herein," "hereof," and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE II
THE PLAN OF ACQUISITION
2.1. The Acquisition of the Assets. Upon the terms and subject to the
conditions of this Agreement, at the Closing, the Companies and the Stockholders
agree to sell, convey, transfer, assign and deliver to Newco, and Newco agrees
to purchase from the Companies, all of the Companies' right, title and interests
in the Companies' respective assets, properties, Businesses, franchises,
goodwill and rights of every kind and character, tangible or intangible, real or
personal, whether owned or leased, free and clear of all Encumbrances other than
Permitted Encumbrances and any created by Newco or PalEx, as the case may be,
other than Excluded Assets (collectively, the "Assets"). Without limiting the
------
generality of the foregoing, the Assets shall consist of all assets of the
Companies (other than the Excluded Assets), including, without limitation, the
following:
(a) all cash and cash equivalents of the Companies;
(b) all accounts and notes receivable of the Companies;
(c) all inventory (including, without limitation, spare parts
inventory) and work-in-progress of the Companies;
7
(d) all right, title and interest of the Companies in, to and under
all existing contracts and agreements, written and verbal to which any
Company is a party, including, without limitation, those contracts and
agreements identified in Schedule 3.8;
------------
(e) the vehicles and other transportation equipment of the Companies,
including, without limitation, the vehicles and other transportation
equipment of the Companies set forth in Schedule 3.7;
------------
(f) all of the furniture, fixtures, equipment, machinery, tools,
appliances, telephone systems, copy machines, fax machines, implements,
spare parts, supplies and all other tangible personal property of every
kind and description owned by the Companies or the Companies' leasehold
interests therein (the "Equipment"), including, without limitation, the
---------
Equipment of the Companies set forth in Schedule 3.7;
------------
(g) except to the extent not transferable, all right, title and
interest of the Companies in, to and under all Permits owned or possessed
by the Companies and relating to the Businesses or all or any of the
Assets, including, without limitations, the Permits set forth in Schedule
--------
3.9;
---
(h) all customer lists, sales records, credit data and other
information relating to customers of the Companies, the names "Bromley
Pallet Recyclers," "Bromley Pallet," and any derivations thereof, any trade
names or other assumed names under which the Companies operate, all right,
title and interest of the Companies in, to and under all intangible
property of the Companies, the goodwill associated therewith and the rights
and privileges used in the conduct of the Businesses and the right to
recover for infringement thereon, including, without limitation, the
intangible property set forth on Schedule 3.21 (collectively, the
-------------
"Goodwill"); provided, however, the Companies are not transferring or
-------- -------- -------
assigning their rights or interests in the name "Bromley," to the extent
such name is not used in any Competitive Business or in marketing or
providing products or services to any customer of, or provider of products
or services to, Purchaser or its Affiliates;
(i) copies of the Companies' books, records, papers and instruments
of whatever nature and wherever located that relate to the Businesses or
the Assets or that are required or necessary in order for Newco to conduct
the Businesses from and after the Closing in the manner in which they were
being conducted before the Closing;
(j) all insurance proceeds and insurance claims of the Companies
relating to their respective Businesses or all or any part of the Assets,
except for claims and proceeds relating to the Excluded Liabilities, and to
the extent transferable, the benefit of and the right to enforce the
covenants and warranties, if any, that any Company is entitled to enforce
with respect to the Assets against its predecessors in title to the Assets,
if any;
(k) all right, title and interest of the Companies in computer
equipment and hardware, including, without limitation, all central
processing units, terminals, disk drives, tape drives, electronic memory
units, printers, keyboards, screens, peripherals (and other
8
input/output devices), modems and other communication controllers,
networking equipment, and any and all parts and appurtenances thereto,
together with all software and intellectual property used by the Companies
with such computer equipment and hardware, to the extent such software and
intellectual property is assignable;
(l) all rights, title and interests of the Companies in, to and under
all rights, privileges, claims, causes of action, and options relating to
or pertaining to the foregoing Assets; and
(m) all other or additional privileges, rights, interests, properties
and assets of the Companies of every kind and description and wherever
located that are used or intended for use in connection with, or that are
necessary to the continued conduct of, their respective Businesses as
conducted prior to the date hereof or proposed to be conducted after the
date hereof, provided that the foregoing provisions of this clause (m)
----------
shall not include claims the Companies may have against its officers or
directors for acts or failures to act prior to the Closing, to the extent
such claims do not affect title to the Assets or the transfer of title to
the Assets free and clear of all Encumbrances other than Permitted
Encumbrances..
2.2. Excluded Assets. It is expressly understood and agreed that the
Assets shall not include, Newco shall not purchase and the respective Companies
shall not sell or transfer to Newco, the following assets (collectively, the
"Excluded Assets"):
---------------
(a) agreements with or rights or claims of the Companies or the
Stockholders against Chep;
(b) the Companies minute books, financial and tax records, income Tax
refunds and benefits (i.e., Tax loss carryovers), rights under this
Agreement;
(c) the items of personal property specifically identified on
Schedule 2.2;
------------
(d) previously purchased goodwill;
(e) equity interests in any of the Companies; and
(f) rights of the Stockholders or the Companies under this Agreement
or any ancillary agreements contemplated by this Agreement by and among any
of the Companies, the Stockholders or Newco.
2.3. Purchase Price. At the Closing, Newco shall pay an aggregate purchase
price for the Assets (the "Purchase Price") totaling:
--------------
(a) $20,250,000, less the amount of bona fide indebtedness set forth
in Section 2.4 below (which indebtedness shall be discharged as of the date
hereof), in cash;
9
(b) $6,625,000 principal amount of subordinated notes of Newco, which
notes shall (i) amortize over five years, (ii) accrue interest at the rate
of 9% per annum, (iii) provide for quarterly payments of principal and
accrued interest, (iv) be guaranteed by PalEx on such terms and conditions
as may be mutually agreed upon by the Companies and PalEx at or before the
Closing, and (v) have such other terms as may be mutually agreed upon by
the Companies and Newco (the "Subordinated Notes"); and
------------------
(c) 119,318 IFCO Ordinary Shares;
The cash portion of the Purchase Price, the Subordinated Notes and the IFCO
Ordinary Shares to be issued as part of the Purchase Price shall be paid or
issued as may be directed by the Companies and the Stockholders in writing
before the Closing.
2.4. Liabilities.
(a) As further consideration for the purchase of the Assets, Newco
shall assume and discharge: (i) $5,503,062.96 of bona fide indebtedness of
the Companies, which indebtedness shall be determined in accordance with
GAAP, but shall not include ordinary course payables and accruals of the
Companies as determined in accordance with GAAP; (ii) the ordinary course
payables and accruals of the Companies as reflected on the Companies'
financial statements as of the Closing Date, which financial statements
shall be prepared in accordance with GAAP; and (iii) the Companies
liabilities and obligations under the contracts and agreements described in
Section 2.1, to the extent such liabilities and obligations arise under
-----------
such contracts and agreements after the Closing and are not related to the
failure of the Companies to obtain consents to the assignments of such
contracts or agreements; provided, however, that notwithstanding anything
-------- -------
to the contrary contained in any other Section of this Agreement, neither
PalEx nor Newco shall assume or be liable for: (A) any other liabilities or
obligations of the Companies; (B) any fees, expenses, finder's fees,
brokerage commissions or advisory fees, expenses or commissions arising in
connection with the consummation of the transactions contemplated by this
Agreement; (C) any Loss with respect to, arising out of or from any claim,
action, suit or proceeding, whether disclosed or not, or now or hereafter
arising, including any claim arising out of or relating to any violation of
(1) any agreement, contract or undertaking by which such Company is bound,
or (2) any Law, including, without limitation, any Environmental Law; (D)
liabilities or obligations of any Company with respect to claims by
employees, workmen's compensation, employee benefit plans, product
warranties or liabilities; (E) any Taxes of the Company or the
Stockholders; (F) obligations and liabilities as a successor in interest of
the Companies under Laws relating to product liability or otherwise; (G)
any obligations or liabilities of the Companies or the Stockholders to
Chep; (H) any liabilities resulting from any environmental conditions
occurring or existing on, under or emanating from any of the Companies'
facilities prior to the Closing; (I) any liabilities or obligations of or
relating to Bromley FL or the Ft. Xxxxx Facility or any Losses arising out
of the operation of the business of Bromley FL or the operations of the Ft.
Xxxxx Facility, at any time, (J) any liabilities or obligations of the
Companies or the Stockholders to Pallet, Pallet, Inc., or any of its
successors or assigns, in
10
connection with the agreement of any Company to acquire the assets or rent
the facility of Pallet, Pallet, Inc. located at 0000 X. 00xx Xxxxxx,
Xxxxxxx, Xxxxxxxx, and (K) any Losses arising from the failure of the
Companies to obtain any consents required for the assignment of any
contracts, rights or agreements being assigned by the Companies or the
Stockholders in connection with the transactions contemplated herein
(collectively, the "Excluded Liabilities"). The liabilities and obligations
--------------------
of the Companies to be assumed by Newco pursuant to the provisions of
Section 2.4(a) are herein referred to as the "Assumed Liabilities."
-------------- -------------------
(b) Neither PalEx nor Newco assumes or agrees to pay, perform or
discharge, or shall be responsible for, Excluded Liabilities, whether
accrued, absolute, contingent or otherwise. The Stockholders and the
Companies agree that the Companies shall remain solely responsible and
liable for the Excluded Liabilities.
2.5. Conveyance Documents.
(a) At the Closing, the Companies shall execute and deliver to Newco
(i) a completed Xxxx of Sale and Assignment and Assumption Agreement, in a
mutually acceptable form, covering all of the Assets, and (ii) a
certificate of title to any Asset covered by a certificate of title. At
all times hereafter as may be necessary, the Companies shall execute and
deliver to Newco such other instruments of transfer as shall be reasonably
necessary or appropriate to vest in Newco good and indefeasible title to
the Assets, free and clear of all Encumbrances other than Permitted
Encumbrances and to comply with the purposes and intent of this Agreement.
(b) At the Closing, Newco shall execute and deliver to the Companies
a completed Xxxx of Sale and Assignment and Assumption Agreement, in a
mutually acceptable form, providing for Newco's assumption of the Assumed
Liabilities.
2.6. Allocation of Purchase Price. Schedule 2.6 sets forth the allocation
------------
of the Purchase Price and the Assumed Liabilities (to the extent included in the
sales price for federal income Tax purposes) among the Assets. Newco, the
Companies and the Stockholders agree that they shall not take any position or
action inconsistent with such allocation in the filing of any income Tax
returns.
2.7. Post-Closing Working Capital Adjustment.
(a) Not later than 30 days following the Closing Date, Newco shall
prepare a calculation of the Net Working Capital as of the Closing Date
(the "Closing Date Net Working Capital"). The Closing Date Net Working
--------------------------------
Capital shall be prepared in accordance with GAAP as employed in the
preparation of the Financial Statements. All of the parties hereto shall
cooperate in good faith with each other in the calculation of the Closing
Date Net Working Capital. The Stockholders shall have access at all
reasonable times to review work papers, books and records relating to the
preparation of the Closing Date Net Working Capital.
11
(b) The Stockholders shall have the right to dispute the calculation
of the Closing Date Net Working Capital by giving written notice of dispute
to Newco within 30 days after the Closing Date Net Working Capital
calculation has been given to such parties. Such notice shall set forth in
detail the reasons for the dispute and the proposed adjustments to the
Closing Date Net Working Capital. If the Stockholders do not provide a
notice of dispute to Newco within such 30-day period in accordance with the
foregoing, the Closing Date Balance Sheet and calculations of Closing Date
Net Working Capital as prepared by Newco shall become final and binding.
If the Stockholders provide notice of dispute to Newco within such 30-day
period in accordance with the foregoing, all parties shall endeavor in good
faith to promptly resolve the dispute. If the parties are unable to reach
agreement on all of the disputed items during such 30-day period, then such
dispute shall be referred to Newco's accountant and the Companies'
accountant, who shall endeavor in good faith to resolve such dispute and
whose joint determination shall be final, conclusive and binding on the
parties hereto. If Newco's accountant and the Companies' accountant are
unable to resolve such dispute within 15 days, then Newco's accountant and
the Companies' accountant shall mutually choose a third independent
accounting firm to resolve such dispute, and such accounting firm's
determination of such dispute shall be final, conclusive and binding on the
parties hereto. Newco shall be responsible for any fees and expenses of
Newco's accountant in connection with services provided under this Section
-------
2.7, and the Companies shall be responsible for any fees and expenses of
---
the Companies' accountant in connection with services provided under this
Section 2.7. The fees and expenses charged by any independent accounting
-----------
firm for services performed under this Section 2.7 shall be borne equally
-----------
by the Stockholders and Newco.
(c) If the Closing Date Net Working Capital, as finally prepared and
binding upon the parties in accordance with this Section 2.7 is less than
-----------
$8,000,000 then, within 10 days after such determination, the Companies and
the Stockholders shall jointly and severally pay Newco an amount in cash
equal to the amount by which $8,000,000 exceeds the Closing Date Net
Working Capital. The Companies and the Stockholders specifically
acknowledge and agree that, in the event that Closing Date Net Working
Capital exceeds $8,000,000, neither Newco nor any of its Affiliates shall
owe the Companies or the Stockholders any additional amount.
(d) The Companies and the Stockholders covenant that between the
Balance Sheet Date and the Closing the Companies shall not have made any
distributions of working capital to the Stockholders or any of their
Affiliates other than payroll distributions consistent with the payroll
distributions set forth in the June 30, 2000 balance sheets of the
Companies.
2.8. Closing. The consummation of the purchase of the Assets and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
-------
the offices of PalEx in Houston, Texas, concurrently with the execution of this
Agreement or at such other time and date
12
as Newco, the Companies and the Stockholders may mutually agree, which date
shall be referred to as the "Closing Date."
------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
AND THE COMPANIES
Each Stockholder and each Company jointly and severally represent and
warrant to Newco as follows:
3.1. Due Organization and Qualification. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its organization, which state of organization is set forth for each Company on
Schedule 3.1. Each Company is duly authorized and qualified to do business under
------------
all applicable Laws to carry on its business in the places and in the manner now
conducted. Each Company has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is
currently being conducted. Schedule 3.1 contains a list of all jurisdictions in
------------
which each Company is authorized or qualified to do business. True, complete and
correct copies of the articles or certificate of incorporation, limited
liability company organizational documents and by-laws, as applicable and as
amended, of each Company have been provided to Newco. All the stock records and
minute books of each Company have been made available to Newco and are correct
and complete in all material respects.
3.2. Authorization; Non-Contravention; Approvals.
(a) Each Company has the requisite power and authority to enter into
this Agreement and to effect the transactions contemplated hereby. The
Stockholders have the full legal right, power and authority to enter into
this Agreement. The execution, delivery and performance of this Agreement
have been approved by the board of directors, managers, members or
stockholders of each Company, as applicable, and by the Stockholders. No
additional proceedings on the part of any Company are necessary to
authorize the execution and delivery of this Agreement or the consummation
by any Company of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each Company and each
Stockholder, and, assuming the due authorization, execution and delivery
hereof by PalEx and Newco, constitutes a valid and binding agreement of
each Company and each Stockholder, enforceable against each Company and
Stockholder in accordance with its terms.
(b) The execution and delivery of this Agreement by the Companies and
the Stockholders do not, and the consummation by the Companies and the
Stockholders of the transactions contemplated by this Agreement will not,
violate or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of, or, except as set forth
on Schedule 3.2, accelerate the performance required by, or result in a
------------
right of
13
termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of any Company under any of the terms, conditions or provisions of,
(i) the articles or certificate of incorpora tion, limited liability
company organizational documents or by-laws, as applicable, of any Company,
(ii) any Law applicable to any Stockholder or any Company or any of its
properties or assets, or (iii) any agreement, note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, lease or
other instrument, obligation or agreement of any kind to which any Company
or any Stockholder is now a party or by which any Company or any of its
properties or assets may be bound or affected.
(c) Except as set forth on Schedule 3.2, no declaration, filing or
------------
registration with, or notice to, or authorization, consent or approval of,
any Governmental Authority is necessary for the execution and delivery of
this Agreement by any Company or any Stockholder or the consummation by any
Company or any Stockholder of the transactions contemplated hereby. Except
as set forth on Schedule 3.2, none of the customer contracts or other
------------
material agreements to which any Company is a party requires notice to, or
the consent or approval of, any third party for the execution and delivery
of this Agreement by any Company or the consummation by any Company of the
transactions contemplated by this Agreement.
3.3 Capitalization. The authorized and outstanding capital stock or
membership interests, as applicable, of each Company is as set forth on Schedule
--------
3.3 (collectively, the "Company Stock"), all of which outstanding shares or
--- -------------
membership interests, as applicable, are owned beneficially and of record by the
Stockholders or the Companies, as respectively set forth on Schedule 3.3. All of
------------
the issued and outstanding shares of the Company Stock were duly authorized and
validly issued and are fully paid and nonassessable. None of such shares were
issued in violation of the preemptive rights of any past or present stockholder
or member. No subscription, option, warrant, call, convertible or exchangeable
security, other conversion right or commitment of any kind exists which
obligates any Company to issue any of its capital stock or membership interest,
as applicable, or any Stockholder or Company to transfer any of the Company
Stock.
3.4. Financial Statements.
(a) Attached hereto as Schedule 3.4 are complete and correct copies
------------
of the following financial statements:
(i) the audited combined statements of financial position of the
Companies as of December 31, 1997, 1998 and 1999 and the
related combined statements of income and statements of cash
flows and owners' equity of the Companies for the three-year
period ended December 31, 1999 (such statements of financial
positions and the related statements of income and
statements of cash flows and owners' equity are collectively
referred to herein as the "Year-End Financial Statements");
-----------------------------
and
14
(ii) the unaudited combined balance sheets of the Companies as of
June 30, 2000 (the "Balance Sheet Date") and the related
------------------
combined statements of income and statements of cash flows
for the six-month period ended on the Balance Sheet Date
(collectively, together with the Year-End Financial
Statements, the "Financial Statements").
--------------------
(b) The Financial Statements have been prepared from the books and
records of the Companies in conformity with GAAP (except that the Interim
Financial Statements exclude notes and are subject to normal year-end
adjustments, which shall not be material) and present fairly the combined
financial position and results of operations of the Companies as of the
dates of such statements and for the periods covered thereby. The books of
account of the Companies have been kept accurately in all material respects
in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all
material respects.
3.5. Liabilities and Obligations. Except as set forth in Schedule 3.5 and
------------
Schedule 3.15, the Companies did not have at the Balance Sheet Date, nor have
-------------
they incurred since that date,
any Assumed Liabilities (whether absolute, accrued, contingent or
otherwise) of any nature other than (i) liabilities, obligations or
contingencies (A) that are accrued or reserved against in the Financial
Statements or (B) that were incurred after the Balance Sheet Date and were
incurred in the ordinary course of business, consistent with past practices
and (ii) liabilities and obligations that (A) are of a nature not required
to be reflected in the Financial Statements prepared in accordance with
GAAP, (B) were incurred in the normal course of business and (C) are
described on Schedule 3.5; and
------------
(b) Excluded Liabilities that result in any Encumbrance on the Assets
or result in any Loss to Newco, PalEx or IFCO.
3.6. Accounts and Notes Receivable. Schedule 3.6 sets forth an accurate
------------
list of the accounts and notes receivable of the Companies as of the Balance
Sheet Date and as of the close of business on December 31, 1999, including any
such amounts that are not reflected in the Interim Balance Sheet. Receivables
from and advances to employees, any Stockholder and any entities or persons
related to or Affiliated with any Stockholder are separately identified on
Schedule 3.6. Schedule 3.6 sets forth an accurate aging of all accounts and
------------ ------------
notes receivable of the Companies as of the Balance Sheet Date, showing amounts
due in 30-day aging categories. The trade and other accounts receivable of the
Company, including without limitation those set forth on the Interim Balance
Sheet and those set forth on Schedule 3.6 as of the close of business on
------------
December 31, 1999, are bona fide receivables, were acquired in the ordinary
course of business, and are stated in accordance with GAAP. The allowance for
doubtful accounts included in the Interim Financial Statements or described on
Schedule 3.6 is sufficient to cover the uncollectible accounts receivable of the
------------
Companies.
15
3.7. Assets.
(a) Schedule 3.7 sets forth an accurate list of all real and personal
------------
property included in the Assets (i) as of the Balance Sheet Date and (ii)
December 31, 1999, excluding in each case only Assets that are not material to
the operation of the Businesses.
(b) Schedule 3.7 describes all the leases to which real or personal
------------
property included in the Assets are subject. Schedule 3.7 includes complete and
------------
correct copies of leases, including amendments, for all real property leased by
any Company and descriptions of all real property on which buildings,
warehouses, workshops, garages and other structures used in the operation of the
Business of such Company are situated. Schedule 3.7 includes complete and
------------
correct copies of leases, including amendments, for all significant equipment
leased by any Company. All leases set forth on Schedule 3.7 are in full force
------------
and effect and constitute valid and binding agreements of the respective
Company, and to the knowledge of the Companies and the Stockholders, of the
other parties thereto, and are enforceable in accordance with their respective
terms.
(c) Schedule 3.7 includes complete copies of all title reports and title
------------
insurance policies possessed by the Companies or the Stockholders with respect
to Assets consisting of leased real property. The Companies hold no fee estates
in any real property.
(d) Schedule 3.7 indicates which of the Assets set forth thereon are
------------
currently owned by a Stockholder or Affiliates of any Company or Stockholder.
(e) Except as specifically identified on Schedule 3.7, and except for
------------
those assets having an insignificant book value, all of the tangible assets,
vehicles and other significant machinery and equipment of any Company listed on
Schedule 3.7 are in good working order and condition, ordinary wear and tear
------------
excepted, and have been maintained in accordance with standard industry
practices.
(f) Schedule 3.7 includes a summary description of all contractual
------------
commitments of any Company involving the opening of new operations, expansion of
existing operations or the acquisition of any real property or existing
Business, to which management of such Company has devoted any significant effort
or expenditure in the two-year period prior to the date of the Agreement, and
which (i) are currently being implemented by such Company, and (ii) involve
purchases of capital equipment in connection with existing operations in amounts
in excess of $10,000, individually, or $25,000 in the aggregate.
(g) Each Company has good title to its respective owned Assets, and,
except as set forth on Schedule 3.7, the Companies own or lease their respective
------------
Assets free and clear of all Encumbrances, other than Permitted Encumbrances and
the Encumbrances set forth on Schedule 3.7.
------------
16
(h) Except for the Excluded Assets, the Assets constitute all the
assets used in, or reasonably necessary for, the operation of the Businesses as
conducted at the Balance Sheet Date and are either owned by a Company or leased
or licensed under an agreement identified on Schedule 3.7; provided, however,
------------
that such Schedule 3.7 excludes leases and licenses requiring payments of less
------------
than $5,000 per year.
(i) Schedule 3.7 lists those assets used exclusively in the operation
------------
of the Ft. Xxxxx Facility (the "Ft. Xxxxx Assets") and none of the Ft. Xxxxx
Assets are used in the operation of the Businesses.
3.8. Material Customers, Contracts and Bartering Commitments.
(a) Schedule 3.8 sets forth an accurate list of all customers
------------
representing 5% or more of the Companies' combined revenues for the year ended
December 31, 1998 and the year ended December 31, 1999 (the "Material
--------
Customers").
---------
(b) Schedule 3.8 sets forth an accurate list of all material
------------
executory contracts, commitments and similar agreements to which any Company is
currently a party or by which it or any of its Assets are bound, including, but
not limited to:
(i) all customer contracts in excess of $10,000,
individually, or $25,000 in the aggregate;
(ii) contracts with any labor organizations;
(iii) employment agreements;
(iv) leases providing for annual rental payments in excess of
$5,000, individually, or $10,000 in the aggregate;
(v) loan agreements;
(vi) pledge and security agreements;
(vii) indemnity or guaranty agreements;
(viii) bonds;
(ix) notes and mortgages;
(x) joint venture or partnership agreements;
(xi) options to purchase real or personal property;
(xii) agreements relating to the purchase or sale by any
Company of assets (other than oral agreements relating to
sales of inventory in the ordinary course of business,
consistent with past practices) or securities for more
than $5,000, individually, or $10,000 in the aggregate;
(xiii) confidentiality agreements;
(xiv) noncompete or similar agreements; and
(xv) agreements under which any Company has any
indemnification obligation.
Prior to the date hereof, each Company has made available to PalEx complete and
correct copies of all such agreements.
17
(c) Except to the extent set forth on Schedule 3.8, (i) no Material
------------
Customer has canceled or substantially reduced or is currently attempting
or, to the knowledge of the Companies or the Stockholders, threatening to
cancel or substantially reduce its purchases of any Company's products or
services, and (ii) each Company is in compliance with all material
commitments and obligations pertaining to it under the agreements described
in subsection (b) and is not in default under any such agreement.
--------------
(d) No Company is a party to any governmental contracts subject to
price redetermination or renegotiation. No Company is required to provide
any bonding or other financial security arrangements in any material amount
in connection with any transactions with any of its customers or suppliers.
(e) Schedule 3.8 sets forth a summary of the material terms of all
------------
material oral and all written bartering arrangements to which any Company
is a party. Each Company has a sufficient supply of uncommitted inventory
to fulfill its bartering obligations with third parties.
(f) Each Company has previously provided notice of termination of its
agreements with Chep in accordance with their respective terms, and neither
Newco, PalEx nor any of PalEx's Affiliates required or requested that the
Companies terminate such agreements.
3.9. Permits. Schedule 3.9 contains an accurate list of all licenses,
------------
franchises, permits, transportation authorities and other governmental
authorizations ("Permits") held by each Company that are material to the conduct
-------
of its Business including, without limitation, permits, licenses and operating
authorizations, franchises and certificates owned or held by such Company.
3.10 Environmental Matters. Except as set forth on Schedule 3.10: (a) each
-------------
Company has complied, and is in compliance, with all Environmental Laws,
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Substances; (b) each Company has obtained and complied
with all necessary Permits and other approvals necessary to treat, transport,
store, dispose of and otherwise handle Hazardous Substances and has reported, to
the extent required by all Environmental Laws, all past and present sites owned
or operated by such Company where Hazardous Substances have been treated,
stored, disposed of or otherwise handled; (c) to the knowledge of the Companies
and the Stockholders, there have been no "releases" or threats of "releases" (as
defined in any Environmental Laws) at, from, in or on any property owned or
operated by any Company except as permitted by Environmental Laws; (d) there is
no on-site or off-site location to which any Company has transported or disposed
of Hazardous Substances or arranged for the transportation or disposal of
Hazardous Substances, which is the subject of any federal, state, local or
foreign enforcement action or any other investigation that could reasonably be
expected to lead to any claim against PalEx or Newco for any clean-up cost,
remedial work, damage to natural resources or personal injury, including, but
not limited to, any claim now or in the future under any Environmental Law; and
(e) no Company has any contingent liability in connection with any release or
disposal of any Hazardous Substance into the environment.
18
3.11. Labor and Employee Relations. No Company is bound by or subject to
any arrangement with any labor union. No employees of any Company are
represented by any labor union or covered by any collective bargaining agreement
nor, to the Companies' and the Stockholders' knowledge, is any campaign to
establish such representation in progress. There is no pending or, to the
Companies' and the Stockholders' knowledge, threatened labor dispute involving
any Company and any group of its employees nor has any Company experienced any
labor interruptions over the past five years. Except as set forth on Schedule
--------
3.11., each Company considers its relationship with its employees to be good.
----
3.12. Insurance. Each Company has provided PalEx true and complete copies
of all insurance policies carried by such Company during the last three years
and all insurance loss runs or workmen's compensation claims received for the
past five policy years.
3.13. Compensation; Employment Agreements. Schedule 3.13 sets forth an
-------------
accurate schedule of all officers, directors and key employees of each Company,
listing the rate of compensation (and the portions thereof attributable to
salary, bonus, benefits and other compensation, respectively) of each such
person as of (a) the Balance Sheet Date and (b) the date hereof. No Company is a
party with any officer, director, stockholder, member or employee of any Company
to any employment agreement or similar arrangement containing "golden
parachute," change of control, or other similar provisions.
3.14. Employee Benefit Plans.
(a) Schedule 3.14 sets forth an accurate schedule of each "employee
------------- --------
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
------------
Security Act of 1974, as amended ("ERISA"), and deferred compensation
-----
arrangements sponsored, maintained or contributed to currently by any
Company or any ERISA Affiliate (each such plan and arrangement being herein
referred to as a "Plan"), together with true, complete and correct copies
----
of such Plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except as set forth on Schedule 3.14, no Company nor any ERISA Affiliate
-------------
sponsors, maintains or contributes, currently or at any time during the
preceding five years, to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does any Company or any
ERISA Affiliate have any obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding arrangement
on behalf of any employee or employees (such as, for example, and without
limitation, any individual retirement account or annuity, retiree medical
benefits or "excess benefit plan" (within the meaning of Section 3(36) of
ERISA or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall
-----------------------------
have the same meaning given that term in Section 3(2) of ERISA, and the
term "ERISA Affiliate" means any entity that is a member of the same
---------------
controlled group as any Company, as described in Section 414 of the
Internal Revenue Code of 1996, as amended (the "Code"). No Company nor
----
any ERISA Affiliate has sponsored, maintained or
19
contributed to any Plan pursuant to the provisions of any collective
bargaining agreement at any time during the preceding five years.
(b) Except as set forth therein, all Plans listed on Schedule 3.14
-------------
are in compliance in all material respects with all applicable provisions
of ERISA, the Code and the regulations issued thereunder, as well as with
all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of each Company with
respect to any Plan have either been fulfilled in their entirety or are
fully reflected on the Interim Balance Sheet of such Company.
(c) Each Plan that is intended to qualify under Section 401(a) of
the Code (a "Qualified Plan") has been determined by the Internal Revenue
--------------
Service to be so qualified, and copies of each such determination letter is
included as part of Schedule 3.14 hereof. Except as disclosed on Schedule
------------- --------
3.14, all reports and other documents required to be filed with any
----
Governmental Authority or distributed to Plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns)
have been timely filed or distributed. True and complete copies of all such
reports and other documents with respect to the past five years have been
provided to PalEx. None of the Stockholders, any Plan or any Company has
engaged in any transaction prohibited under the provisions of Section 4975
of the Code or Section 406 of ERISA. No Plan has incurred, and no Company
nor any ERISA Affiliate has incurred, any liability for excise tax or
penalty due to the Internal Revenue Service nor any liability to the
Pension Benefit Guaranty Corporation. There have been no terminations,
partial terminations or discontinuances of contributions to any such
Qualified Plan during the preceding five years without notice to and
approval by the Internal Revenue Service and payment of all obligations and
liabilities attributable to such Qualified Plan.
3.15. Litigation and Compliance with Law. Except as set forth in Schedule
--------
3.15, there are no claims, actions, suits or proceedings, pending or, to the
----
knowledge of the Companies and the Stockholders, threatened against or affecting
any Company, at law or in equity, or before or by any Governmental Authority
having jurisdiction over such Company. No notice of any claim, action, suit or
proceeding affecting or against any Company, whether pending or threatened, has
been received by any Company. Except to the extent set forth on Schedule 3.15,
-------------
each Company has complied, and is in compliance, with all Laws the violation of
which would materially affect the value or use of the Assets.
3.16. Taxes. For purposes of this Agreement, the term "Taxes"
-----
shall mean all taxes, charges, fees, levies or other assessments including,
without limitation, income, gross receipts, excise, property, sales,
withholding, social security, unemployment, occupation, use, service, service
use, license, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the United States or any other Governmental Authority,
whether computed on a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, fines, penalties or additional
amounts attributable to or imposed with respect to any such taxes, charges,
fees, levies or other assessments. Except as set forth on Schedule 3.16, each
-------------
Company has timely filed all requisite federal, state, local and other tax
returns for all fiscal periods ended on or before
20
the Closing Date that were required to be filed before the Closing Date, and has
duly paid in full or made adequate provision in the Financial Statements for the
payment of all Taxes for all periods ending at or prior to the Balance Sheet
Date. There are no examinations in progress or claims against any Company
relating to Taxes payable by the Companies and no written notice of any claim
for Taxes payable by the Companies, whether pending or threatened, has been
received by any Company or any Stockholder. The amounts shown as accruals for
Taxes on the Interim Financial Statements as of the Balance Sheet Date are
sufficient for the payment of all Taxes for all fiscal periods ended on or
before that date. True and complete copies of (i) any tax examinations, (ii)
extensions of statutory limitations and (iii) the federal, state and local Tax
returns of each Company for the last three fiscal years have been previously
provided to PalEx.
3.17. Absence of Changes. Since December 31, 1999, except as set forth in
Schedule 3.17 and the transactions contemplated by this Agreement, each Company
-------------
has conducted its operations in the ordinary course and there has not been:
(a) any adverse change in the business, operations, properties,
condition (financial or other), assets, liabilities (contingent or
otherwise), results of operations or prospects of the Companies, taken as a
whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties of the Companies or the
Businesses, taken as a whole, individually or in the aggregate;
(c) any change in the authorized capital stock of any Company or
their respective outstanding securities or any change in any Stockholder's
ownership interests of any Company or any grant of any options, warrants,
calls, conversion rights or commitments;
(d) any increase in the compensation payable or to become payable by
any Company to any Stockholder or any of its officers, directors, managers,
employees, consultants or agents;
(e) any work interruptions, labor grievances or claims filed of any
character adversely affecting the Businesses or future prospects of the
Companies, taken as a whole;
(f) any sale or transfer, or any agreement to sell or transfer, any
material assets, properties or rights of any Company to any person,
including, without limitation, any Stockholder or his Affiliates, if such
sale or transfer is outside the ordinary course of business or is for more
than $25,000;
(g) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to any Company involving more than $10,000
individually or $25,000 in the aggregate;
21
(h) any purchase or acquisition of, or agreement or plan to purchase
or acquire, any material property, rights or assets outside of the ordinary
course of business of any Company;
(i) any waiver of any material rights or claims of any Company;
(j) any material breach, amendment or termination of any material
contract, agreement, license, permit or other right to which any Company is
a party or any of its property is subject; or
(k) any material transaction by any Company outside the ordinary
course of business.
3.18. Accounts with Banks and Brokerages; Powers of Attorney. Each Company
has provided PalEx (a) the name of each financial institution or brokerage firm
in which such Company has accounts or safe deposit boxes; (b) the names in which
the accounts or boxes are held; (c) the type of account and the cash, cash
equivalents and securities held in such account as of the date of this
Agreement; and (d) the name of each person authorized to draw thereon or have
access thereto. Except as set forth on Schedule 3.18, no person, corporation,
-------------
firm or other entity holds a general or special power of attorney from any
Company, including without limitation for purposes of filing any Tax returns.
3.19. Absence of Certain Business Practices. No Company nor any of its
Affiliates has given or offered to give anything of value to any governmental
official, political party or candidate for government office nor has it
otherwise taken any action which would constitute a violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any similar law.
3.20. Competing Lines of Business; Related-Party Transactions.
Except as set forth in Schedule 3.20, neither any Stockholder nor any other
-------------
Affiliate of any Company owns, directly or indirectly, any interest in, or is an
officer, director, employee or consultant of or otherwise receives remuneration
from, any Business (excluding for this purpose each Company) which is a
competitor, lessor, lessee, customer or supplier of the Business of any Company
or which is a creditor or has other contractual relationships with any Company.
3.21. Intangible Property. Schedule 3.21 sets forth an accurate list of all
-------------
patents, patent applications, trademarks, service marks, trade names and
copyrights and other intangible property ("Intangible Property") owned or used
-------------------
by each Company. No Company has received notice of any infringement or claim of
infringement of the rights of others.
3.22. Disclosure. No representation or warranty of the Companies or the
Stockholders contained in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PALEX AND NEWCO
PalEx and Newco jointly and severally represent and warrant to the
Companies as follows:
4.1. Organization. Each of PalEx and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly authorized and qualified under all applicable laws,
regulations, and ordinances of public authorities to carry on its business in
the places and in the manner now conducted.
4.2. Authorization; Non-Contravention; Approvals.
(a) Each of PalEx and Newco has the full legal right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement have been approved by the boards of directors of PalEx and Newco
and by PalEx, as the sole stockholder of Newco. No additional corporate
proceedings on the part of PalEx or Newco are necessary to authorize the
execution and delivery of this Agreement and the consummation by PalEx and
Newco of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by PalEx and Newco, and, assuming
the due authorization, execution and delivery by the Companies and the
Stockholders, constitutes a valid and binding agreement of PalEx and Newco,
enforceable against PalEx and Newco in accordance with its terms.
(b) The execution and delivery of this Agreement by PalEx and Newco
do not, and the consummation by PalEx and Newco of the transactions
contemplated hereby will not, violate or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the
properties or assets of PalEx or Newco or any of its subsidiaries under any
of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-Laws of PalEx or Newco, (ii) any Law applicable to
PalEx or Newco or any of its properties or assets or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which PalEx or Newco is now a party or by which PalEx or Newco or any of
its properties or assets may be bound or affected.
(c) Except as set forth on Schedule 3.2, no declaration, filing or
------------
registration with, or notice to, or authorization, consent or approval of,
any Governmental Authority or third party is necessary for the execution
and delivery of this Agreement by PalEx and Newco or the consummation by
PalEx and Newco of the transactions contemplated by this Agreement.
23
4.3. IFCO Ordinary Shares. The IFCO Ordinary Shares to be issued pursuant
to Section 2.3 of this Agreement, when issued in accordance with the terms of
-----------
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable. Such issuance of IFCO Ordinary Shares is not subject to any
preemptive rights or rights of first refusal. The issuance of IFCO Ordinary
Shares in accordance with the terms hereof will transfer to the respective
Companies valid title to such IFCO Ordinary Shares, free and clear of all
Encumbrances other than the restrictions on transfer described in this
Agreement, Encumbrances created by the Companies or the Stockholders, and
restrictions imposed by applicable Laws.
4.4. SEC Filings; Disclosure. IFCO has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
---
documents required to be filed by it prior to the date hereof under each of the
1933 Act, the 1934 Act, and the respective rules and regulations thereunder, all
of which, as amended, if applicable, complied when filed in all material
respects with all applicable requirements of the appropriate Act and the rules
and regulations thereunder
4.5. Litigation. There are no suits, actions, or legal, administrative,
arbitration or other proceedings or, to PalEx's knowledge, governmental
investigations against PalEx or IFCO pending or, to PalEx's knowledge,
threatened, which (a) if determined adversely to PalEx or IFCO, could reasonably
be expected to result in any adverse change in the business, operations,
properties, condition (financial or other), assets, liabilities (contingent or
otherwise), results of operations or prospects of PalEx or IFCO and its
subsidiaries, taken as a whole, or (b) seek to prevent the consummation of the
transactions contemplated hereby.
4.6. No Violation of Law. Neither IFCO, PalEx nor Newco is in violation of,
nor has either of them been given notice or been charged with any violation of,
any Law, except to the extent any such violation would not have a adverse effect
on the businesses, financial condition or results or operation of IFCO, PalEx or
either of their subsidiaries, taken as a whole.
4.7. Disclosure. PalEx has fully provided the Companies or their
representatives with all the information that they have requested in analyzing
whether to consummate the transactions contemplated hereby, including, without
limitation, IFCO's Annual Report on Form 20-F for the year ended December 31,
1999 and its Quarterly Report on Form 6-K for the quarter ended March 31, 2000.
None of the information so provided nor any representation or warranty of PalEx
or Newco contained in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading. PalEx hereby acknowledges that as of the Closing the Companies have
not provided PalEx or any of its representatives with any information that, to
PalEx's knowledge, is the subject of a confidentiality obligation of any
Company.
24
ARTICLE V
CERTAIN COVENANTS
5.1. Release From Guarantees. Each of PalEx and Newco shall
use its commercially reasonable efforts to have each Stockholder released from
the personal guarantees of Assumed Liabilities, each of which guarantees is
identified in Schedule 5.1. PalEx and Newco hereby agree to indemnify each
------------
Stockholder and hold him harmless for any amounts that he is required to pay
under such personal guarantees after the Closing.
5.2. Future Cooperation; Tax Matters. The Stockholders, the Companies,
Newco and PalEx shall each deliver or cause to be delivered to the other
following the Closing such additional instruments as the other may reasonably
request for the purpose of fully carrying out this Agreement. The Companies and
the Stockholders will cooperate in all reasonable respects and use their
commercially reasonable efforts to have the present officers, directors and
employees of the Companies cooperate in all reasonable respects with PalEx
and/or Newco at and after the Closing in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing. Each of PalEx and Newco will cooperate in all
reasonable respects with the Companies and the Stockholders in the preparation
of all tax returns covering the period from the beginning of the Companies'
current tax years through the Closing. In addition, Newco will provide the
Companies and the Stockholders with access to such of its books and records as
may be reasonably requested by the Companies and the Stockholders in connection
with federal, state and local tax matters relating to the Companies and periods
ending on or prior to the Closing Date. The Companies shall retain liability for
all income, sales or transfer Taxes, if any, resulting from sale of the Assets
pursuant to the terms of this Agreement.
5.3. Expenses. PalEx or Newco shall pay the fees, expenses and
disbursements of PalEx and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the execution, delivery and
performance of this Agreement and any amendments hereto and the consummation of
the transactions contemplated hereby. The Stockholders and the Companies will
pay their respective fees, expenses and disbursements and those of their
respective agents, representatives, financial advisors, accountants and counsel
incurred in connection with the execution, delivery and performance of this
Agreement and any amendments hereto and the consummation of the transactions
contemplated hereby.
5.4. Employment Agreement; Noncompetition Agreement. At the
Closing, (a) Newco and Xxxxx Xxxxxx shall enter into a Employment and Non-
Competition Agreement (the "Employment Agreement") to be effective as of the
--------------------
Closing Date and (b) Newco and Del Xxxxxx shall enter into a Non-Competition
Agreement to be effective as of the Closing Date (the "Non-Competition
Agreement"). The terms and conditions of the Employment Agreement and the Non-
Competition Agreement shall be mutually acceptable to Newco and the respective
individual.
25
5.5. Repayment of Related Party Indebtedness. Concurrently with the
execution of this Agreement, (a) the Stockholders shall repay to the Companies
all amounts outstanding as advances to or receivables from any Stockholder, each
of which advance or receivable is specifically reflected on Schedule 3.6, and
------------
(b) each Company shall repay all amounts outstanding under loans to such Company
from any Stockholder, each of which loans is specifically reflected on Schedule
--------
3.5.
---
5.6. Prorations. Ad valorem and similar taxes and assessments relating to
the Assets shall be prorated between the Companies and Newco as of the Closing
Date based upon estimates of the amount of such taxes and assessments that are
due and payable on the Assets during the year during which the Closing Date
occurs. As soon as the amount of actual taxes and assessments is known, the
Companies and Newco shall reassess the amounts to be paid by each party with the
result that the Companies shall pay for those taxes and assessments attributable
to the time period up to and including the Closing Date and Newco shall pay for
those taxes and assessments attributable to the period thereafter. Utilities
expenses relating to the Businesses shall be prorated between the Companies and
Newco for the month of the Closing based on the number of days in the billing
cycle before and after the Closing.
5.7. COBRA Notices. With the Companies' assistance, as reasonably requested
by Newco, Newco shall provide all notices required by Code Section 4980B and the
regulations promulgated thereunder and Part 6 of Subtitle B of Title I or ERISA
to each employee who is entitled thereto with respect to each Employee Benefit
Plan that is a Group Health Plan, as defined in Section 4980B(g)(2) of the Code.
5.8. Chep Agreements. On or prior to the Closing, the Companies shall have
provided Chep with notice of termination of all their agreements with Chep (the
"Chep Agreements") in accordance with their respective terms. The Companies
shall use their commercially reasonable efforts to negotiate an agreement with
Chep respecting the post notice/pre-termination transition of services under the
Chep Agreements. To the extent such agreements have advance notice requirements
for such terminations to be effective without liability to the Companies and to
the extent such advance notice periods have not expired as of the Closing Date,
then at the request of the Companies, Newco and PalEx shall (a) provide the
Companies the use of assets, employees and administrative services necessary for
the Companies to perform their obligations under their Chep agreements for the
remainder of the advance notice periods, (b) provide such assets to the
Companies at Newco's and PalEx's costs, which costs shall include allocations of
corporate overhead to the same extent such overhead is allocated to PalEx
subsidiaries, and (c) bear the operating costs of performing services for Chep
during the remainder of the advance notice periods; provided, however, that the
Companies will pay to Newco any profits realized from the Chep Agreements during
such advance notice periods; and, further provided that, notwithstanding the
foregoing, nothing herein shall be deemed or construed to provide for the
assumption of, and neither PalEx, Newco nor any of their Affiliates shall
assume, any liability or obligation arising or relating to the Chep Agreements
or the termination of the Chep Agreements other than an obligation to fund
operating expenses during the advance notice periods remaining under such
agreements as of the Closing Date.
26
5.9. Listing of IFCO Ordinary Shares. On or before the first anniversary of
the Closing Date, the IFCO Ordinary Shares will be approved for trading on the
Amtlicher Handel SMAX segment of the Frankfurt Stock Exchange and the Nasdaq
National Market
5.10. Acquisition of Chicago Facility. As of the Closing, the Companies
shall have completed, and the Stockholders shall have caused the Companies to
complete, the acquisition of the assets and facility at 0000 X. 00/xx/ Xxxxxx,
Xxxxxxx, Xxxxxxxx, from Pallet Pallet, Inc., which assets and facility are
described on Schedule 5.10 (the "Chicago Assets"), and the Assets shall include
------------- --------------
the Chicago Assets. The Stockholders shall have caused the Companies to convey
the Chicago Assets to Newco at the Closing free and clear of all Encumbrances
other than Permitted Encumbrances.
5.11. Environmental Clean-up. Within 30 days from the Closing Date the
Companies and Stockholders will, at the expense of the Companies and the
Stockholders, initiate work to address those items listed on Schedule 511 and
complete such work within 180 days from the Closing Date, unless otherwise
agreed to by Pal Ex and Newco.
ARTICLE VI
INDEMNIFICATION
The Companies, each Stockholder, PalEx and Newco each make the following
covenants:
6.1. General Indemnification by the Companies and the Stockholders. Subject
to Section 6.4, each Company and each Stockholder covenants and agrees that it
-----------
or he will, jointly and severally, indemnify, defend, protect and hold harmless
PalEx and Newco, and their respective officers, directors, employees,
stockholders, agents, representatives and Affiliates from and against all Losses
incurred by any of such indemnified persons as a result of or arising from (a)
any breach of the representations and warranties of the Companies and the
Stockholders set forth herein, provided that notice of such claim is given in
accordance with Section 10.5 hereof on or before the Expiration Date, (b) all
------------
Taxes payable by any Company for all periods prior to and including the Closing
Date, provided that notice of such claim is given in accordance with Section
-------
10.5 hereof on or before the expiration of the statute of limitations with
----
respect to the underlying claim, (c) any Excluded Liability, (d) the Companies'
agreements with Chep or the termination of such agreements, or (e) any breach or
nonfulfillment of any covenant or agreement on the part of any Company or
Stockholder under this Agreement.
6.2. Indemnification by PalEx. Subject to Section 6.4, PalEx covenants and
-----------
agrees that it will indemnify, defend, protect and hold harmless the Companies
at all times from and after the date of this Agreement from and against all
Losses incurred by the Companies as a result of or arising from (a) any breach
of the representations and warranties set forth herein, provided that notice of
such claim is given in accordance with Section 10.5 hereof on or before the
------------
Expiration Date, (b) any breach or nonfulfillment of any covenant or agreement
on the part of PalEx or Newco under this Agreement, or (c) Newco's failure to
timely perform or otherwise discharge the Assumed Liabilities.
27
6.3. Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
-----------------
person not a party to this Agreement ("Third Person"), or the commencement of
------------
any action or proceeding by a Third Person, which the Indemnified Party believes
in good faith is an indemnifiable claim under this Agreement, the Indemnified
Party shall give to the party obligated to provide indemnification pursuant to
Section 6.1 or 6.2 hereof (hereinafter the "Indemnifying Party") written notice
----------- --- ------------------
of such claim or the commencement of such action or proceeding; provided,
--------
however, that the Indemnified Party's failure to timely provide such notice
-------
shall not affect its right to indemnification hereunder unless, and only to the
extent that, such failure materially prejudices the Indemnifying Party's ability
to defend such claim. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof or a statement that the
amount of such claim cannot be reasonably estimated. The Indemnifying Party
shall have the right to defend and settle, at its own expense and by its own
counsel, any such matter so long as the Indemnifying Party pursues the same
diligently and in good faith. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in all commercially reasonable respects in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records and other
information reasonably requested by the Indemnifying Party and in the
Indemnified Party's possession or control. After the Indemnifying Party has
notified the Indemnified Party of its intention to undertake to defend or settle
any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability; provided, however,
-------- -------
that the Indemnified Party shall be entitled, at its expense, to participate in
the defense of such asserted liability and the negotiations of the settlement
thereof, and the Indemnifying Party shall not settle any such Third Person claim
without the consent of the Indemnified Party unless the settlement thereof
imposes no liability or obligation on, and includes a complete release from
liability of, the Indemnified Party. If the Indemnifying Party desires to accept
a final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person claim
shall be limited to the amount so offered in settlement by said Third Person;
provided, however, that notwithstanding the foregoing, the Indemnified Party
-------- ------
shall be entitled to refuse to consent to any such proposed settlement and the
Indemnifying Party's liability hereunder shall not be limited by the amount of
the proposed settlement unless such settlement provides for the complete release
of the Indemnified Party. If, upon receiving notice, the Indemnifying Party does
not timely undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnified
Party may settle such matter, and the Indemnifying Party shall immediately upon
request reimburse the Indemnified Party for the amount paid in such settlement
and any other liabilities or expenses paid or incurred by the Indemnified Party
in connection therewith.
28
6.4. Indemnification Deductible. Neither the Stockholders and the
Companies, on the one hand, nor PalEx and Newco, on the other hand, shall be
entitled to indemnification from the other under the provisions of Section
-------
6.1(a) or Section 6.2(a), as the case may be, until such time as, and only to
------ --------------
the extent that, the claims subject to indemnification by such other party
exceed, in the aggregate, $295,000; provided, however, that such indemnification
-------- -------
deductible shall not apply to any breach of the representations set forth in
Section 3.5, which breaches shall have no deductible.
-----------
6.5. Limitation Upon Indemnity. Notwithstanding anything to the contrary
contained herein,
(a) the aggregate indemnification obligation of the Companies and the
Stockholders under Section 6.1(a) shall be limited to one-half the sum of
--------------
(i) the Purchase Price and (ii) the Assumed Liabilities; and
(b) the aggregate indemnification obligation of each Stockholder
under Section 6.1(a) shall be limited to the Purchase Price received,
--------------
directly or indirectly, by distribution from the Companies or otherwise, by
such Stockholder; provided, however, (i) such Stockholder shall be deemed
-------- -------
to have received the original principal amount of the Subordinated Notes
received by him, and (b) if such Stockholder has sold, transferred,
assigned or otherwise disposed of the IFCO Ordinary Shares received by him,
then the Purchase Price received by him shall be deemed to include such
IFCO Ordinary Shares at the Reference Price.
6.6. Indemnification for Negligence of Indemnitee. THE RIGHTS TO
INDEMNIFICATION UNDER THIS ARTICLE VI INCLUDE RIGHTS TO INDEMNIFICATION FOR THE
----------
RESULTS OF AN INDEMNIFIED PARTY'S ACTUAL OR ALLEGED NEGLIGENCE, IF SUCH
INDEMNIFIED PARTY WOULD OTHERWISE BE ENTITLED TO INDEMNIFICATION HEREUNDER.
6.7. Exclusive Remedy. The parties hereto agree that, notwithstanding
anything to the contrary contained herein, all claims arising as a result of
breaches of representations or warranties, or the failure to perform any
covenant or agreement, in this Agreement shall be made exclusively under, and be
subject to the provisions of, this ARTICLE VI; provided, however, that nothing
---------- -------- -------
herein shall in any way limit any party's rights to assert claims based on fraud
without regard to the provisions of this ARTICLE VI, nor in any way limit any
----------
party's liabilities therefor.
6.8. Indemnification Payments. Any amounts owed to Newco pursuant to the
indemnification provisions hereof shall be paid by the Companies and
Stockholders as follows: (i) 8.9% of any amounts owed shall be paid to Newco in
the form IFCO Ordinary Shares at the Reference Price; (ii) 22.46% of any amounts
owed shall be paid to Newco by the transfer of the Subordinated Notes priced at
principal plus accrued interest at date of transfer and (iii) the remaining
balance of any amounts owed shall be paid to Newco in cash.
29
ARTICLE VII
NONCOMPETITION COVENANTS
7.1. Prohibited Activities.
(a) Each Stockholder will not for the longer of (y) five years
following the Closing Date and (z) with respect to Xxxxx Xxxxxx, one year
following his voluntary termination of his employment with Newco or its
Affiliates or the termination of such individual's employment with Newco
"with cause," as determined in accordance with the respective individual's
Employment Agreement, directly or indirectly, for himself or on behalf of
or in conjunction with any other person, company, partnership, corporation
or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial or
advisory capacity, whether as an employee,
independent contractor, consultant or advisor, or as
a sales representative, in any Competitive Business
within 175 miles of where any Company has a facility
or conducts or proposes to conduct business as of the
Closing Date or where Newco or an Affiliate of Newco
has a facility after the Closing that is, within six
months prior to the date of termination of such
Stockholder's employment, under such Stockholder's
supervision or managerial authority (the
"Territory");
---------
(ii) directly or indirectly hire any person who is, at
that time, an employee of PalEx or any of its
subsidiaries or call upon any such person for the
purpose or with the intent of enticing such employee
away from or out of the employ of PalEx or any of its
subsidiaries; or
(iii) call upon any person or entity which is, at that
time, or which has been, within one year prior to
that time, a customer of the Companies or PalEx or
any of its subsidiaries within the Territory for the
purpose of soliciting or selling services or products
in a Competitive Business within the Territory.
(b) Notwithstanding the above, the foregoing covenant shall not
be deemed to prohibit any Stockholder from (i) acquiring, as a passive
investor with no involvement in the operations of the business, not more
than one percent of the capital stock of a Competitive Business whose stock
is publicly traded on a national securities exchange or the Nasdaq National
Market or over-the-counter or (ii) servicing the Chep Agreements between
the date hereof and the date of termination of such agreements in
accordance with the notice provisions contained therein, which notice of
termination shall have been provided in accordance with Section 5.8 hereof.
---
30
7.2. Equitable Relief. Because of the difficulty of measuring economic
losses to PalEx and Newco as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to PalEx
and Newco for which it would have no other adequate remedy, each Company and
Stockholder agrees that the foregoing covenant may be enforced against him by
PalEx or Newco by injunctions, restraining orders and other equitable actions.
7.3. Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this ARTICLE VII impose a reasonable restraint on each
-----------
Company and Stockholder in light of the activities of the Companies and their
Businesses on the date of the execution of this Agreement and the current plans
of the Companies.
7.4. Severability; Reformation. The covenants in this ARTICLE VII are
-----------
severable and separate, and the unenforceability of any specific covenant shall
not affect the continuing validity and enforceability of any other covenant. In
the event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth in this ARTICLE VII are unreasonable
-----------
and therefore unenforceable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and this Agreement shall thereby be reformed.
7.5. Material and Independent Covenant. Each Company and Stockholder
acknowledges that the agreements and the covenants set forth in this ARTICLE VII
-----------
are material conditions to PalEx's and Newco's agreements to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. All of
the covenants in this ARTICLE VII shall be construed as an agreement independent
-----------
of any other provision in this Agreement.
ARTICLE VII
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1. General. Each Company and Stockholder recognizes and acknowledges
that in the past it and he had, currently has, and in the future will have,
access to certain confidential information relating to the Businesses being
conveyed to Newco pursuant to this Agreement and/or PalEx, such as lists of
customers, operational policies, and pricing and cost policies that are, and
following the Closing will be, valuable, special and unique assets of Newco
and/or PalEx. Each Company and Stockholder agrees that it and he will not use
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose whatsoever, except as is required in
the course of performing his duties to Newco and/or PalEx, unless (a) such
information becomes known to the public generally through no fault of any
Company or Stockholder, or (b) disclosure is required by Law or the order of any
Governmental Authority, provided, that prior to disclosing any information
--------
pursuant to this clause (b) each Company and Stockholder, as applicable, shall,
if possible, give prior written notice thereof to Newco and PalEx and provide
Newco and PalEx with the opportunity to contest such disclosure. In the event of
a breach or threatened breach by any Company or Stockholder of the provisions of
this Section, PalEx and Newco shall be entitled to an injunction restraining
such Company or
31
Stockholder from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting PalEx or Newco from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
8.2. Equitable Relief. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which Newco and/or
PalEx would have no other adequate remedy, each Company and Stockholder agrees
that the foregoing covenants may be enforced against it and him by injunctions,
restraining orders and other equitable actions.
ARTICLE IX
FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS
ON IFCO SYSTEMS ORDINARY SHARES
9.1. Compliance with Law. The Companies and the Stockholders acknowledge
that any IFCO Ordinary Shares issued pursuant to the provisions of this
Agreement (the "Restricted Shares") will not be registered under the 1933 Act
-----------------
and therefore may not be resold without compliance with the 1933 Act. The
Restricted Shares are being or will be acquired by the Companies solely for
their own account, for investment purposes only, and with no present intention
of distributing, selling or otherwise disposing of them in connection with a
distribution. The Companies and the Stockholders covenant, warrant and represent
that none of the Restricted Shares will be, directly or indirectly, offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the Act
and the rules and regulations of the SEC. Notwithstanding the foregoing, the
Restricted Shares may be distributed by the Companies to the Stockholders,
provided each Stockholder provides PalEx and IFCO a written certification that
such Stockholder's representations set forth in this Section 9.1 and Section 9.3
----------- -----------
are true as of the date of such distribution. Certificates representing the
Restricted Shares shall bear the following legend:
THE ORDINARY SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A
TRANSACTION REGISTERED UNDER THE SECURITIES ACTS OF 1933, AS AMENDED
("SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. tHE SHARES
REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACTS AND APPLICABLE STATE
SECURITIES LAWS OR, IN THE OPINION OF COUNSEL IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACTS AND SUCH LAWS, WHICH
OPINION AND COUNSEL MUST BE ACCEPTABLE TO ISSUER, IN ITS REASONABLE
DISCRETION.
9.2. Restriction on Sale or Other Transfer of Restricted Stock. Each
Company and Stockholder covenants, warrants and represents that none of the
Restricted Shares will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of during the one year period commencing on
the Closing Date (the "Lockup Period") and thereafter only after full compliance
-------------
with all of the applicable provisions of the 1933 Act and the rules and
regulations of
32
the SEC and other applicable Laws, and, during the Lockup Period, the
Stockholder shall not engage in put, call, short-sale, straddle or similar
transactions intended to reduce the Stockholder's risk of owning the Restricted
Shares. Certificates representing the Restricted Shares shall bear the following
legend in addition to the legend under Section 9.1:
-----------
The shares represented by this certificate are subject to a
contractual restriction on transfer and may not be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of
during the period of such contractual restriction without the prior
written consent of IFCO Systems N.V.
9.3. Economic Risk; Accredited Investors. Each Company and Stockholder is
able to bear the economic risk of an investment in the IFCO Ordinary Shares that
may be acquired in accordance with the terms hereof and can afford to sustain a
total loss of such investment. Each Company and Stockholder has such knowledge
and experience in financial and business matters that it or he is capable of
evaluating the merits and risks of the proposed investment and therefore has the
capacity to protect its or his own interests in connection with his acquisition
of any IFCO Ordinary Shares in accordance with the terms hereof. Each Company
and Stockholder represents to IFCO, PalEx and Newco that he is an "accredited
investor," as that term is defined in Regulation D under the 1933 Act, or that
the issuance of the IFCO Ordinary Shares to the Companies or Stockholders in
connection with the transactions contemplated by this Agreement is otherwise
subject to an exemption from registration under the 1933 and all other
applicable securities Laws. Each Company and Stockholder or its or his
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of IFCO, PalEx and Newco concerning, among other
matters, IFCO and PalEx, their management, their plans for the operation of
their businesses and potential additional acquisitions.
ARTICLE X
MISCELLANEOUS
10.1. Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
PalEx, Newco and the Companies, and the heirs and legal representatives of each
Stockholder.
10.2. Entire Agreement. This Agreement (including the Schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Companies, Newco and PalEx and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including, without limitation,
that certain letter of intent dated May 8, 2000, by and among PalEx, the
Companies and the Stockholders, as amended or supplemented. This Agreement may
be modified or amended only by a written instrument executed by the Stockholders
and the Companies, Newco and PalEx, acting through their respective officers,
duly authorized by their respective Boards of Directors.
33
10.3. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.4. Brokers and Agents. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated by
this Agreement. Each party agrees to indemnify each other party against all
loss, cost, damages or expense arising out of claims for fees or commissions of
brokers employed or alleged to have been employed by such indemnifying party.
10.5. Notices. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, as follows:
(a) if to PalEx or Newco, addressed to them at PalEx, Inc., 0000
Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxx 00000, Attn: Xxxxxx Xxxxx; and
(b) if to the Stockholders and/or the Companies, addressed to
Xxxxxxx Xxxxxx, The Xxxxxxx Companies, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX,
00000, with a copy (which shall not constitute notice) to Xxxxxxx Xxxxxxxx,
Esq., Xxxxxxx & Xxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000-
2300;
or such other address as any party hereto shall specify pursuant to this Section
-------
10.5 from time to time.
----
10.6 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Texas (except for its principles governing
conflicts of laws).
10.7 Survival of Representations and Warranties. The representations and
warranties set forth in ARTICLE III and ARTICLE IV shall survive the Closing for
----------- ----------
one year from the Closing Date (the "Expiration Date"), except that the
---------------
representations and warranties set forth in Sections 3.5, 3.7(g), 3.10, 31.6,
------------ ------ ---- ----
and 4.3, hereof shall survive until the expiration of the applicable statutory
---
limitations period for third parties to assert claims against the Companies,
Newco or PalEx with respect to the matters covered in such Sections, which shall
be deemed to be the Expiration Date for such sections. The respective parties
shall remain liable after the Expiration Date for breaches of the
representations and warranties set forth in ARTICLE III and ARTICLE IV ,
----------- ----------
provided such breaches are asserted in good faith by notice in writing to the
alleged breaching party prior to the Expiration Date. Notwithstanding anything
to the contrary contained in this Agreement, any party to this Agreement may
assert claims based on fraud during the applicable statutory limitations period.
10.8. Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of
34
any breach or default by any other party under this Agreement shall impair any
such right, power or remedy, nor shall it be construed as a waiver of or
acquiescence in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default be deemed
a waiver of any other breach or default occurring before or after that waiver.
10.9. Time of Essence. Time is of the essence with respect to this
Agreement.
10.10. Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and unenforceable,
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
[The remainder of page intentionally left blank.]
35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
PALEX, INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President and General Counsel
BROMLEY ACQUISITION COMPANY, INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President
BROMLEY PALLET RECYCLERS, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Its: President
------------------------------------
BROMLEY PALLET RECYCLERS, LLC
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Its: Member
------------------------------------
36
BROMLEY PALLET RECYCLERS OF ALABAMA, LLC
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------
Its: Member
--------------------------------------
BROMLEY PALLET RECYCLERS OF OHIO, LLC
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Its: Member
-----------------------------------
BROMLEY PALLET RECYCLERS OF INDIANA, LLC
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Its: Member
-------------------------------------
37
BROMLEY PALLET RECYCLERS OF TENNESSEE, LLC
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Its: Member
-------------------------------------
/s/ Xxxxxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx, Individually
/s/ Del Xxxxxx
--------------------------------------------
Del Xxxxxx, Individually
/s/ Xxxxx Xxxxxx
-------------------------------------------
Xxxxx Xxxxxx, Individually
38
TABLE OF CONTENTS
-----------------
ARTICLE I
---------
DEFINITIONS
-----------
1.1. Definitions.................................................... 2
-
1.2. Interpretation................................................. 7
-
ARTICLE II
----------
THE PLAN OF ACQUISITION
-----------------------
2.1. The Acquisition of the Assets.................................. 7
-
2.2. Excluded Assets................................................ 9
-
2.3. Purchase Price................................................. 9
-
2.4. Liabilities.................................................... 10
--
2.5. Conveyance Documents........................................... 11
--
2.6. Allocation of Purchase Price................................... 11
--
2.8. Closing........................................................ 12
--
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
--------------------------------------------------
AND THE COMPANIES
-----------------
3.1. Due Organization and Qualification............................. 13
--
3.2. Authorization; Non-Contravention; Approvals.................... 13
--
3.3. Capitalization................................................. 14
--
3.4. Financial Statements........................................... 14
--
3.5. Liabilities and Obligations.................................... 15
--
3.6. Accounts and Notes Receivable.................................. 15
--
3.7. Assets......................................................... 16
--
3.8. Material Customers, Contracts and Bartering Commitments........ 17
--
3.9. Permits........................................................ 18
--
3.10. Environmental Matters.......................................... 18
--
3.11. Labor and Employee Relations................................... 19
--
3.12. Insurance...................................................... 19
--
3.13. Compensation; Employment Agreements............................ 19
--
3.14. Employee Benefit Plans......................................... 19
--
3.15. Litigation and Compliance with Law............................. 20
--
3.16. Taxes.......................................................... 20
--
3.17. Absence of Changes............................................. 21
--
3.18. Accounts with Banks and Brokerages; Powers of Attorney......... 22
--
3.19. Absence of Certain Business Practices.......................... 22
--
3.20. Competing Lines of Business; Related-Party Transactions........ 22
--
3.21. Intangible Property............................................ 22
--
3.22. Disclosure..................................................... 22
--
i
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF PALEX AND NEWCO
-------------------------------------------------
4.1. Organization....................................................... 23
--
4.2. Authorization; Non-Contravention; Approvals........................ 23
--
4.3. IFCO Ordinary Shares............................................... 24
--
4.4. SEC Filings; Disclosure............................................ 24
--
4.5. Litigation......................................................... 24
--
4.6. No Violation of Law................................................ 24
--
4.7. Disclosure......................................................... 24
--
ARTICLE V
---------
CERTAIN COVENANTS
-----------------
5.1. Release From Guarantees............................................ 25
--
5.2. Future Cooperation; Tax Matters.................................... 25
--
5.3. Expenses........................................................... 25
--
5.4. Employment Agreement; Noncompetition Agreement..................... 25
--
5.5. Repayment of Related Party Indebtedness............................ 26
--
5.6. Prorations......................................................... 26
--
5.7. COBRA Notices...................................................... 26
--
5.8. Chep Agreements.................................................... 26
--
5.9. Listing of IFCO Ordinary Shares.................................... 27
--
5.10. Acquisition of Chicago Facility................................... 27
--
5.11. Environmental Clean-up............................................ 27
--
ARTICLE VI
----------
INDEMNIFICATION
---------------
6.1. General Indemnification by the Companies and the Stockholders...... 27
--
6.2. Indemnification by PalEx........................................... 27
--
6.3. Third Person Claims................................................ 28
--
6.4. Indemnification Deductible......................................... 29
--
6.5. Limitation Upon Indemnity.......................................... 29
--
6.6. Indemnification for Negligence of Indemnitee....................... 29
--
6.7. Exclusive Remedy................................................... 29
--
6.8. Indemnification Payments........................................... 29
--
ARTICLE VII
-----------
NONCOMPETITION COVENANTS
------------------------
7.1. Prohibited Activities.............................................. 30
--
7.2. Equitable Relief................................................... 31
--
7.3. Reasonable Restraint............................................... 31
--
7.4. Severability; Reformation.......................................... 31
--
7.5. Material and Independent Covenant.................................. 31
--
ii
ARTICLE VIII
------------
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
-----------------------------------------
8.1. General....................................................... 31
--
8.2. Equitable Relief.............................................. 32
--
ARTICLE IX
----------
FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS
---------------------------------------------------
ON IFCO SYSTEMS ORDINARY SHARES
-------------------------------
9.1. Compliance with Law........................................... 32
--
9.2. Restriction on Sale or Other Transfer of Restricted Stock..... 32
--
9.3. Economic Risk; Accredited Investors........................... 33
--
ARTICLE X
---------
MISCELLANEOUS
-------------
10.1. Successors and Assigns........................................ 33
--
10.2. Entire Agreement.............................................. 33
--
10.3. Counterparts.................................................. 34
--
10.4. Brokers and Agents............................................ 34
--
10.5. Notices....................................................... 34
--
10.6. Governing Law................................................. 34
--
10.7. Survival of Representations and Warranties.................... 34
--
10.8. Exercise of Rights and Remedies............................... 34
--
10.9. Time of Essence............................................... 35
--
10.10. Reformation and Severability.................................. 35
--
iii
SCHEDULES
---------
Title Sche. No.
----- ---------
Excluded Assets................................................ 2.2
---
Allocation of Purchase Price................................... 2.6
---
States of Incorporation/Jurisdictions for Conducting Business.. 3.1
---
Authorizations/Consents........................................ 3.2
---
Capitalization and Stock Ownership............................. 3.3
---
Financial Statements........................................... 3.4
---
Liabilities and Obligations.................................... 3.5
---
Accounts and Notes Receivable.................................. 3.6
---
Assets/Real Property/Condition of Assets/Liens/Assets Held By
Affiliates..................................................... 3.7
---
Material Customers, Customers and Bartering Commitments........ 3.8
---
Permits........................................................ 3.9
---
Environmental Matters.......................................... 3.10
----
Labor and Employee Relations................................... 3.11
----
Compensation................................................... 3.13
----
Employee Benefit Plans......................................... 3.14
----
Litigation and Compliance With Law............................. 3.15
----
Taxes.......................................................... 3.16
----
Absence of Changes............................................. 3.17
----
Powers of Attorney............................................. 3.18
----
Competing Lines of Business; Related-Party Transactions........ 3.20
----
Intangible Property............................................ 3.21
----
Stockholder Guarantees......................................... 5.1
---
Pallet Pallet Assets........................................... 5.10
----
Environmental Clean-up......................................... 5.11
----
