ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement"), dated October 4, 1996, is
entered into by and among Smithway Motor Xpress, Inc., an Iowa corporation
("Smithway"); with respect to Section 7.5 only, Smithway Motor Xpress Corp., a
Nevada corporation; and Xxxxxxxxx Transportation, Inc., a South Dakota
corporation ("Seller"); and with respect to Sections 4.3, 5.1, 5.5, 6.1, and 7.1
only, Xxxxx and Xxxxxxx Xxxxxxxxx, individual residents of Yankton, South Dakota
and Seller's sole Shareholders (together, the "Shareholders").
RECITALS
1. Shareholders and Seller desire to convey the Transferred
Assets to Smithway and Smithway desires to acquire the
Transferred Assets and assume certain obligations of Seller.
2. The parties propose to reduce to written form their agreement
as to the terms and conditions which shall govern the
transaction contemplated herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants, representations, and warranties herein contained, and upon the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
Definitions
In addition to the capitalized terms defined elsewhere herein, the
following terms, when capitalized, shall have the meanings ascribed to them
below:
1.1 "Adjustment Amount" means the dollar amount to reflect
deficiencies in the condition of assets subject to Inspection.
1.2 "Assigned Leases" means the leases relating to the Leased
Tractors and Leased Trailers assigned to and assumed by
Smithway under Section 2.2 hereof.
1.3 "Assigned Equipment Financing" means the lending documents
relating to the Tractors and Trailers assigned to and assumed
by Smithway under Section 2.2 hereof.
1.4 "Benefit Plans" means all contracts, plans, arrangements,
policies, and understandings providing for any compensation or
benefit other than base wages or salaries that are maintained
by Seller or affect its employees or independent
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contractors, regardless of whether defined as an "employee
benefit plan" under ERISA or subject to any provision of
ERISA, including, without limitation: all pension,
profit-sharing, retirement, thrift, 401(K), and other similar
plans and arrangements (defined benefit and defined
contribution); all health and welfare, disability, insurance
(including self-insurance), workers' compensation,
supplemental unemployment, severance, vacation, and similar
plans and arrangements; and all bonus, stock option, incentive
compensation, stock appreciation rights, phantom stock,
overtime guaranty, employment contract, employee handbook, and
other similar plan or arrangement.
1.5 "Business" means Seller's business of providing truckload
transportation of freight.
1.6 "Drivers" means the employee and independent contractor truck
drivers that operate tractors in the Business.
1.7 "Inspection" means the inspection of Leased Tractors, Leased
Trailers, Tractors, and Trailers conducted by Smithway as
described in Section 2.13.
1.8 "Inspection Report" means the written report prepared by
Smithway and presented to Seller which identifies each Leased
Tractor, Leased Trailer, Tractor, Trailer, MCT, and headache
rack presented for Inspection and the Adjustment Amount which
reflects the calculation in accordance with Section 2.13 to
take into account deficiencies from the required condition of
assets subject to Inspection. Any broken glass or body damage
shall be evidenced by a photograph if available.
1.9 "Judgment" means any judgment, order, writ, injunction,
decree, or award of any federal, state or provincial court, or
governmental agency.
1.10 "Law" means any federal, state, or local constitution, law,
ordinance, or governmental order, rule, or regulation
(including, without limitation, those relating to
environmental, energy, safety, health, zoning,
antidiscrimination, antitrust, and wage and hour matters).
1.11 "Leased Tractors" means the tractors identified on Exhibit A.
1.12 "Leased Trailers" means the trailers identified in Exhibit A.
1.13 "Lien" means any mortgage, lien, pledge, security interest,
conditional sale agreement, charge, claim, right, condition,
restriction, or other encumbrance or defect of title of any
nature whatsoever (including, without limitation, any
assessment, charge, or other type of notice which is levied or
given by any governmental authority and for which a lien could
be filed).
1.14 "MCT's" means the Qualcomm mobile communication terminals.
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1.15 "Miscellaneous Equipment" means (i) each set of "headache
racks," which includes for the purposes of this Agreement
tarps, tie-downs, chains, and any safety equipment; (ii) shop
and office equipment; (iii) supplies; (iv) forklifts; (v)
parts, tires, and general inventory; (vi) Seller's California
intrastate operating authority; and (vii) other assets listed
or otherwise identified on Exhibit B.
1.16 "Permits" means all permits, licenses, franchises, and other
approvals required by Law.
1.17 "Proceeding" means any litigation, arbitration, investigation,
proceeding, notice of violation, order, claim, citation,
complaint, review, or penalty assessment, in each case whether
formal or informal, administrative, civil, or criminal, at law
or in equity.
1.18 "Property" shall mean the real estate and any and all
improvements thereon presently owned by Seller and comprised
of an office building, maintenance shop, and yard, where
Seller has been conducting its trucking business, as more
fully described in the lease attached hereto as Exhibit C
("Lease").
1.19 "Specialized Equipment" means the trailers identified on
Exhibit D.
1.20 "Taxes" means all taxes, charges, fees, levies, or other
assessments of whatever kind or nature, including, without
limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated,
severance, stamp, occupancy or property taxes, customs duties,
fees, assessments, or charges of any kind whatsoever (together
with any interest and any penalties, additions to tax or
additional amounts) imposed by any taxing authority (domestic
or foreign).
1.21 "Tractors" means the owned tractors identified on Exhibit E to
be transferred to Smithway pursuant to Section 2.2 hereof.
1.22 "Trailers" means the owned semi-trailers identified on Exhibit
F to be transferred to Smithway pursuant to Section 2.2
hereof.
1.23 "Transferred Assets" means the Trailers, Tractors, Assigned
Leases, MCTs, Miscellaneous Equipment, and Specialized
Equipment, as well as driver files, tariffs, equipment
maintenance files, extended warranty agreements, customer
files, and other business records associated with the
Business. Notwithstanding the foregoing, Seller shall retain
all of its logs, corporate minute books, corporate records,
and tax records, but will provide copies of the same to
Smithway on an as needed basis. Except as expressly identified
as a "Transferred Asset," all other assets owned by Seller are
being retained by Seller and are not being sold hereunder.
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ARTICLE 2
Purchase, Sale, and Employment
2.1 Purchase and Sale. As hereinafter provided, Smithway shall
purchase, acquire, and assume from Seller, and Seller shall
sell, assign, and transfer to Smithway, all right, title, and
interest of Seller in and to the Transferred Assets.
2.2 Assignment and Assumption. Seller shall assign and Smithway
shall assume, as of January 1, 1997, all obligations of
Seller, financial and otherwise, under the Assigned Leases and
Assigned Equipment Financing on the following terms and
conditions:
A. Assumption Period. For the period from Closing to
the assumption of leases on the Leased Tractors and
Leased Trailers and assumption of the financing on
the Tractors and Trailers on January 1, 1997 or such
later date as shall be required if the applicable
lenders or lessor should not consent to assignment
(the "Assumption Period"), Smithway shall sublease or
lease, as appropriate, the Leased Tractors, Leased
Trailers, Tractors, and Trailers on the same terms
and conditions of the Assigned Leases and Assigned
Equipment Financing and be responsible for all
operating costs associated with the Leased Tractors,
Leased Trailers, Tractors, and Trailers, including
but not limited to all state and federal road and
fuel taxes and federal highway use taxes when due.
During the Assumption Period, Smithway shall pay
directly to the appropriate lessor or lender
identified on Exhibit A, D, or E, as appropriate, an
amount equal to the aggregate monthly payment due
under the Assigned Leases and Assigned Equipment
Financing. Smithway shall provide insurance coverage
as provided in the respective Assigned Leases and
Assigned Equipment Financing, naming the lessee or
lender, as appropriate, and Seller as an additional
insured thereunder, and providing evidence of such
coverage to Seller as of Closing. Except as provided
herein, Smithway shall perform all of the other
terms, conditions, and obligations of Seller under
the Assigned Leases and Assigned Equipment Financing.
B. Assignment; Release. During the Assumption Period,
the parties shall use their best efforts to obtain
all consents required to effectively assign and
convey the Assigned Leases and Assigned Equipment
Financing to Smithway, such assignment to be
effective January 1, 1997. Smithway shall use its
best efforts to ensure that such assignments shall
result in the release of Seller and the Shareholders
from any and all liability under the Assigned Leases
and Assigned Equipment Financing, if unsuccessful in
obtaining such releases, Smithway hereby agrees to
indemnify, defend, and hold harmless Seller and the
Shareholders from any and all loss, damage, cost or
expense (including reasonable attorney fees) arising
under the Assigned Leases and Assigned Equipment
Financing. If Smithway is unable to arrange for the
release of Seller or the Shareholders from all
obligations under an Assigned
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Lease or Assigned Equipment Financing, Smithway shall
pay all amounts due thereunder, but only if there is
no prepayment penalty or other detriment.
C. Leased Tractors and Leased Trailers. Regardless of
whether assignment is obtained under Section 2.2.B.,
Smithway shall operate the Leased Tractors and Leased
Trailers from Closing until the applicable lease
expires and return the Leased Tractors and Leased
Trailers in accordance with the terms and conditions
of the Assigned Lease. Smithway shall be responsible
for returning the Leased Tractors and Leased Trailers
to "turn-in" condition as provided in the applicable
Assigned Lease (or paying any penalty for
noncompliance).
D. Tractors and Trailers. Regardless of whether
assignment is obtained under Section 2.2.B.,
Smithway shall operate the Tractors and Trailers from
Closing in accordance with the terms and conditions
of the Assigned Equipment Financing.
E. On the Closing Date, Smithway shall pay to Seller a
one-time sum of $20,000.00 in consideration for the
transitional use, for a period of 30 days, of the
tractors and trailers owned by Seller and not a part
of the Leased Tractors, Leased Trailers, Tractors,
and Trailers. Said nonacquired tractors and trailers
shall herein be referred to as the "Nonacquired
Tractors" and "Nonacquired Trailers," respectively,
and together as the "Nonacquired Trucks." Smithway
agrees to transition out of the Nonacquired Trucks in
an orderly manner and shall not send out any of the
Nonacquired Trucks that have come back to the Yankton
terminal. Smithway shall route all Nonacquired
Tractors, except where such Nonacquired Tractors are
located in California and such tractors shall be
routed on the same schedule to the Stockton terminal,
back to the Yankton terminal and return them to
Seller within 30 days after Closing at Smithway's
cost. Smithway agrees to use its best efforts to
route as many of the Nonacquired Trailers as
practicable to the Yankton terminal and return them
to Seller within 30 days after Closing at Smithway's
expense. After such 30 days, Seller and the
Shareholders will be responsible for returning the
Nonacquired Trailers, at their own expense. If
Smithway wants to lease, purchase or assume any of
the Nonacquired Trailers, it may negotiate such
lease, purchase or assumption with the Seller and
Shareholders. Smithway shall not be required in any
event to run bobtail or incur deadhead miles to
retrieve or deliver Nonacquired Trailers. Smithway
agrees to use its best efforts to route the twelve
(or more) tractors identified by Xxxxx Xxxxxxxxx at
Closing as "priority tractors" to Yankton as soon as
reasonably practicable (with a target of less than
one week from Closing). From and after the Closing,
Smithway shall (i) provide insurance coverage on all
of the Nonacquired Trucks that it is using, and (ii)
be responsible for all operating costs associated
with the Nonacquired Trucks until the earlier of (x)
such time as such trucks have been taken out of use
and returned to the Yankton terminal or (y) the date
thirty days after the
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Closing Date. Smithway shall not assume or be
responsible for any lease or financing payments.
Seller shall remain responsible for all such
payments. Smithway shall be responsible for returning
the Nonacquired Trucks in the condition they were in
on the date of Closing with the exception of ordinary
wear. All of Smithway's obligations hereunder shall
cease on the date thirty days after Closing.
2.3 Proration of Liability. Except as otherwise provided in this
Agreement, any liability with respect to the operation of the
Leased Tractors, Leased Trailers, Tractors, or Trailers that
arises from facts or events that span all or part of the
Assumption Period and a period prior to Closing shall be
prorated based upon the relative responsibility of Smithway
and Seller for the liability accrued during the Assumption
Period. As an example, in case of a fuel tax audit that
results in liability for a period which includes the
Assumption Period, Smithway shall be liable for an amount
equal to the ratio of the amount of fuel used in the
Assumption Period bears to the total amount of fuel used in
the audit period, and Seller shall be liable for the balance.
All (i) lease payments on the Assigned Leases, (ii) payments
on the Assigned Equipment Financing, (iii) rent on the
California Property (both to the landlord and from subtenants)
(iv) property taxes on the Property and the other Transferred
Assets, and (v) similar items shall be prorated as of the
Closing.
2.4 Payment. Smithway shall pay to Seller the aggregate amount due
under Sections 2.2.E., 2.5, 2.6, 2.7, and 2.8, less the
aggregate of all then known Adjustment Amounts, at Closing in
the form of a Smithway check. Smithway shall pay the amount
due under Section 2.9 as stated therein. To the extent any
Leased Tractor, Tractor, Trailer, MCT, or headache rack has
not been inspected prior to Closing, the Adjustment Amount
with respect to such item shall be offset against remaining
payments due to Seller or Xxxxx Xxxxxxxxx under any other
provision of this Agreement, the Lease, or any document
executed in connection with this Agreement.
2.5 Licenses. Smithway shall pay Seller $_______ for the unused
portion of the Tractor and Leased Tractor vehicle licenses and
permits (such amount equal to twenty-five percent (25%) of the
annual license and permit fee).
2.6 Miscellaneous Equipment. Smithway shall pay Seller the amount
set forth opposite each item on Exhibit B for the
Miscellaneous Equipment, plus the sum of $100 for the
California intrastate authority; provided, the headache racks,
as defined in 1.14(i), shall be the lesser of (i) $1,800/unit
or (ii) the book value on the depreciation schedule; and
further provided that Smithway shall pay for parts, tires,
supplies, and general inventory at cost (not to include
out-dated or items non-usable to Smithway).
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2.7 MCT's. Smithway shall pay Seller $2,500/unit for seventy-two
(72) MCT's; provided, that Smithway shall not pay anything for
MCT's installed in a Tractor or Leased Tractor and included in
the payments under Assigned Equipment Financing or Assigned
Tractor Leases applicable to such tractor. All Leased Tractors
and Tractors shall have MCT's installed and operational and
such terminals shall be included in the seventy-two (72)
MCT's. All other MCT's shall have the necessary wiring to make
the terminal operational without additional expense to
Smithway, other than installation costs. Smithway shall
receive a $50 credit toward the purchase price for each MCT
without wiring.
2.8 Specialized Equipment. Smithway shall purchase the Specialized
Equipment for an aggregate $471,000, payable by Smithway check
at Closing. Each trailer included in the Specialized Equipment
shall have 50% tread depth and 50% brake wear remaining at
Closing.
2.9 Business. Smithway shall pay Seller $648,000 (adjusted as set
forth below) for the goodwill associated with the Business,
including the value of ongoing shipper, Driver, and other
business relationships. Payment shall be made as follows: (a)
at Closing, Smithway shall deliver a check in the amount of
$448,000; and (b) on the date six months following Closing,
Smithway shall deliver a check in the amount of $200,000 (the
"Base Amount") adjusted as follows: (i) for each Tractor that
Seller removes from the transaction so that Smithway does not
assume the Assigned Equipment Financing related thereto,
$4,000 shall be added to the Base Amount (provided, however,
that the ten 1996 Volvos scheduled for September deliver shall
not be eligible for removal); (ii) for each Recruited or
Retained Driver below 120 at the date six months following
Closing, the Base Amount shall be reduced $1,667; and (iii)
for each Recruited or Retained Driver above 120 at the date
six months following Closing, the Base Amount shall be
increased by $2,500. For the purpose of this Section 2.9,
"Recruited or Retained Driver" shall mean (i) a Driver
operating for Seller at Closing and at the relevant date
operating for Smithway, (ii) a Driver recruited by Xxxxx
Xxxxxxxxx after the Closing and operating for Smithway at the
relevant date, or (iii) a Driver recruited by Smithway after
the Closing and based at the Yankton or Stockton terminal at
the relevant date.
2.10 Yankton Lease. Smithway shall lease the Property from Seller
for four years at a monthly rental of $2,000, triple net,
pursuant to the Lease. The Lease shall provide Smithway with a
right of first refusal on any sale of the Property during the
Lease term or expiration thereof. Smithway and Seller shall
share equally the cost of a Phase I site environmental
assessment of the Property. Said Phase I Site Assessment shall
be completed prior to closing. If the results of the site
assessment indicate that remediation is required or additional
assessment is required, Smithway may at its
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option (i) elect not to proceed to closing or (ii) may require
Seller at Seller's expense to remediate pursuant to the South
Dakota Department of Environment and Natural Resources
Standards and Guidelines, in such event Seller shall hold
Smithway harmless from any contamination existing prior to
closing. If additional assessments or remediation are needed
for events on the Property arising after Closing, Smithway
shall bear the cost of such additional assessments or
remediation.
2.11 California Lease. Smithway shall assume from Seller the lease
of the property located in Stockton, California ("California
Property"). Such lease is attached as Exhibit F. Smithway and
Seller shall share equally the cost of a Phase I environmental
site assessment of the California Property. Said Phase I Site
Assessment shall be completed prior to Closing. If the results
of the site assessment indicate that remediation is required
or that additional assessment is required, Smithway may at its
option (i) elect to sublease the California Property from
Seller for the balance of the original lease term under the
California lease, (ii) may simply proceed to take an
assignment of said lease, or (iii) may elect not to proceed to
Closing. In any event, Seller shall hold Smithway harmless
from and against any liability arising from the presence of
contamination at the California Property during the time that
Seller has been in possession thereof. If additional
assessments or remediation are needed for events on the
California Property arising after Closing, Smithway shall bear
the cost of such additional assessments or remediation.
2.12 Xxxxxxxxx Consulting Services. Xxxxx Xxxxxxxxx agrees to
provide consulting services to Smithway, as an independent
contractor, for a period of six months following Closing.
Xxxxxxxxx shall provide transition services as requested by
Smithway including driver recruitment and retention, and shall
receive $31,000, payable $5,167 monthly. Smithway shall
provide Xxxxxxxxx with an office at the Yankton terminal while
he is providing services.
2.13 Inspection; Adjustment. From the period commencing with the
execution of this Agreement and continuing until all Leased
Tractors, Leased Trailers, Tractors, Trailers, MCT's and
Miscellaneous Equipment have been inspected as provided below
(even if after Closing), Seller and Smithway shall direct all
Leased Tractors, Leased Trailers, Tractors, and Trailers to
the Yankton or Stockton terminal of Seller, the Fort Dodge
terminal of Smithway, or any Kenworth or Freightliner dealer
for physical inspection (the "Inspection") either prior to or
within three (3) business days after the Closing. The
Inspection shall cover the condition and include amounts
required to return the items to satisfactory condition as
follows:
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A. as to Leased Tractors:
(i) the amount required to return the Leased
Tractors to turn-in condition under the
applicable Assigned Lease in terms of body
damage, general road worthiness, and other
maintenance or repair related turn-in
requirements under the applicable lease
(generally, no broken glass, $250 or less
body damage, and meeting DOT operating
specifications, but in each case as
specifically provided in the lease);
(ii) the amount of any penalty associated with a
violation of turn-in tread depth on tires or
if no penalty is specified, to provide tires
with at least 50% tread depth; and
(iii) the amount of excess mileage penalty
attributable to Seller. The Leased
Tractor's mileage shall be compared with the
total miles permitted without penalty under
the applicable lease, with such total
mileage being prorated to reflect the
percentage of the lease term attributable to
Seller from lease inception to Closing. If
the mileage exceeds the miles allowable
under the proportion of the lease term
served prior to Closing ("excess miles"),
Seller shall be liable for the number of
excess miles multiplied by the applicable
lease penalty per mile. For example, if a
lease permits 360,000 total miles during a
three-year term and Seller has run 240,000
miles during the first 18 months,
Shareholders or Seller would be liable for
any penalty attributable to up to the first
60,000 excess miles (240,000 mileage less
the 180,000 prorated allowable miles as of
Closing).
B. as to Tractors:
(i) the amount required to return the Tractors
to good operating condition in terms of body
damage, general road worthiness, and other
maintenance or repair, including no broken
glass, $250 or less body damage, no engine
or drive train repair required, and meeting
DOT operating specifications; and
(ii) the amount required to restore the Tractors
to 50% tread depth on tires and 50%
remaining life on brakes.
C. as to Trailers: each of the Trailers shall, at the
time of the Inspection, be in good repair and
condition, adequate for the normal course of
operating a trucking business, shall have a straight
frame and at least 50% wear remaining on brakes and
50% tread depth on all tires, shall have body damage
less than $250 per unit (excluding normally
acceptable damage to bumpers or rub rail), and shall
meet Department of Transportation standards of
road-worthiness.
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D. as to Leased Trailers: each of the Leased Trailers
shall, at the time of Inspection, be in good repair
and condition, adequate for the normal course of
operating a trucking business and shall have a
straight frame and shall include adjustment for (i)
the amount to return the Leased Trailers to turn-in
condition under the applicable Assigned Lease in
terms of body damage, general road worthiness, wear
on brakes, and wear on tires, and other maintenance
or repair related turn-in requirements under the
applicable Lease; and (ii) the amount of any penalty
associated with a violation of turn-in tread depth on
tires or if no penalty is specified, to provide tires
with at least 50% tread depth.
E. as to Miscellaneous Equipment: the MCTs and headache
racks shall be in good operating repair and
condition, suitable for continued use in the
Business. Smithway may test any of the MCTs within
72 hours of delivery of said MCTs to the Yankton
terminal and, if any malfunctions exist, Seller shall
either make necessary repairs or shall repurchase any
non-operational MCTs. After such 72-hours period,
however, Smithway shall be deemed as having accepted
such MCTs in their "as is" condition. All other
Miscellaneous Equipment shall not be subject to
warranty as to condition because Smithway is buying
only the items it elects to purchase at an agreed
price and is purchasing such items "as is."
F. Smithway shall provide the results of each Inspection
to Seller by means of an Inspection Report. The
Adjustment Amount reflected on the Inspection Report
shall be calculated as provided above and presented
to Seller for approval. In the event that Seller, for
any reason, does not approve the Adjustment Amount,
Seller shall have the following options:
(i) Seller may, at Seller's expense, repair the
Leased Tractor, Leased Trailer, Tractor,
Trailer, or other item to bring it up to the
foregoing standards;
(ii) Seller may pay Smithway the amount required
to repair such Leased Tractor, Leased
Trailer, Tractor, Trailer, or other item to
bring it up to the standard; or
(iii) Seller may elect not to sell or assign any
such Leased Tractor, Leased Trailer,
Tractor, Trailer, or other item and Smithway
shall not pay for or assume an Assigned
Lease or Assigned Equipment Financing in
connection with such item.
2.14 Excluded Assets and Liabilities. Smithway is not purchasing
any assets other than as specified herein. Smithway is not
assuming and shall not be deemed to have assumed, any
liabilities or obligations of Seller of any kind or nature
whatsoever, except as expressly provided in Section 2.2 hereof
with respect to the Assigned Leases and Assigned Equipment
Financing and pursuant to Sections 2.15 and 2.16
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with respect to accrued vacation and sick leave and Volvos,
respectively. Without limiting the generality of the
foregoing, it is hereby agreed that Smithway is not assuming,
and shall not be deemed to have assumed, any liability and
shall not have any obligation for or with respect to any
liability or obligation of Seller (i) for any advances or
receivables for Drivers, provided Smithway will assist Seller
in collecting on such advances or receivables and forwarding
collected sums to Seller, or (ii) for any notes, liabilities,
or obligations to the Shareholders.
2.15 Vacation and Sick Leave. At Closing, Seller shall pay to all
of its employees the accrued vacation and personal leave owed
to such employees by Seller.
2.16 Volvos. Smithway shall assume Seller's obligation to take
delivery of ten (10) 1996 model-year Volvo tractors that are
awaiting delivery at Sioux Falls Kenworth. Smithway shall
arrange for and be responsible for all financing of such
tractors. Seller and the Shareholders represent and warrant
that the entire purchase price of each of such tractors,
including all delivery charges, dealer preparation, federal
excise tax, and other amounts payable for or in connection
with such tractors is less than $62,500.
2.17 Revenue and Expense Cutoff. Seller shall retain all revenue
and shall pay all expenses associated with loads dispatched
prior to 12:01 a.m. on the Closing Date. Smithway shall be
deemed to take possession of any equipment in transit at the
time of Closing as of the time the load is delivered and
unloaded.
ARTICLE 3
Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur at 10:00 a.m., October ___, 1996 (the "Closing Date"), at
the office of Seller, or at such other time and place as the parties may
mutually agree (which alternative date shall become the Closing Date).
ARTICLE 4
Representations and Warranties
4.1 General Statement. The parties hereto make the representations
and warranties to each other as set forth in this Article 4.
The survival of all such representations and warranties shall
be in accordance with Section 8.3 hereof. All representations
and warranties of the parties are made subject to the
exceptions which are noted in the respective Schedules
attached hereto (the "Schedules"). Copies of all documents
referenced in the Schedules shall be attached thereto or
delivered separately.
4.2 Representations and Warranties of Smithway. Smithway
represents and warrants to Seller and the Shareholders, as
follows:
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A. Corporate Status. Smithway is a corporation, duly
organized, validly existing, and in good standing
under the laws of the State of Iowa with all
requisite power and authority to carry on its
respective business. Smithway is a wholly owned
subsidiary of Smithway Motor Xpress Corp. ("SMXC"),
a publicly traded corporation listed on the Nasdaq
National Market System.
B. Authority; Validity. Smithway has full right, power,
and authority to execute and deliver this Agreement,
and to consummate and perform the transactions
contemplated hereby. The execution and delivery of
this Agreement and any other contract or agreement
contemplated hereunder by Smithway and the
consummation and performance of the transactions
contemplated hereby have been duly and validly
authorized by all necessary corporate and other
proceedings. This Agreement has been duly executed
and delivered by Smithway and constitutes a legal,
valid, and binding obligation enforceable against
Smithway in accordance with its terms.
C. Noncontravention; Consents. The execution and
delivery of this Agreement (and every other contract
or agreement contemplated hereby) by Smithway does
not, and the performance of this Agreement (and every
other contract or agreement contemplated hereby) by
Smithway will not, violate, conflict with, or result
in the breach of any term, condition, or provision
of: (i) any existing Law to which it is subject,
(ii) any Judgment which is applicable, (iii) the
articles of incorporation or other charter documents
or bylaws of Smithway, or (iv) any contract to which
Smithway is a party or by which Smithway is otherwise
bound. No authorization, approval, or consent of,
and no registration, filing, or notice to, any
governmental authority or any other party to any
contract is required in connection with the
execution, delivery, and performance of this
Agreement by Smithway.
D. Drivers. As to all Drivers who meet Smithway's
driver standards, Smithway intends to offer
employment to such individuals and pay employee
Drivers at the rate per mile and the same other
benefits as received by Smithway employee drivers,
subject to Smithway's eligibility schedules. As to
independent contractor Drivers, Smithway shall offer
its standard independent contractor contract. All
Drivers employed by Smithway shall receive credit for
their length of service with Seller, and such
employees shall not be provided pay or benefits for
the period from Closing to six months thereafter,
which are less than those provided to such drivers by
Seller. If any employee drivers or owner operators
receive a reduction in pay or benefits and such
driver quits as a result thereof, Smithway agrees
that there shall be a like reduction in the 120
driver threshold established in Section 2.9.
E. Broker. Smithway has not contracted with or is aware
of any broker concerning the transaction contemplated
hereby except Xxxxx & Associates, Ltd.
12
4.3 Representations and Warranties of Seller and Shareholders.
Shareholders and Seller, jointly and severally, represent
and warrant to Smithway as follows:
A. Corporate Status. Seller is a corporation, duly
organized, validly existing, and in good standing
under the laws of the State of South Dakota, with all
requisite power and authority to carry on its
business. Seller conducts its business only under its
own name and has no subsidiaries and no entities
affiliated through common ownership or otherwise that
conduct any business related to that conducted by
Seller.
B. Authority; Validity. Seller has full right, power,
and authority to execute and deliver this Agreement,
and to consummate and perform the transactions
contemplated hereby. The execution and delivery of
this Agreement by Seller and the consummation and
performance by it of the transactions contemplated
hereby have been duly and validly authorized by all
necessary corporate and other proceedings. This
Agreement has been duly executed and delivered by
Seller and the Shareholders and constitutes the
legal, valid, and binding obligation of each,
enforceable against each in accordance with its
terms.
C. Noncontravention; Consents. The execution and
delivery of this Agreement (and every other contract
or agreement contemplated hereby) by Seller and the
Shareholders does not, and the performance of this
Agreement (and every other contract or agreement
contemplated hereby) by Seller and the Shareholders
will not, violate, conflict with, or result in the
breach of any term, condition, or provision of: (i)
any existing Law to which Seller or either
Shareholder is subject; (ii) any Judgment which is
applicable to Seller or either Shareholder; (iii)
the articles of incorporation or other charter
documents or bylaws of Seller, which is a
corporation; or (iv) any material contract to which
Seller or either Shareholder is a party or by which
any is otherwise bound. No authorization, approval,
or consent of, and no registration, filing, or notice
to any governmental authority or other party to any
contract is required in connection with the
execution, delivery, and performance of this
Agreement by Seller and the Shareholders. Notwith-
standing the foregoing , approvals and consents may
generally be required by all of Seller's equipment
leasing companies, equipment financing companies,
banks, and landlords.
D. Financial Statements. Seller has delivered to
Smithway the annual, audited financial statements of
Seller as of December 31, 1994, and 1995, together
with the unaudited financial statements as of and for
the periods ended June 30, and July 31, 1996,
(collectively, the "Historical Financial
Statements"). The Historical Financial Statements,
including all balance sheets and statements of
income, cash flows, and retained earnings, and all
notes thereto, have been prepared in accordance with
GAAP, present fairly the financial condition and
results of operations of Seller for all periods
13
reflected therein, are correct and complete, and are
consistent with the books and records of Seller,
which books and records are correct and complete.
E. Absence of Changes or Events. Except as disclosed on
Schedule 4.3.E., since July 31, 1996, Seller has not:
(i) sold, assigned, or transferred or agreed to
sell, assign, or transfer any of the
Leased Tractors, Leased Trailers, or
Transferred Assets or any interest therein;
(ii) created, incurred, assumed, or guaranteed
any indebtedness for money borrowed or any
other indebtedness or obligation of any
nature (absolute or contingent), that
involves the mortgage, pledge, or placement
of any Lien on any of the Leased Tractors,
Leased Trailers, or Transferred Assets, or
agreed to do any of the foregoing;
(iii) granted, entered into, or agreed to grant or
enter into any agreement or policy with any
Driver or other employee that grants
severance or termination pay, increases
compensation, increases benefits under any
current benefit plan, or creates any
continuing employment relationship;
(iv) experienced any labor unrest or union
organizing activity;
(v) suffered any material adverse change in its
Business, other than such changes as affect
all truckload carriers generally;
(vi) amended, terminated, or entered into any
agreement relating to the Leased Tractors,
Leased Trailers, Property, California
Property, Volvo Tractors, or Transferred
Assets; or
(vii) suffered any damage, destruction, or loss,
whether or not covered by insurance, which
would have a materially adverse effect on
the Business or the Transferred Assets.
F. Title and Condition of Assets. The Leased Tractors,
Leased Trailers, Tractors, Trailers, Specialized
Equipment, MCTs, and Miscellaneous Equipment are in
good repair and condition and adequate for the
ordinary course of operation of Seller's business as
presently conducted. Seller has good and valid title
to the Transferred Assets, in each case, free and
clear of all Liens, except Liens disclosed on
Schedule 4.3.F. Seller is the lessee under the
Assigned Leases and no party other than the
respective lessors thereunder has any other interest
in or Lien on the Assigned Leases (or the tractors
and trailers which are the subject thereof) except as
disclosed on Schedule 4.3.F. Seller is the borrower
under the Assigned Equipment Financing and no other
party other than the respective lender thereunder has
14
any other interest in or Lien on the Assigned
Equipment Financing except as disclosed on Schedule
4.3.F. Except as disclosed on Schedule 4.3.F., there
are no agreements or similar understanding that limit
leasing of the Property or the purpose for which the
Property may be used.
G. Tax Matters. With respect to Taxes:
(i) Seller and Shareholders have filed, within
the time and in the manner prescribed by
law, all returns, declarations, reports,
estimates, information returns, and
statements (the "Returns") required to be
filed by it, including all such Returns with
respect to the Business and the Transferred
Assets, and all such Returns are true,
correct, and complete in all material
respects. Seller and Shareholders have
within the time and in the manner prescribed
by law, paid and hereafter will continue,
within the time and in the manner prescribed
by law, to pay all Taxes that relate to the
Business and the Transferred Assets for
periods prior to Closing. There are no
Liens for Taxes upon the Transferred Assets.
(ii) Except as set forth on Schedule 4.3.G.,
Seller and Shareholders have not received
notice of, nor is either under audit, any
audit by any tax authority, nor has a
deficiency for any Taxes been proposed,
asserted, or assessed against them. There
are no outstanding waivers or comparable
consents regarding the application of the
statute of limitations with respect to any
Tax or Return that have been given by Seller
or Shareholders.
(iii) Seller and Shareholders have complied in all
respects with all applicable laws, rules and
regulations relating to the payment and
withholding of Taxes and have, within the
time and in the manner prescribed by law,
withheld from employee wages and paid over
to the proper governmental authorities all
amounts required to be so withheld and paid
over under all applicable laws.
H. Litigation. Except as set forth in Schedule 4.3.H.,
there is no action, suit, or Proceeding pending or to
the best of Seller's knowledge threatened against
Seller that, if adversely determined, could have a
materially adverse effect on the Business or the
Transferred Assets.
I. Insurance. Seller maintains such insurance coverage
on (i) the Transferred Assets, its Business and
employees, which insurance covers liabilities and
risks prudently insured against by similar
businesses, (ii) the Leased Tractors and Leased
Trailers which complies in all respects with the
Assigned Leases, and (iii) the Tractors and Trailers
which complies in all material respects with the
Assigned Equipment Financing. All such insurance
policies will be maintained through Closing.
15
J. Contracts and Commitments. Except for contracts
with independent contractor Drivers that relate to
the provision of equipment by such Drivers, Schedule
4.3.J. contains a complete list and description of
all contracts, involving, directly or indirectly, the
Transferred Assets, including any financing
arrangement involving the Leased Tractors, Leased
Trailers, Tractors, Trailers, or independent
contractor Drivers. Except as otherwise described,
each contract disclosed pursuant to this Section
4.3.J. is a valid and binding agreement of the
parties thereto, is in full force and effect, and no
party thereto is in material breach thereunder.
K. Drivers; Employees.
(i) Except as set forth on Schedule 4.3.K.,
Seller is not a party to any collective
bargaining agreement relating to its
employees, including employee Drivers, nor
does any such agreement determine the terms
and conditions of employment of any such
employee or employee Driver.
(ii) There are no agreements, plans, or policies
that would give rise to any severance,
termination, change-in-control, or other
similar payment to employees or independent
contractors of Seller as a result of the
consummation of this Agreement.
(iii) Schedule 4.3.K. identifies each of Seller's
Benefit Plans, copies of which, amended to
date, have been furnished to Smithway. No
Benefit Plan is a multi-employer or a
defined benefit plan, and neither Seller nor
any predecessor or affiliate has ever been a
party to or sponsored a multi-employer or
defined benefit plan. Seller and all
Benefit Plan fiduciaries have fully complied
with their obligations with respect to all
Benefit Plans; there has been no prohibited
transaction with respect to any Benefit
Plan; each Benefit Plan that is intended to
be qualified under Section 401(a) of the
Code is so qualified; each trust created
under any Benefit Plan is exempt from tax
under Section 501(a) of the Code and has
been exempt from tax from creation; and
Seller has received determination letters
from the Internal Revenue Service for each
such Benefit Plan. Each Benefit Plan has
been maintained in compliance with its terms
and all applicable Laws. All payments and
contributions due or accrued under each
Benefit Plan, determined in accordance with
such plans and prior funding and accrual
practices, have been paid. The "plan year"
of each Benefit Plan is the calendar year.
Seller has no current or projected liability
with respect to post -employment or post-
retirement welfare benefits for former or
retired employees.
16
L. WARN Act Notice and Liability. The facility located
in Yankton, South Dakota is Seller's only employment
site with more than 50 employees. Seller has taken no
action in respect to employees of Seller that would
require notice or create liability under the Worker
Adjustment and Retraining Notification Act ("WARN
Act"), or any state counterpart.
M. Compliance With Laws. Seller has owned, leased, and
used all of its properties and assets involved in its
Business, and has conducted its Business, in
compliance in all material respects with all
applicable Laws.
N. Environment, Health, and Safety.
(i) Seller and affiliates have complied with all
Laws concerning pollution or protection of
the environment, public health and safety,
or employee health and safety, including
Laws relating to emissions, discharges,
releases, or threatened release of
pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or
wastes (including petroleum and any fraction
or derivative thereof) into ambient air,
surface water, ground water, or lands, or
otherwise relating to the manufacture,
processing, distribution, use, treatment,
storage, disposal, transport, or hauling of
such substances (collectively "Environmental
Laws"), and no action, suit, Proceeding,
hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or
commenced against any of them alleging any
failure so to comply. Without limiting the
generality of the preceding sentence, Seller
and affiliates have obtained and been in
compliance with all of the terms and
conditions of all Permits which are required
under, and has complied with all other
limitations, restrictions, conditions,
standards, prohibitions, requirements,
obligations, schedules, and timetables which
are contained in, all Environmental Laws.
(ii) Seller does not have any liability (and
neither Seller nor any affiliate has handled
or disposed of any substance, arranged for
the disposal of any substance, exposed any
employee or other individual to any
substance or condition, or owned or operated
any property or facility in any manner that
could form the basis for any present or
future action, suit, Proceeding, hearing,
investigation, charge, complaint, claim, or
demand against Seller giving rise to any
liability) for damage to any site, location,
or body of water (surface or subsurface),
for any illness of or personal injury to any
employee or other individual, or for any
reason under any Environmental Law.
(iii) Any fuel storage tanks located at properties
owned or used by Seller in its Business,
including the Property and California
Property, comply in all respects with
applicable Laws, do not leak, are
17
registered with the appropriate state agency
(and all required actions in connection
therewith have been taken) in the manner
permitting Seller to take advantage of any
state liability limitation, insurance, or
similar program relating to fuel storage
tanks, and such tanks are not scheduled for
removal in the next five years.
O. No Untrue Statement or Omissions of Material Fact.
The representations, warranties, and covenants
contained in this Agreement and the Schedules and
Exhibits hereto and in any document delivered in
connection herewith appended to this Agreement, do
not contain any untrue statement of a material fact
and do not omit to state any fact necessary to make
any statement herein or therein not misleading or
necessary to a correct presentation of all material
aspects of the Business, the Transferred Assets, and
the matters contemplated under this Agreement.
P. Broker. Seller and Shareholders have not contracted
with or are aware of any broker concerning the
transaction contemplated hereby except Xxxxx &
Associates, Ltd.
ARTICLE 5
Covenants and Agreements
5.1 Conduct of Business Pending the Closing. From the date hereof
to the Closing:
A. Seller shall carry on its business diligently and
substantially in the same manner as heretofore and
shall not make or institute any unusual or novel
method of purchase, sale, lease, management,
accounting, or operation, and Seller and the Share-
holders will use their best efforts to preserve the
assets, goodwill, and value of Seller's business,
including keeping Seller's present management intact,
keeping available Seller's present employees, and
preserving the present relationships with its
suppliers and customers and others having business
relations with it.
B. Seller and the Shareholders shall not, without the
prior written consent of Smithway take, or permit to
be taken, any action which would render untrue any
representation or warranty contained in Section 4.3.
5.2 Access. Seller shall give the officers, employees, counsel,
accountants, and other authorized representatives of Smithway
free and full access to and the right to inspect, during
normal business hours upon advance notice, all of the
premises, properties, assets, records, contracts, and other
documents relating to Seller's Business and shall permit them
to consult with Seller's officers, employees, accountants,
counsel, agents, customers, and other persons having business
dealings with Seller or knowledge of its business, operations,
assets, liabilities, actual or potential litigation and
claims, properties, and prospects; provided, that such
18
investigation shall not unreasonably interfere with Seller's
business. Furthermore, Seller shall promptly provide to
Smithway (and their representatives) all such reports,
surveys, documents, and copies of documents and records and
information with respect to the Business and copies of any
working papers relating thereto as they shall from time to
time reasonably request. Smithway acknowledges and agrees that
all information regarding the Seller gathered pursuant to this
Section 5.2 is confidential to Seller. Smithway further
acknowledges that Seller would be irreparably harmed if, after
having such access to Seller's confidential information,
Smithway did not proceed to closing. In consideration of
Seller making available to Smithway such books, records, and
files, Smithway agrees as follows:
A. All such information provided to Smithway by Seller
shall not be disclosed by Smithway to any third
party.
B. Smithway will disclose such information to its
officers, directors, and agents only on a "need to
know" basis.
C. Smithway shall use its best efforts and due diligence
to prevent the dissemination of any of Seller's
confidential information by buyers, directors,
officers, employees, or agents.
D. Smithway agrees to indemnify and hold harmless Seller
from any damages, loss, costs, or liabilities
(including legal fees and the cost of enforcing this
indemnity) arising out of or resulting from any
unauthorized use or disclosure of the information
gathered in Smithway's negotiations with Seller.
Smithway acknowledges that money damages will be
incalculable and an insufficient remedy for any
breach of this Agreement by Smithway or its
representatives and that any such breach would cause
Seller irreparable harm. Accordingly, Smithway also
agrees that in the event of any breach hereof, Seller
shall be entitled, without the requirement of posting
a bond or other security, to equitable relief,
including without limitation injunctive relief and
specific performance. Said remedies shall not be the
exclusive remedies for any breach of this Agreement
but shall be in addition to all of the remedies
available at law or in equity to the Seller.
5.3 Publicity and Filings. The parties agree that Smithway shall
be authorized to issue such press releases or file such
documents with the Securities and Exchange Commission, Nasdaq,
and other agencies as recommended by Smithway's counsel. The
parties acknowledge that Smithway shall announce the existence
of this Agreement only after all parties hereto have executed
this Agreement, or as it otherwise deems necessary to comply
with its obligations under the federal and state securities
laws and Nasdaq rules and regulations.
5.4 Equipment Registration. Seller shall not renew the licenses
or registrations of, or purchase new license plates for, any
of the Leased Tractors, Tractors, Trailers, or Specialized
Equipment between the date hereof and the Closing.
19
5.5 Non-competition.
A. During the three years following the Closing, neither
Shareholders nor any entity of which a Shareholders
directly or indirectly owns more than 5% shall (i)
own, operate, manage, be employed or retained as a
consultant by, or in any other manner assist any
truckload carrier, broker, agent, intermodal company,
consolidator, third-party logistics provider, or
other company engaged in the business of transporting
or arranging for the transportation of truckload
freight that conducts a competitive business in the
United States; (ii) divert or solicit any person who
is or was a customer of Seller during such period; or
(iii) induce or influence any employee, agent, owner-
operator, or other representative of Seller to leave
Seller or engage in a competitive business. For the
purposes of this Agreement, "competitive business"
shall mean flatbed operations but shall not include
(i) selling or leasing the Nonacquired Trucks to
third-parties or owner-operators of Seller (but the
sale or lease to any employee driver of Seller shall
be prohibited); or (ii) owning up to three (3)
tractors used to haul the Shareholders' own farm
equipment and farm commodities from his own farm.
The parties deem the restrictions contained in this
Section reasonable and necessary to secure for
Smithway the benefits of employing Shareholders and
obtaining for the stockholders of SMXC the benefits
of this Agreement. However, if a court of competent
jurisdiction determines that such restrictions are
unreasonable, the restrictions shall be reduced by
the court to a reasonable level and enforced in
accordance therewith pursuant to Section 8.13 hereof.
B. The existence of any claim or cause of action by
Shareholders against SMXC, whether predicated on this
Agreement or otherwise, shall not constitute a
defense to the enforcement by Smithway of this
covenant. It is expressly agreed that the remedy at
law for the breach of any such covenant is inadequate
and injunctive relief shall be available to prevent
the breach or any threatened breach thereof.
5.6 Volvos. Seller shall not sign or agree to any financing on
the ten (10) 1996 Volvo tractors scheduled for delivery in
September without Smithway's consent.
5.7 Insurance. Effective as of the date of Closing, and for a
period of three years thereafter, Smithway agrees to cause
Seller and the Shareholders to be named as additional insureds
as to acts of Smithway after Closing under Smithway's primary
and umbrella public liability policies. Smithway agrees to
provide Seller with proof of coverage, from time to time, as
reasonably requested by Seller.
5.8 Driver Recruiting. Subject to Smithway's overall management
and control, Xxxxx Xxxxxxxxx shall be afforded reasonable
support and funding for recruiting and retaining Drivers after
the Closing.
20
ARTICLE 6
Conditions to Closing
6.1 Conditions Precedent for all Parties. The respective
obligations of each party to effect this Agreement shall be
subject to the fulfillment of all of the following conditions
precedent at or prior to Closing:
A. Representations and Warranties True as of Closing.
The representations and warranties of each party
hereto contained in this Agreement or in any list,
certificate, or document delivered by such party to
the other pursuant to the provisions hereof shall be
true in all material respects at and as of the
Closing with the same effect as though such
representations and warranties were made as of such
date.
B. Compliance with this Agreement. Each party hereto
shall have performed and complied in all material
respects with all agreements, covenants, and
conditions required to be performed or complied with
by such party under this Agreement.
C. Closing Certificates. Each corporate party hereto
shall have received a certificate from the other,
dated as of the Closing Date, and signed on behalf of
each by its president, and Smithway shall have
received the certificate of Shareholders, each
certifying in such detail as the other party may
reasonably request that the conditions specified in
this Article 6 have been fulfilled.
D. Opinion of Counsel. Counsel for each party shall
have delivered to the other party its written
opinion, dated as of the Closing Date, substantially
in the form of Exhibits H-1 and H-2, respectively.
E. No Bar to Consummation of Transaction. There shall
not exist any injunction or decree by any federal,
state, or provincial court which prevents the
consummation of this Agreement and there shall have
not been enacted any statute or regulation which
would prevent the consummation of this Agreement. All
governmental consents and approvals required for this
Agreement shall have been obtained.
F. Leases. The parties shall have executed the Lease
and received consents to assignment of the Lease on
the California Property as well as the agreement of
subtenants at the California Property to continue
subleasing portions of such property from Smithway
on terms comparable to those currently in place.
21
6.2 Conditions Precedent to the Obligation of Smithway. In
addition to the requirements of Section 6.1, the obligations
of Smithway under this Agreement are subject to the
fulfillment of all of the following conditions precedent at or
prior to Closing:
A. Adverse Changes. There shall not have been any
materially adverse changes in the Business or the
condition of the Transferred Assets. The Transferred
Assets shall not have suffered any destruction or
damage by fire, accident or other casualty or Act of
God, whether or not covered by insurance, which
affects such equipment in a material and adverse way.
B. Due Diligence. Smithway shall have completed its due
diligence investigation of Seller, and the various
information provided by Seller, and shall have
determined that there is no material violation of any
of Seller's or the Shareholders' representations and
warranties contained herein, that there exists no
previously undisclosed condition with respect to the
Business that is materially adverse. This
investigation shall include specifically the
agreement of major customers of Seller to use
Smithway after the Closing at least to the extent
such customers used Seller; provided, that Smithway's
service is acceptable. The parties acknowledge that
the Schedules to this Agreement were delivered
without adequate time for Smithway to investigate and
understand the full nature of the items being
disclosed. Accordingly, the disclosures thereon
shall not be considered "previously disclosed"
conditions, and Smithway shall be entitled to its
full due diligence investigation and right to
terminate this Agreement without liability if any
item (or the aggregate of such items) on the
Schedules indicates a materially adverse condition
with respect to the Business.
C. Seller shall have obtained and filed releases of all
Liens on the Leased Tractors, Leased Trailers, and
Transferred Assets except the Liens imposed by the
Assigned Leases and Assignment Equipment Financing.
Notwithstanding disclosure of a Lien on any Schedule
to this Agreement, in any public record, or
otherwise, at Closing, Seller shall convey, by
appropriate documents, good and valid title to the
Leased Tractors, Leased Trailers, and Transferred
Assets, in each instance free and clear of all Liens
except the Liens imposed by the Assigned Leases and
Assigned Equipment Financing.
22
ARTICLE 7
Indemnification
7.1 Indemnification by Seller and Shareholders. Seller and the
Shareholders, jointly and severally, shall indemnify, defend,
and hold harmless Smithway, SMXC, and their officers,
directors, shareholders, employees, agents, and
representatives from and against any and all claims, causes of
action, suits, judgments, taxes, losses, damages,
deficiencies, obligations, costs, and expenses (including,
without limitation, interest, penalties, reasonable attorneys'
fees, and costs) arising out of or otherwise in respect of:
(i) any misrepresentation, inaccuracy in, or breach of any
representation, warranty, covenant, or agreement of Seller or
Shareholders contained in this Agreement or any Exhibit, or
other document or agreement executed in connection herewith;
(ii) any third-party claims relating to the Business or the
Transferred Assets that are not expressly assumed by Smithway
under this Agreement and that do not arise from actions of
Smithway after Closing; and (iii) any third-party claims not
relating to the Transferred Assets or the Business that arise
from actions of Seller or Shareholders, regardless of whether
such actions are before or after Closing.
7.2 Indemnification by Smithway. Smithway shall indemnify, defend,
and hold harmless Seller and Shareholders and their officers,
directors, employees, agents, and representatives from and
against any and all claims, causes of action, suits,
judgments, taxes, losses, damages, deficiencies, obligations,
costs, and expenses (including, without limitation, interest,
penalties, reasonable attorneys' fees, and costs) arising out
of or otherwise in respect of: (i) any misrepresentation,
inaccuracy in, or breach of any representation, warranty,
covenant, or agreement of Smithway contained in this
Agreement; (ii) any transaction or claim relating to the
operation of Smithway, the Leased Tractors, the Leased
Trailers or the Transferred Assets, the factual basis of which
transaction or claim arose subsequent to the Closing
(including but not limited to Smithway's use of the
Nonacquired Trucks, Leased Tractors, Leased Trailers,
Tractors, and Trailers); and (iii) liabilities under the
Assumed Tractor Leases and Assumed Equipment Financing.
7.3 Indemnification Procedures. A party seeking indemnification
under Section 7.1 or 7.2 (the "Indemnified Party") agrees to
give prompt written notice to the party against whom
indemnification is sought (the "Indemnifying Party") of the
assertion of any claim or commencement of any Proceeding in
respect of which indemnification may be sought. The
Indemnifying Party may, at its expense, assume the defense of
any claim or Proceeding in respect of which indemnification is
sought hereunder, and take all steps to settle or defeat any
such claims, and to employ counsel to contest any such claims;
provided, however, that the Indemnifying Party shall
reasonably consider the advice of the Indemnified Party as to
the defense of such claims. The Indemnified Party shall have
the right to participate at its own expense in such defense,
but the control of such litigation or settlement shall remain
with the Indemnifying Party. The Indemnified Party shall
provide all reasonable cooperation in connection with any such
defense. If a party from whom indemnification is sought elects
not to undertake the defense thereof or does not do
23
so in a timely fashion, the Indemnified Party shall be
entitled to control the defense or settlement of such claim or
Proceeding and shall be entitled to indemnity with respect
thereto.
7.4 Maximum Liability. The maximum liability of the Shareholders
for indemnification shall be $600,000 in total (and not
$600,000 for each Shareholder). Further, the Shareholders'
obligations under the indemnification section shall terminate
on that date which is three years after the date of Closing
with the exception of liabilities respecting Taxes and
environmental issues. With respect to Taxes, the obligations
of Shareholders under the indemnification shall terminate on
that date which is six months following the last date on which
a claim may be made under applicable statutes of limitations.
With respect to environmental issues, the obligations of the
Shareholders under the indemnification shall terminate on that
date which is six years following the date of Closing.
7.5 Guarantees. Smithway Motor Xpress Corp, a Nevada corporation,
hereby guarantees all liabilities of Smithway owing to Seller
or Shareholders and arising under this Agreement to the same
extent indemnification would be due and owing from Smithway.
ARTICLE 8
Miscellaneous
8.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement (and all other agreements
contemplated hereby) may be terminated by any party by written
notice of termination to the other parties before the Closing
(a) at any time if the representations and warranties made to
such party were materially incorrect when made and have not
been cured by the Closing, (b) any condition precedent to the
terminating party's obligations hereunder has not been
satisfied or waived prior to the Closing, or (c) any court of
competent jurisdiction in the United States or any state shall
have issued an order, judgment, or decree (other than a
temporary restraining order) restraining, enjoining, or
otherwise prohibiting the transaction contemplated hereby and
such order, judgment, or decree shall have become final and
non-appealable. This Agreement may also be terminated by
mutual consent of all parties hereto. In the event of
termination of this Agreement as provided above, this
Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto; provided that a
party then in breach shall be liable for such breach.
8.2 Costs and Expenses; Brokers' Fees. Each party to this
Agreement shall bear its own expenses incurred in connection
with the negotiation and execution of this Agreement and the
Closing. Smithway shall pay the brokerage fee owed to Xxxxx &
Associates, Ltd. Any party through which a broker or finder
claims any fee, commission, or payment resulting from or
arising out of the negotiation or execution of this Agreement
or the consummation of the transactions contemplated
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hereby agrees to indemnify, defend, and hold the other
harmless from and against any claim.
8.3 Survival of Representations, Warranties, Covenants, and
Agreements. The covenants, agreements, representations, and
warranties of the parties hereto contained in this Agreement
or in any certificate or other writing delivered pursuant
hereto or in connection herewith shall survive and be
enforceable following the Closing for a period of three years.
The foregoing notwithstanding, all covenants, agreements,
representations, and warranties respecting Taxes shall survive
until the date six months following the last date on which a
claim may be made under applicable statutes of limitation and
all covenants, agreements, representations, and warranties
respecting environmental issues shall survive until six years
following the date of Closing.
8.4 Complete Agreement, etc. All exhibits and schedules referred
to herein are intended to be and hereby are specifically made
a part of this Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or
modified except by written instrument duly executed by each of
the parties hereto. Any and all previous agreements and
understandings between or among the parties regarding the
subject matter hereof, whether written or oral, are superseded
by this Agreement.
8.5 Assignment and Binding Effect. This Agreement may not be
assigned prior to the Closing by any party hereto without the
prior written consent of the other parties; provided, that
Smithway may assign its rights to another subsidiary of SMXC
if it guaranties performance of all of its obligations
hereunder. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure
to the benefit of and be enforceable by the successors and
assigns of any party.
8.6 Waiver. Any term or provision of this Agreement may be waived
at any time by a written instrument duly executed by the party
entitled to the benefit thereof.
8.7 Attorneys' Fees. Should any party hereto breach any term of
this Agreement, the defaulting party shall pay to the
non-defaulting party all reasonable attorneys' fees and other
costs and fees incurred by the non-defaulting party in
enforcing this Agreement, and such amounts shall be included
in any judgment obtained in enforcing this Agreement.
8.8 Time. Time is of the essence in connection with this Agreement
and each and every provision hereof. Any extension of time
granted for the performance of any duty under this Agreement
shall not be considered an extension of time for the
performance of any other duty under this Agreement.
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8.9 Notices. Any notice, request, demand, waiver, consent,
approval, or other communication required or permitted
hereunder shall be in writing and deemed given only if
delivered personally or sent by telecopier or certified mail,
postage prepaid, as follows:
If to Smithway: With a required copy to:
Xx. Xxxxxxx X. Xxxxx, President Xxxx X. Xxxxxxx, Esq.
Smithway Motor Xpress, Inc. Xxxxxxx Law Firm, P.C.
Xxxxx Xxxxx #0 000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxx 00000 Xxxxxxx, Xxxxxxxx 00000
If to Shareholders or Seller: With a required copy to:
Xx. Xxxxx Xxxxxxxxx Xxxxxxxx X. Xxxxx, Esq.
X.X. Xxx 0000 Xxxxxxxxx, Xxxxx, Xxxxxxx & Xxxxx, L.L.P.
Xxxxxxx, Xxxxx Xxxxxx 00000 000 Xxxxx Xxxx Xxxxxx
P.O. Box 1030
Sioux Falls, South Dakota 57101-1030
or to such other address as the addressee may have specified
in a notice duly given to the sender as provided herein. Such
notice, request, demand, waiver, consent, approval, or other
communication shall be deemed to have been given as of the
date so personally delivered, deposited in the mail, or
telecopied.
8.10 Cooperation. Subject to the terms and conditions herein
provided, the parties hereto shall use their best efforts to
take, or cause to be taken, such action, to execute and
deliver, or cause to be executed and delivered, such
additional documents and instruments and to do, or cause to be
done, all things necessary, proper, or advisable under the
provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by
this Agreement.
8.11 Governing Law. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the
State of South Dakota.
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8.12 Headings, Gender, and Person. All section headings contained
in this Agreement are for convenience and reference only, do
not form a part of this Agreement and shall not affect in any
way the meaning or interpretation of this Agreement. Words
used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine,
feminine, or neuter, as the context requires. Any reference to
a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority, or
any other entity.
8.13 Severability. Any provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall be ineffective to
the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability
in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.14 No Third Party Beneficiary Rights. This Agreement is not
intended to and shall not be construed to give any person or
entity other than the parties signatory hereto any interest or
rights (including, without limitation, any third party
beneficiary rights) with respect to or in connection with any
agreement or provision contained herein or contemplated
hereby.
8.15 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such
counterpart, each of which when executed and delivered shall
be deemed to be an original and all of which counterparts
taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or
more counterparts taken together shall have been executed and
delivered by the parties. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
8.16 Approval of Exhibits and Schedules. The respective obligations
of each party is conditioned on all parties approving the
exhibits and schedules, despite such approval, if any,
occurring after signature of this agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
XXXXXXXXX TRANSPORTATION, INC., SMITHWAY MOTOR XPRESS, INC.,
a South Dakota corporation an Iowa corporation
By:------------------------------- By:------------------------------
Xxxxx Xxxxxxxxx, President Xxxxxxx X. Xxxxx, President
With respect to Sections 4.3, 5.1, 5.5,
6.1, and 7.1 only,
------------------------------ With respect to Section 7.5 only,
Xxxxx Xxxxxxxxx, Individually SMITHWAY MOTOR XPRESS CORP.,
a Nevada corporation
------------------------------
Xxxxxxx Xxxxxxxxx, Individually By:------------------------------
Xxxxxxx X. Xxxxx, President
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