EXHIBIT 10.30
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
PACER INTERNATIONAL, INC.,
GTS TRANSPORTATION SERVICES, INC.
AND
ALL OF THE SHAREHOLDERS OF
GTS TRANSPORTATION SERVICES, INC.
Dated as of August 31, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF SHARES.................................................................. 1
1.1 Transfer of Shares........................................................................... 1
1.2 Purchase Price............................................................................... 1
1.3 Payment at Closing........................................................................... 2
1.4 Delivery of Shares........................................................................... 2
1.5 Affiliate-Owned Assets....................................................................... 2
1.6 Earn Out..................................................................................... 2
1.7 Further Assurances........................................................................... 4
ARTICLE II THE CLOSING................................................................................. 4
ARTICLE III WORKING CAPITAL ADJUSTMENTS................................................................ 4
3.1 Initial Working Capital Adjustment........................................................... 4
3.2 Delivery of the Closing Balance Sheet........................................................ 5
3.3 Review and Final Determination of Closing Net Working Capital................................ 6
3.4 Adjustment of Closing Payment; Payments...................................................... 7
3.5 Accounts Receivable Adjustment............................................................... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.......................................... 9
4.1 Title to the Shares.......................................................................... 9
4.2 Organization and Power....................................................................... 9
4.3 Authority; Authorization, Execution and Delivery; Enforceability; No Conflict................ 9
4.4 Consents..................................................................................... 10
4.5 Brokers...................................................................................... 10
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP........................................... 11
5.1 Organization, Power, Authority and Good Standing............................................. 11
5.2 Authority; Authorization, Execution and Delivery; Enforceability; No Conflict................ 11
5.3 Consents..................................................................................... 12
5.4 Capitalization............................................................................... 12
5.5 Subsidiaries; Investments.................................................................... 13
5.6 Financial Information........................................................................ 13
5.7 Absence of Undisclosed Liabilities........................................................... 14
5.8 Absence of Changes........................................................................... 14
5.9 Tax Matters.................................................................................. 15
5.10 Title to Assets, Properties and Rights and Related Matters................................... 17
5.11 Real Property - Owned or Leased.............................................................. 17
5.12 Intellectual Property........................................................................ 18
5.13 Agreements, No Defaults, Etc................................................................. 19
5.14 Litigation, Etc.............................................................................. 21
5.15 Compliance with Laws......................................................................... 21
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5.16 Insurance.................................................................................... 22
5.17 Labor Relations; Employees.................................................................. 22
5.18 ERISA Compliance............................................................................. 24
5.19 Environmental Matters........................................................................ 26
5.20 Brokers...................................................................................... 27
5.21 Related Party Transactions................................................................... 27
5.22 Accounts and Notes Receivable................................................................ 28
5.23 Bank Accounts; Powers of Attorney............................................................ 28
5.24 Suppliers and Vendors........................................................................ 28
5.25 Customers.................................................................................... 29
5.26 Conflicts of Interest........................................................................ 29
5.27 Year 2000.................................................................................... 29
5.28 Disclosure................................................................................... 29
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................. 29
6.1 Organization; Corporate Authority............................................................ 30
6.2 Authority; Authorization; Execution and Delivery; Enforceability; No Conflict................ 30
6.3 Consents..................................................................................... 30
6.4 Brokers...................................................................................... 31
ARTICLE VII COVENANTS AND AGREEMENTS................................................................... 31
7.1 Non-competition Covenant..................................................................... 31
7.2 Disclosure of Information.................................................................... 32
7.3 Use of Proprietary Name...................................................................... 34
7.4 Certain Employee Matters..................................................................... 34
7.5 Reservation of Purchaser's Shares............................................................ 34
ARTICLE VIII CLOSING OBLIGATIONS....................................................................... 35
8.1 Closing Obligations of the Seller Group...................................................... 35
8.2 Closing Obligations of the Purchaser......................................................... 36
ARTICLE IX INDEMNIFICATION............................................................................. 37
9.1 Generally.................................................................................... 37
9.2 Assertion of Claims.......................................................................... 38
9.3 Notice and Defense of Third Party Claims..................................................... 38
9.4 Survival of Representations and Warranties................................................... 39
9.5 Limitations on Indemnification............................................................... 40
9.6 Satisfaction of Indemnification Obligations.................................................. 41
9.7 Recourse Against Options and Shares.......................................................... 41
ARTICLE X MISCELLANEOUS PROVISIONS..................................................................... 42
10.1 Amendment.................................................................................... 42
10.2 Entire Agreement............................................................................. 42
10.3 Severability................................................................................. 42
10.4 Benefits of Agreement........................................................................ 42
10.5 Expenses; Sales and Transfer Taxes........................................................... 43
10.6 Remedies..................................................................................... 43
10.7 Notices...................................................................................... 43
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10.8 Counterparts and Facsimile Execution......................................................... 45
10.9 Governing Law............................................................................... 45
10.10 Jurisdiction and Venue....................................................................... 45
10.11 Mutual Contribution.......................................................................... 46
10.12 No Third Party Beneficiaries................................................................. 46
10.13 Independence of Covenants and Representations and Warranties................................. 46
10.14 Interpretation; Construction................................................................. 47
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ANNEXES, SCHEDULES AND EXHIBITS
Annexes
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Annex I Shareholders
Annex II Certain Definitions
Annex III Company EBIT Amount
Schedules
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Schedule 1.3 - Shareholder Percentages for Allocation of Purchase Price
Schedule 4.4 - Shareholder Consents
Schedule 5.1 - Foreign Qualifications for the Company
Schedule 5.3 - Company Consents
Schedule 5.4(a) - Capitalization of the Company
Schedule 5.4(b) - Options, Warrants, Voting Agreements, etc.
Schedule 5.5 - Subsidiaries and Investments
Schedule 5.6(a) - Financial Statements
Schedule 5.6(c) - Accounts Payable and Accounts Receivable
Schedule 5.7 - Undisclosed Liabilities
Schedule 5.8 - Absence of Changes
Schedule 5.9(a) - Tax Matters
Schedule 5.9(c) - Taxing Authority Notifications
Schedule 5.10(a) - Encumbrances
Schedule 5.10(b) - Tangible Personal Property
Schedule 5.11(a) - Real Property
Schedule 5.11(b) - Real Property Proceedings, Notices and Exceptions
Schedule 5.12(a) - Intellectual Property Rights
Schedule 5.12(b) - Actions to Protect Intellectual Property Rights
Schedule 5.13(a) - Material Contracts
Schedule 5.13(d) - Funded Indebtedness
Schedule 5.14(a) - Litigation, Etc.
Schedule 5.14(b) - Resolved Litigation
Schedule 5.15 - Compliance with Laws
Schedule 5.16(a) - Insurance Policies
Schedule 5.16(b) - Insurance Claims, Etc.
Schedule 5.17(a) - Directors, Officers and Key Employees
Schedule 5.17(b) - Number of Employees, Independent Contractors, etc.
Schedule 5.17(c) - Labor Relations
Schedule 5.17(e) - Labor Proceedings
Schedule 5.17(f) - Joint Employer Matters
Schedule 5.17(g) - Independent Contractor Agreements
Schedule 5.18(a) - Employee Benefit Plans
Schedule 5.18(b) - ERISA Compliance
Schedule 5.19(a) - Environmental Laws - Violations
Schedule 5.19(b) - Environmental Compliance - Previously Owned Properties
Schedule 5.21 - Related Party Transactions
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Schedule 5.22 - Accounts and Notes Receivable
Schedule 5.23 - Bank Accounts; Powers of Attorney
Schedule 5.24 - Suppliers and Vendors
Schedule 5.25 - Customers
Schedule 6.1 - Foreign Qualifications for the Purchaser
Schedule 6.3 - Purchaser Consents
Exhibits
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Exhibit A - Form of Opinion of the Seller Group's Counsel
Exhibit B - Form of Agreement and General Release
Exhibit C - Form of Employment Agreement with Xxxx Xxxxx
Exhibit D - Form of Option Agreement for Xxxx Xxxxx
Exhibit E - Form of Employment Agreement with Xxxxxxx Xxxxx
Exhibit F - Form of Option Agreement for Xxxxxxx Xxxxx
Exhibit G - Form of Spousal Consent
Exhibit H - Form of Opinion of the Purchaser's Counsel
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INDEX OF DEFINED TERMS
The following capitalized terms, which may be used in more than one
Section or other location of this Agreement, are defined in the following
Sections or other locations:
Section or
Term other Location
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Acquisition Proposal Annex II
Affiliate Annex II
Affiliate-Owned Assets 1.5
Aggregate Consideration Annex II
Agreement 10.14
Annual Balance Sheet 5.6(a)(i)
Annual Balance Sheet Date 5.6(a)(i)
Annual Financial Statements 5.6(a)(i)
Arbitrating Accountants Annex II
Best Knowledge 10.14
BCI Annex II
Business Preamble
Business Day Annex II
Capital Lease Annex II
Charter Documents Annex II
Closing Article II
Closing Balance Sheet 3.2
Closing Balance Sheet Adjustments 3.2
Closing Date Article II
Closing Net Working Capital 3.2
Closing Net Working Capital Statement 3.2
Closing Payment 1.3
COBRA 5.18(b)(viii)
Code 5.9(a)
Commission Annex II
Company Caption
Company Employee Plans 5.18(a)
Competing Business 7.1(b)
Confidential Information 7.2(a)
Contract Annex II
Control Annex II
Covered Properties 5.19(b)
Disputed Accounts Receivable 3.5
Earn Out Amount 1.6(c)
Earn Out Financial Statements 1.6(a)
Earn Out Period Annex II
EBIT Certificate 1.6(a)
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Section or
Term other Location
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EBIT Final Determination Date 1.6(b)
EBIT Notice of Disagreement 1.6(b)
Employee Benefit Plan Annex II
Encumbrances Annex II
Environmental, Health and Safety Laws Annex II
ERISA Annex II
ERISA Affiliate Annex II
Excluded Seller Representations 9.5(a)
Financial Statements 5.6(a)(iii)
Funded Indebtedness Annex II
GAAP Annex II
General Release 8.1(c)(i)
Governmental Entity Annex II
Guaranty Annex II
HIPAA 5.18(b)(viii)
Hired Employees 7.4
Income Taxes Annex II
Indemnified Persons Annex II
Indemnifying Persons Annex II
Initial Adjustment 3.1(b)
Initial Adjustment Amount 3.1(b)
Initial Payment 1.2
Intellectual Property Rights Annex II
Interim Balance Sheets 5.6(a)(ii)
Interim Financial Statements 5.6(a)(ii)
Latest Balance Sheet 5.6(a)(iii)
Latest Balance Sheet Date 5.6(a)(iii)
Latest Financial Statements 5.6(a)(iii)
Law Annex II
Leased Property 5.11(a)
Liability Annex II
Licensed Requisite Rights 5.12(a)(i)
Litigation Expense Annex II
Losses Annex II
Management Shareholders Annex II
Material Adverse Change 5.8(i)
Material Contracts 5.13(b)
Maximum Earn Out Amount 1.6(c)
Minimum Target EBIT Amount 1.6(c)
Xxxxx Employment Agreement 8.1(c)(iv)
Xxxxx Option Agreement 8.1(c)(v)
Options Annex II
Orders Annex II
Overpayment Amount 3.4(a)(i)
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Section or
Term other Location
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Owned Requisite Rights 5.12(a)(i)
Permits Annex II
Permitted Encumbrances Annex II
Person Annex II
Plan 7.5
Pre-Closing Balance Sheet 3.1(a)
Pre-Closing Net Working Capital 3.1(a)
Proceeding Annex II
Purchase Price 1.2
Purchaser Caption
Purchaser Indemnified Persons Annex II
Purchaser Indemnifying Persons Annex II
Purchaser Losses Annex II
Purchaser's Accountants Annex II
Purchaser's Notice of Adjustment 3.2
Related Documents 8.1(c)
Representatives 7.2(a)
Requisite Rights 5.12(a)(i)
Restrictive Period 7.1(a)
Xxxxx Employment Agreement 8.1(c)(ii)
Xxxxx Option Agreement 8.1(c)(iii)
Securities Annex II
Securities Act Annex II
Seller Group Caption
Seller Indemnified Persons Annex II
Seller Indemnifying Persons Annex II
Seller Losses Annex II
Shares Preamble
Stock Preamble
Shareholders Caption
Shareholders' Representative Annex II
Survival Date 9.4(a)
Target Net Working Capital Amount Annex II
Tax Return Annex II
Taxes Annex II
Third Party 5.17(f)
Third Party Claim 9.3
Underpayment Amount 3.4(a)(i)
Working Capital Holdback Amount Annex II
Working Capital Final Determination Date 3.3
Working Capital Notice of Disagreement 3.3
Working Capital Shortfall Amount 3.4(b)(i)
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EXECUTION COPY
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of August 31, 2000, is by and among
PACER INTERNATIONAL, INC., a Tennessee corporation (the "Purchaser"), GTS
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TRANSPORTATION SERVICES, INC., a California corporation (the "Company"), and
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those shareholders of the Company listed on Annex I attached to this Agreement
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(collectively, the "Shareholders"; and the Shareholders and the Company are
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collectively referred to as the "Seller Group"). Certain capitalized terms used
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in this Agreement are defined on Annex II attached to this Agreement.
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PREAMBLE
The Company is engaged in the business (collectively, the "Business")
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of providing intermodal (trucks and rail) transportation services to third party
shippers/customers in the food and beverage industry.
The Shareholders represent all of the Company's shareholders, with the
Shareholders owning all of the outstanding shares of the common stock of the
Company (the "Stock"). The shares of Stock owned by the Shareholders are
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collectively referred to as the "Shares." The Shareholders desire to sell to
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the Purchaser, and the Purchaser desires to purchase from the Shareholders, all
of the Shares, on the terms and subject to the conditions contained in this
Agreement.
ACCORDINGLY, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Transfer of Shares.
On the terms and subject to the conditions contained in this Agreement, at
the Closing, the Shareholders shall sell, transfer, convey and assign to the
Purchaser, and the Purchaser shall purchase and acquire from the Shareholders,
all of the Shares, free and clear of all Encumbrances.
1.2 Purchase Price.
The aggregate purchase price (the "Purchase Price") to be paid by the
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Purchaser to the Shareholders for the Shares shall consist of: (i) a cash
payment equal to $15,691,750 less the amount of the Funded Indebtedness set
forth on the certificate to be delivered at the Closing pursuant to Section
8.1(d)(iii) (the "Initial Payment"), subject to adjustment, if at all, pursuant
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to Article III, and (ii) the Earn Out Amount, if any, as finally determined in
accordance with Section 1.6. The Initial Payment shall be paid in accordance
with Section 1.3.
1.3 Payment at Closing.
At the Closing, the Purchaser shall pay or deliver the Initial Payment less
the Initial Adjustment Amount determined pursuant to Section 3.1, if any (the
"Closing Payment"), to the Shareholders. The Closing Payment shall be paid to
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each Shareholder in accordance with the percentages set forth on Schedule 1.3,
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by wire transfer of immediately available funds to the account or accounts
designated to the Purchaser by the Shareholders in writing not later than three
(3) Business Days prior to the Closing Date, against receipt at the Closing of
the certificate or certificates representing all of the Shares pursuant to
Section 1.4.
1.4 Delivery of Shares.
At the Closing, in consideration of the Purchaser's delivery of the Closing
Payment pursuant to Section 1.3, (a) the Shareholders shall deliver to the
Company the certificate or certificates representing the Shares, duly endorsed
for transfer to the Purchaser or accompanied by duly executed stock powers
transferring the Shares to the Purchaser, in each case sufficient in form and
substance to convey to the Purchaser good title to all of the Shares, free and
clear of all Encumbrances, and (b) the Company shall deliver to the Purchaser a
certificate registered in the name of the Purchaser representing the Shares.
1.5 Affiliate-Owned Assets.
To the extent that any asset, property, interest in property or right
relating to, or used or held for use by the Company in the conduct of the
Business is owned by a Shareholder or any of his, her or its Affiliates or by
any other Affiliate of the Company, such asset, property, interest in property
or right shall be deemed to be an "Affiliate-Owned Asset" for purposes of this
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Agreement.
1.6 Earn Out.
(a) As soon as practicable, but in no event later than ninety (90)
days after the last day of the Earn Out Period, the Purchaser shall prepare and
deliver to the Shareholders (i) a statement of income of the Company for the
Earn Out Period (the "Earn Out Financial Statement"), which shall be reviewed by
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the Purchaser's Accountants and accompanied by their report of their review, and
(ii) a certificate from the Chief Financial Officer of the Purchaser (the "EBIT
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Certificate") setting forth in reasonable detail the Purchaser's calculation of
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the Company EBIT Amount (as defined on Annex III). The Earn Out Financial
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Statement shall be prepared in accordance with GAAP applied on a basis
consistent with the Annual Financial Statements (to the extent that GAAP was
applied properly) and the Company EBIT Amount shall be calculated as set forth
on Annex III. The Purchaser and the Shareholders shall use commercially
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reasonable efforts to confer with one another during the preparation of the Earn
Out Financial Statements.
(b) The Shareholders (together with the Shareholders' accountant)
shall be entitled to review and, if applicable, object to the Company EBIT
Amount for a period of thirty (30) days following the Shareholders receipt of
the Earn Out Financial Statement and the EBIT Certificate. The Company EBIT
Amount set forth on the EBIT Certificate shall become final and binding upon the
parties hereto on the thirty-first day following delivery of the Earn Out
Financial Statement and the EBIT Certificate unless the Shareholders give
written notice prior to
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such date to the Purchaser of their disagreement with the Company EBIT Amount
(an "EBIT Notice of Disagreement"). Any EBIT Notice of Disagreement shall
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specify in reasonable detail the nature of any disagreement so asserted. If a
timely EBIT Notice of Disagreement is received by the Purchaser, then the
Company EBIT Amount set forth therein (as revised in accordance with clause (i)
or clause (ii) below) shall become final and binding upon the parties hereto on
the earlier of (i) the date on which the Purchaser and the Shareholders resolve
in writing any differences they have with respect to any and all matters
specified in the EBIT Notice of Disagreement, or (ii) the date on which any and
all matters in dispute are finally resolved in writing by the Arbitrating
Accountants. The date on which the Company EBIT Amount becomes final and binding
pursuant to this Section 1.6 is called the "EBIT Final Determination Date".
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During the thirty (30) days immediately following the delivery of any EBIT
Notice of Disagreement, the Purchaser and the Shareholders shall seek in good
faith to resolve in writing all differences that they may have with respect to
the matters specified in such EBIT Notice of Disagreement. At the end of such
thirty (30) day period, the Purchaser and the Shareholders shall submit to the
Arbitrating Accountants for review and resolution any and all matters that
remain in dispute and that were included in any EBIT Notice of Disagreement, as
well as its calculation of the Company EBIT Amount, revised as such party deems
necessary or appropriate at the time of such submission. The Arbitrating
Accountants shall be required to reach a final, binding resolution of all
matters that remain in dispute and provide its own calculation of the Company
EBIT Amount, whereupon that calculation of the Company EBIT Amount submitted to
the Arbitrating Accountants by either the Purchaser or the Shareholders that is
closest to the Arbitrating Accountant's calculation thereof shall be the final
calculation of the Company EBIT Amount. The Arbitrating Accountant's resolution
of such dispute and calculation of the Company EBIT Amount shall be (a) in
writing, (b) furnished to the Purchaser and the Shareholders as soon as
practicable after the items in dispute have been referred to the Arbitrating
Accountants, (c) made in accordance with this Agreement, and (d) conclusive and
binding upon the parties to this Agreement. The Company EBIT Amount, as
determined by the Arbitrating Accountants, shall become final and binding on the
parties hereto on the date the Arbitrating Accountants deliver their final
resolution to the Purchaser and the Shareholders. The parties hereto shall
endeavor in good faith to cause the Arbitrating Accountants to so deliver their
final determination within one hundred and eighty (180) days after the date of
receipt by the Shareholders of the Earn Out Financial Statements and the EBIT
Certificate. Each party hereto shall pay his, her or its own fees, costs and
expenses incurred in connection with the discussion and negotiation of any and
all disputes that may arise as to the determination of the Company EBIT Amount;
provided, however, that the fees and disbursements of the Arbitrating
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Accountants shall be borne one hundred percent (100%) by the party whose
determination of the Company EBIT Amount was not closest to the Company EBIT
Amount as determined by the Arbitrating Accountants.
(c) If the Company EBIT Amount as finally determined pursuant to
Section 1.6(b) exceeds $3,171,875 (the "Minimum Target EBIT Amount"), then the
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Purchaser shall pay to the Shareholders in accordance with the last sentence of
this Section 1.6(c) an amount (the "Earn Out Amount") equal to the product
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arrived at by multiplying $2,231,250 (the "Maximum Earn Out Amount") by an
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amount equal to the quotient arrived at by dividing (A) an amount equal to the
difference arrived at by subtracting the Minimum Target EBIT Amount from the
Company EBIT Amount, by (B) an amount equal to the difference arrived at by
subtracting the Minimum Target EBIT Amount from $3,625,000.00 (provided,
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however, that in no event shall
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the Earn Out Amount exceed the Maximum Earn Out Amount). If the Company EBIT
Amount as finally determined pursuant to Section 1.6(b) is less than or equal to
the Minimum EBIT Target Amount, then the Earn Out Amount shall be deemed to be
zero and neither the Purchaser nor the Shareholders shall have any payment
obligation to the other under this Section 1.6. Any payment pursuant to this
Section 1.6 shall be deemed to be an increase in the amount of the Purchase
Price and shall be made to the Shareholders in accordance with the percentages
set forth on Schedule 1.3, as soon as practicable following the EBIT Final
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Determination Date, by the Purchaser's wire transfer of immediately available
funds to the account or accounts designated to the Purchaser by the Shareholders
in writing not later than three (3) Business Days following the EBIT Final
Determination Date.
1.7 Further Assurances.
The Shareholders shall, at any time after the Closing, upon the request of
the Purchaser, do, execute, acknowledge and deliver, and cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and other assurances as may be
required to transfer, convey, grant and confirm to and vest in the Purchaser
good title to (i) the Shares and (ii) the Affiliate-Owned Assets, in each case
free and clear of all Encumbrances.
ARTICLE II
THE CLOSING
On the terms and subject to the conditions contained in this Agreement, the
closing (the "Closing") of the transactions contemplated by this Agreement shall
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take place at the offices of Holland & Knight LLP, counsel for the Purchaser, at
the address set forth in Section 10.7, on the date hereof. The date on which
the Closing occurs shall be referred to as the "Closing Date."
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ARTICLE III
WORKING CAPITAL ADJUSTMENTS
3.1 Initial Working Capital Adjustment.
(a) Prior to the Closing Date, the Company prepared and delivered to
the Purchaser a balance sheet (the "Pre-Closing Balance Sheet") of the Company
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reflecting the financial position of the Company as of the close of business on
the last day of the last month preceding the Closing Date, a statement setting
forth the Company's computation of the Pre-Closing Net Working Capital, as
adjusted to take into account the Closing Balance Sheet Adjustments (as defined
in Section 3.2), as of the close of business on the last day of the last month
preceding the Closing Date, and a notice setting forth its proposed adjustment,
if any, of the Initial Payment as contemplated hereby. The Pre-Closing Balance
Sheet was prepared in accordance with GAAP applied on a basis consistent with
the Annual Balance Sheet (to the extent that GAAP was applied properly), as
adjusted to take into account the Closing Balance Sheet Adjustments, and was
certified by the Company's Chief Executive Officer or Chief Financial Officer.
As used in this Agreement, the "Pre-Closing Net Working Capital" shall be
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determined in accordance with this Section 3.1 and shall mean the total current
assets minus the total current liabilities of the Company as reflected on the
Pre-Closing Balance Sheet.
(b) If the Pre-Closing Net Working Capital is less than the Target
Net Working Capital Amount (the amount of such deficit being referred to herein
as the "Initial Adjustment Amount"), then the Initial Payment shall be reduced
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(the "Initial Adjustment"), and the Purchase Price shall be deemed to be
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decreased, by an amount equal to the Initial Adjustment Amount. If the Pre-
Closing Net Working Capital is equal to or greater than the Target Net Working
Capital Amount, then the Initial Payment shall not be reduced and the Purchase
Price shall not be decreased.
3.2 Delivery of the Closing Balance Sheet.
As soon as practicable following the Closing Date, but in no event later
than 90 days after the Closing Date, the Purchaser shall prepare and deliver to
the Shareholders a balance sheet (the "Closing Balance Sheet") of the Company
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reflecting the financial position of the Company as of the close of business on
the Closing Date, a statement (the "Closing Net Working Capital Statement")
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setting forth the Purchaser's computation of the Closing Net Working Capital as
of the close of business on the Closing Date, and a notice (the "Purchaser's
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Notice of Adjustment") setting forth its proposed adjustment, if any, of the
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Closing Payment as contemplated hereby. The Closing Balance Sheet shall be
prepared in accordance with GAAP applied on a basis consistent with the Annual
Balance Sheet (to the extent that GAAP was applied properly), and shall be
certified by the Purchaser's Chief Executive Officer or Chief Financial Officer;
provided, however, that the Closing Balance Sheet shall contain an accrual for
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(i) any and all fees, costs and expenses incurred by the Company in connection
with transactions contemplated hereby (including the fees, costs and expenses of
the Company's accountants, attorneys and other professional advisers), and (ii)
any and all sales, use, gains and excise Taxes and all registration or transfer
taxes that may be payable in connection with or arising as a result of the
consummation of the transactions contemplated by this Agreement and the Related
Documents, except to the extent that the Shareholders pay or reimburse the
Company for any such fees, costs, expenses and Taxes on or prior to the Closing
Date; provided further, however, that the Closing Balance Sheet shall also
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reflect the following additional adjustments (collectively, the "Closing Balance
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Sheet Adjustments"): (A) an accrual in accordance with GAAP for any and all
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obligations that the Company owes to its employees for or with respect to
vacation, sick leave and personal time accrued through the date of such balance
sheet, (B) an accrual in accordance with GAAP for or with respect to actual or
anticipated employee bonus obligations of the Company with respect to all
periods through the date of such balance sheet, (C) the write-down of $917,000
of the accounts receivable owed to the Company by BCI as of the commencement
date of the BCI bankruptcy case, and (D) the recognition into income (and
resulting write-off) of $1,500,000 of outstanding accounts payable accrued by
the Company that have not yet been billed or invoiced to the Company. The
Purchaser and the Shareholders shall use commercially reasonable efforts to
confer with one another during the preparation of the Closing Balance Sheet. As
used in this Agreement, the "Closing Net Working Capital" shall be determined in
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accordance with this Section 3.1 and shall mean the total current assets minus
the total current liabilities of the Company as reflected on the Closing Balance
Sheet.
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3.3 Review and Final Determination of Closing Net Working Capital.
The Shareholders (together with the Shareholders' accountant) shall be
entitled to review and, if applicable, object to the Purchaser's Notice of
Adjustment for a period of thirty (30) days following receipt of the same. The
Purchaser's Notice of Adjustment shall become final and binding upon the parties
hereto on the thirty-first day following delivery thereof unless the
Shareholders prior to such date give written notice to the Purchaser of their
disagreement therewith (a "Working Capital Notice of Disagreement"). Any
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Working Capital Notice of Disagreement shall specify in reasonable detail the
nature of any disagreement so asserted. If a timely Working Capital Notice of
Disagreement is received by the Purchaser, then the Closing Net Working Capital
set forth therein (as revised in accordance with clause (i) or clause (ii)
below) shall become final and binding upon the parties hereto on the earlier of
(i) the date on which the Purchaser and the Shareholders resolve in writing any
differences they have with respect to any and all matters specified in the
Working Capital Notice of Disagreement, or (ii) the date on which any and all
matters in dispute are finally resolved in writing by the Arbitrating
Accountants. The date on which the Closing Net Working Capital becomes final
and binding pursuant to this Section 3.3 is called the "Working Capital Final
---------------------
Determination Date." During the thirty (30) days immediately following the
------------------
delivery of any Working Capital Notice of Disagreement, the Purchaser and the
Shareholders shall seek in good faith to resolve in writing any differences that
they may have with respect to any matter specified in such Working Capital
Notice of Disagreement. At the end of such thirty (30) day period, the
Purchaser and the Shareholders shall submit to the Arbitrating Accountants for
its review and resolution any and all matters that remain in dispute and that
were included in any Working Capital Notice of Disagreement as well as its
calculation of the Closing Net Working Capital, revised as such party deems
necessary or appropriate at the time of such submission. The Arbitrating
Accountants shall be required to reach a final, binding resolution of the
matters that remain in dispute and provide its own calculation of the Closing
Net Working Capital, whereupon that calculation of the Closing Net Working
Capital submitted to the Arbitrating Accountants by either the Purchaser or the
Shareholders that is closest to the Arbitrating Accountant's calculation thereof
shall be the final calculation of the Closing Net Working Capital. The
Arbitrating Accountant's resolution of such dispute and calculation of the
Closing Net Working Capital shall be (a) in writing, (b) furnished to the
Purchaser and the Shareholders as soon as practicable after the items in dispute
have been referred to the Arbitrating Accountants, (c) made in accordance with
this Agreement, and (d) conclusive and binding upon the parties to this
Agreement. The Closing Net Working Capital, as determined by the Arbitrating
Accountants, shall become final and binding on the parties hereto on the date
the Arbitrating Accountants deliver its final resolution to the Purchaser and
the Shareholders. The parties hereto shall endeavor in good faith to cause the
Arbitrating Accountants to so deliver their final determination within one
hundred and eighty (180) days after the Closing Date. Each party hereto shall
pay his, her or its own fees, costs and expenses incurred in connection with the
discussion and negotiation of any and all disputes that may arise as to the
determination of the Closing Net Working Capital; provided, however, that the
-------- -------
fees and disbursements of the Arbitrating Accountants shall be one hundred
percent (100%) by the party whose determination of the Closing Net Working
Capital was not closest to the Closing Net Working Capital as determined by the
Arbitrating Accountants.
6
3.4 Adjustment of Closing Payment; Payments.
(a) If an Initial Adjustment was made at the Closing, then, as soon
as practicable following the Working Capital Final Determination Date, the
following adjustments and payments, if any, shall be made:
(i) if the Closing Net Working Capital is less than the Pre-
Closing Net Working Capital (the amount of such deficit being referred to
herein as the "Overpayment Amount") then, (A) the Purchaser shall retain
------------------
the Initial Adjustment Amount, (B) within five (5) Business Days following
the Working Capital Final Determination Date, the Shareholders, jointly and
severally, shall pay to the Purchaser, in cash, an amount equal to the
Overpayment Amount, and (C) the Purchase Price shall be deemed to be
decreased by an amount equal to the Overpayment Amount; or
(ii) if the Closing Net Working Capital is equal to the Pre-
Closing Net Working Capital, then (A) the Purchaser shall retain the
Initial Adjustment Amount and (B) no further adjustment to the Purchase
Price shall be made; or
(iii) if the Closing Net Working Capital is greater than the
Pre-Closing Net Working Capital but less than the Target Net Working
Capital Amount, then (A) the Purchaser shall retain the Initial Adjustment
Amount, (B) the Purchaser shall pay to the Shareholders, in accordance with
the percentages set forth on Schedule 1.3, by wire transfer of immediately
------------
available funds to the account or accounts designated to the Purchaser by
the Shareholders in writing not later than five (5) Business Days following
the Working Capital Final Determination Date, an amount equal to the
difference arrived at by subtracting the amount of the Pre-Closing Net
Working Capital from the amount of the Closing Net Working Capital, and (C)
the Purchase Price shall be deemed to be increased by the amount actually
paid to the Shareholders pursuant to clause (B) of this Section
3.4(a)(iii); or
(iv) if the Closing Net Working Capital is equal to or greater
than the Target Net Working Capital, then, subject to Section 3.4(c), (A)
the Purchaser shall pay to the Shareholders, in accordance with the
percentages set forth on Schedule 1.3, at the times set forth in Section
------------
3.4(c), by wire transfer of immediately available funds to the account or
accounts designated to the Purchaser by the Shareholders in writing not
later than five (5) Business Days following the Working Capital Final
Determination Date, an amount equal to the Initial Adjustment Amount plus,
if applicable, the amount (but not more than $1,000,000) by which the
Closing Net Working Capital exceeds the Target Net Working Capital, and (B)
the Purchase Price shall be deemed to be increased by the aggregate amount
actually paid to the Shareholders pursuant to clause (A) of this Section
3.4(a)(iv).
(b) If an Initial Adjustment was not made at the Closing, then as
---
soon as practicable following the Working Capital Final Determination Date, the
following adjustments and payments, if any, shall be made:
(i) if the Closing Net Working Capital is less than the Target
Working Capital Amount (the amount of such deficit being referred to herein
as the "Working
-------
7
Capital Shortfall Amount") then, (A) within five (5) Business Days
------------------------
following the Working Capital Final Determination Date, the Shareholders,
jointly and severally, shall pay to the Purchaser, in cash, an amount equal
to the Working Capital Shortfall Amount, and (B) the Purchase Price shall
be deemed to be decreased by an amount equal to the Working Capital
Shortfall Amount; or
(ii) if the Closing Net Working Capital is equal to or greater
than the Target Working Capital Amount, then, subject to Section 3.4(c),
(A) the Purchaser shall pay to the Shareholders, in accordance with the
percentages set forth on Schedule 1.3, at the times set forth in Section
------------
3.4(c), by wire transfer of immediately available funds to the account or
accounts designated to the Purchaser by the Shareholders in writing not
later than five (5) Business Days following the Working Capital Final
Determination Date, an amount equal to the amount (but not more than
$1,000,000) by which the Closing Net Working Capital exceeds the Target Net
Working Capital, and (B) the Purchase Price shall be deemed to be increased
by the aggregate amount actually paid to the Shareholders pursuant to
clause (A) of this Section 3.4(b)(ii).
(c) The Purchaser's payment obligation, if any, under Section
3.4(a)(iv) or Section 3.4(b)(ii), as the case may be, shall be subject to (i)
the Company collecting in full the accounts receivable of the Company reflected
on the Closing Balance Sheet and (ii) the Company not having incurred as of the
Closing Date or otherwise becoming liable for any additional accounts payable or
accrued expenses or other current liabilities existing as of the Closing Date
and not reflected on the Closing Balance Sheet. Subject to the immediately
preceding sentence, as promptly as practicable after the Company has collected
that portion of the accounts receivable of the Company reflected on the Closing
Balance Sheet that results in the Company having realized net working capital as
of the Closing Date of an amount equal to the Target Net Working Capital Amount,
the Purchaser shall pay to the Shareholders as aforesaid such amounts as are
subsequently collected on the remaining accounts receivable of the Company that
are reflected on the Closing Balance Sheet until such payment obligation of the
Purchaser is paid in full.
3.5 Accounts Receivable Adjustment.
Anything in this Article III to the contrary notwithstanding, if any
accounts receivable owed to the Company that are specifically identified as to
the account debtor and amount owed to the Company on the Company's unaudited
balance sheet as of April 30, 2000, which balance sheet has been delivered to
the Purchaser prior to the date hereof (such accounts receivable being
collectively referred to as the "Disputed Accounts Receivable"), are written
----------------------------
down on the Closing Balance Sheet, then (i) the Purchaser shall use commercially
reasonable efforts for a period of one (1) year from and after the Closing Date
to collect the portion of the Disputed Accounts Receivable that are written down
on the Closing Balance Sheet, and (ii) to the extent that the Purchaser, during
the one (1) year period referred to in clause (i) of this Section 3.5, collects
amounts (whether in the form of cash, securities or other property) from such
account debtor(s) in payment of the Disputed Accounts Receivable, which amounts
in the aggregate exceed the aggregate amount of the Disputed Accounts Receivable
reflected on the Closing Balance Sheet (the amount of such excess being referred
to herein as the "Accounts Receivable Excess"), (A) as soon as practicable after
--------------------------
the receipt of any Accounts Receivable Excess, the Purchaser shall pay to the
Shareholders, in accordance with the percentages set forth on Schedule 1.3, and
------------
in cash, an
8
amount equal to the amount of Accounts Receivable Excess actually received, and
(B) the Purchase Price shall be deemed to be increased by the amount actually
paid to the Shareholders pursuant to clause (A) of this Section 3.5.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby, severally as to himself, herself or itself only
and not jointly with or as to any of the other Shareholders, represents and
warrants to the Purchaser as of the date hereof as follows:
4.1 Title to the Shares.
Such Shareholder (i) is the lawful owner, of record and beneficially, of
the number of Shares set forth opposite his, her or its name on Annex 1, and
-------
(ii) has good and marketable title to such Shares, free and clear of any and all
Encumbrances whatsoever and with no restriction on the voting rights and other
incidents of record and beneficial ownership pertaining thereto. Such
Shareholder is not the subject of any bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar Proceeding affecting
creditors' rights and remedies generally. Except for this Agreement, there are
no Contracts or other understandings or arrangements between such Shareholder
and any other Person (including any of the other Shareholders or the Company)
with respect to the acquisition, disposition, transfer, registration or voting
of, or any other matters in any way pertaining or relating to, any of the
capital stock or other securities of the Company (including the Shares owned by
such Shareholder). Such Shareholder does not have any right whatsoever to
receive or acquire any additional shares of capital stock or other securities of
the Company.
4.2 Organization and Power.
If applicable, such Shareholder is a corporation, limited liability
company, partnership or trust duly organized or formed, validly existing, and in
good standing under the Laws of the jurisdiction of its incorporation or
formation and has all requisite power and authority (corporate, partnership or
otherwise) to own, lease and operate its assets and properties and to carry on
its business as presently conducted. If applicable, the Purchaser has been
furnished with true, correct and complete copies of the such Shareholder's
Charter Documents, in each case as amended and in effect on and as of the date
this representation is being made and is deemed made hereunder.
4.3 Authority; Authorization, Execution and Delivery; Enforceability; No
Conflict.
(a) Such Shareholder has the full and absolute legal right, capacity,
power and authority (if applicable, corporate or partnership or otherwise) to
execute, deliver and perform his, her or its obligations under this Agreement
and each Related Document to which he, she or it is or will be a party, and to
consummate the transactions contemplated hereby and thereby. If applicable,
such Shareholder's execution and delivery of this Agreement and each Related
Document to which he, she or it is or will be a party, and the performance by
such Shareholder of his, her or its obligations hereunder and thereunder, have
been duly and validly authorized by
9
all requisite action on the part of such Shareholder (including its board of
directors and all committees thereof and its shareholders). This Agreement and
each Related Document to which such Shareholder is or will be a party has been,
or upon the execution hereof and thereof will be, duly and validly executed and
delivered by such Shareholder, and this Agreement and each such Related Document
is, or upon the execution hereof and thereof will be, duly and validly executed
and delivered by such Shareholder and constitutes, or upon such Shareholder's
execution and delivery hereof and thereof, will constitute, a valid and binding
obligation of such Shareholder, enforceable against him, her or it in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar Laws affecting
creditors' rights and remedies generally, and, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(b) Neither the execution and delivery by such Shareholder of, nor
the performance of his, her or its obligations under, this Agreement or any of
the Related Documents to which he, she or it is or will be a party, nor the
consummation by such Shareholder of the transactions contemplated hereby or
thereby, nor the compliance by such Shareholder with any of the provisions
hereof or thereof, will (i) conflict with, or result in any violation of, or
cause a default (with or without notice or lapse of time or both) under, any
provision of the Company's Charter Documents, or, if applicable, such
Shareholder's Charter Documents, (ii) conflict with, or result in any violation
of, or cause a default (with or without notice or lapse of time or both) under,
or give rise to any right of termination, amendment, cancellation or
acceleration of any obligations contained in, or the loss of any benefit under,
any term, condition or provision of any provision of any Contract to which such
Shareholder or the Company is a party or by which such Shareholder, or the
Company, or any of his, her, its, or their assets or properties are or may be
bound, (iii) violate any Law applicable to such Shareholder or the Company, or
(iv) result in an Encumbrance on or against any assets, rights or properties of
such Shareholder or the Company, or on or against any capital stock or other
securities of the Company, or give rise to any claim against the Company or the
Purchaser.
4.4 Consents.
Except as set forth on Schedule 4.4, no Permit, authorization, consent or
------------
approval of or by, or any notification of or filing with, any Person
(governmental or private) is required for, as a result of, or in connection with
the execution, delivery and performance by such Shareholder of this Agreement or
any of the Related Documents to which such Shareholder is or will be a party or
the consummation of the transactions contemplated hereby or thereby.
4.5 Brokers.
Such Shareholder has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees or similar
compensation or transaction based payments in connection with the transactions
contemplated by this Agreement or any of the Related Documents.
10
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SELLER GROUP
Each member of the Seller Group hereby jointly and severally represents and
warrants to the Purchaser as of the date hereof as follows:
5.1 Organization, Power, Authority and Good Standing.
The Company is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate or otherwise) to own, lease and operate
its assets and properties and to carry on its business (all of which
collectively comprise the Business) as presently conducted and as presently
proposed to be conducted. The Company is duly qualified and in good standing to
transact business as a foreign Person in those jurisdictions set forth on
Schedule 5.1, which jurisdictions constitute all of the jurisdictions in which
------------
the character of the property owned, leased or operated by the Company or the
nature of the business or activities conducted by the Company makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified is not reasonably likely to have a materially adversely affect the
Business, properties, financial condition or results of operations of the
Company, taken as a whole. The Purchaser has been furnished with true, correct
and complete copies of the Charter Documents of the Company, in each case as
amended and in effect on and as of the date this representation is being made
and is deemed made hereunder. Except as set forth on Schedule 5.1, the Company
------------
has not (i) engaged in any business or activity other than the Business, or (ii)
used any trade name or assumed name or other corporate name at any time.
5.2 Authority; Authorization, Execution and Delivery; Enforceability; No
Conflict.
(a) The Company has all requisite power and authority (corporate or
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party, and to consummate
the transactions contemplated hereby and thereby. The Company's execution and
delivery of this Agreement and each Related Document to which it is or will be a
party, and the performance by the Company of its obligations hereunder and
thereunder, have been duly and validly authorized by all requisite action on the
part of the Company (including its board of directors and all committees thereof
and its shareholders). This Agreement and each Related Document to which the
Company is or will be a party has been, or upon the Company's execution hereof
and thereof will be, duly and validly executed and delivered by the Company and
constitutes, or upon the Company's execution and delivery hereof and thereof
will constitute, a valid and binding obligation of the Company, enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting creditors' rights and remedies generally,
and, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(b) Neither the execution and delivery by the Company and the
Shareholders of, nor the performance of their respective obligations under, this
Agreement or any of the
11
Related Documents, as applicable, nor the consummation by the Company and the
Shareholders of the transactions contemplated hereby or thereby, nor the
compliance by the Company and the Shareholders with any of the provisions hereof
and thereof, will (i) conflict with, or result in any violation of, or cause a
default (with or without notice or lapse of time or both) under, any provision
of the Company's Charter Documents, (ii) conflict with, or result in any
violation of, or cause a default (with or without notice or lapse of time or
both) under, or give rise to any right of termination, amendment, cancellation
or acceleration of any obligations contained in, or the loss of any benefit
under, any term, condition or provision of any provision of any Contract to
which the Company is a party, or by which the Company or any of its assets or
properties are or may be bound, (iii) violate any Law applicable to the Company,
or (iv) result in an Encumbrance on or against any assets, rights or properties
of the Company, or on or against any capital stock or other securities of the
Company, or give rise to any claim against the Company or the Purchaser.
5.3 Consents.
Except as set forth on Schedule 5.3, no Permit, authorization, consent or
------------
approval of or by, or notification of or filing with, any Person (governmental
or otherwise) is required for, as a result of, or in connection with the
execution, delivery and performance by the Company of this Agreement or any of
the Related Documents to which it is or will be a party or the consummation of
the transactions contemplated hereby or thereby.
5.4 Capitalization.
(a) The authorized capital stock of the Company and is set forth on
Schedule 5.4(a), which schedule also sets forth the total number of outstanding
---------------
shares of the Company. All such outstanding shares disclosed on Schedule 5.4(a)
---------------
are duly and validly issued and outstanding, fully paid and non-assessable, with
no personal Liability attached to the ownership thereof, and are held of record
and beneficially by the Persons, and in the respective amounts, set forth on
Schedule 5.4(a), without Encumbrance.
---------------
(b) Except as set forth on Schedule 5.4(b), there are no outstanding
---------------
securities that are convertible into, exchangeable for, or carrying the right to
acquire, any equity securities of the Company, or subscriptions, warrants,
options, calls, puts, convertible securities, registration or other rights,
arrangements or commitments obligating the Company to issue, sell, register,
purchase or redeem any of its securities or any ownership interest or rights
therein. Except as set forth on Schedule 5.4(b), there are no Contracts,
---------------
commitments, arrangements, understandings or restrictions to which any
Shareholder, or any other Person is bound relating in any way to any shares of
capital stock or other securities of the Company, including voting trusts or
other similar agreements or understandings with respect to the voting of the
Company's capital stock or other securities. There are no stock appreciation
rights, phantom stock rights, or similar rights or arrangements outstanding with
respect to the Company.
(c) All securities issued by the Company have been issued in
transactions exempt from registration under the Securities Act and all
applicable state securities or "blue sky" Laws, and the Company has not violated
the Securities Act or any applicable state securities or "blue sky" Laws in
connection with the issuance of any such securities.
12
5.5 Subsidiaries; Investments.
The Company has no Subsidiaries and, except as set forth on Schedule 5.5,
------------
does not own or hold, directly or indirectly, any equity interest in or debt
obligation of (excluding accounts receivable arising in the ordinary course of
business, consistent with past practice) any other Person.
5.6 Financial Information.
(a) Schedule 5.6(a) contains true, correct and complete copies of
---------------
the following:
(i) the unaudited balance sheet of the Company as of December 31,
1999 (the "Annual Balance Sheet"; and such date being referred to as the
--------------------
"Annual Balance Sheet Date"), December 31, 1998, December 31, 1997, and
-------------------------
December 31, 1996, and the related unaudited statements of income,
shareholders' equity and cash flows of the Company for the fiscal years
then ended, including any footnotes and schedules thereto (all of the
foregoing, including the Annual Balance Sheet being collectively referred
to as the "Annual Financial Statements");
---------------------------
(ii) the unaudited balance sheet of the Company as of January 31,
2000, February 29, 2000, March 31, 2000, April 30, 2000, and May 31, 2000
(collectively, the "Interim Balance Sheets"), and the unaudited statements
----------------------
of income, shareholders' equity and cash flows of the Company for the
respective one-month, two-month, three-month, four-month and five-month
periods then ended, including any and all footnotes and schedules thereto
(all of the foregoing, including the Interim Balance Sheets, being
collectively referred to as the "Interim Financial Statements"); and
----------------------------
(iii) the unaudited balance sheet of the Company as of June 30,
2000 (the "Latest Balance Sheet"; and such date being referred to as the
--------------------
"Latest Balance Sheet Date"), and the unaudited statements of income,
-------------------------
shareholders' equity and cash flows of the Company for the six-month period
then ended, including any and all footnotes and schedules thereto (all of
the foregoing, including the Latest Balance Sheet, being collectively
referred to as the "Latest Financial Statements"; and the Annual Financial
---------------------------
Statements, the Interim Financial Statements and the Latest Financial
Statements being collectively referred to as the "Financial Statements").
--------------------
(b) The Financial Statements (i) are true, correct and complete,
(ii) fairly present the financial position of the Company as of the dates
indicated and the results of operations of the Company for the periods
indicated, (iii) have been prepared in accordance with GAAP consistently applied
throughout the periods covered thereby (subject to the absence of footnotes and
schedules that may be required by GAAP and, in the case of the Interim Financial
Statements and the Latest Financial Statements, normal year-end adjustments that
are not material individually or in the aggregate), and (iv) are in accordance
with the books and records of the Company, which books and records are true,
correct and complete and have been maintained in a manner consistent with
historical practice.
13
(c) Schedule 5.6(c) contains a true, correct and complete summary
---------------
of all accounts payable, accrued expenses and accounts receivable of the Company
as of the most recent practicable date prior to the date hereof, which schedule
sets forth the name of the account debtor (in the case of accounts receivable)
or account creditor (in the case of accounts payable) and the amount owed by
such account debtor or owing to such account creditor (identifying the portion
of such amount that is current, thirty (30) days past due, sixty (60) days past
due, ninety (90) days past due, and more than ninety (90) days past due).
5.7 Absence of Undisclosed Liabilities.
Except as set forth on Schedule 5.7, the Company has no Liability except
------------
(i) to the extent expressly reflected or reserved against on the Latest Balance
Sheet, (ii) Liabilities under Contracts (other than any Liability arising from
any breach or violation thereof or default thereunder), and (iii) Liabilities
incurred in the ordinary course of business, consistent with past practice,
since the Latest Balance Sheet Date (other than any such Liability arising from
any breach or violation of, or default under, any Contract, or arising from any
breach of warranty, tort, infringement, or violation of any Law or any
Proceeding). There are no loss contingencies (as such term is used in Statement
of Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) of or affecting the Company that are not
adequately provided for or disclosed on the Latest Balance Sheet or in the
footnotes or schedules thereto. The Company has not, either expressly or by
operation of Law, assumed or undertaken any Liability of any other Person,
including any obligation for corrective or remedial action relating to
Environmental, Health and Safety Laws.
5.8 Absence of Changes.
Since the Latest Balance Sheet Date, except as set forth on Schedule 5.8,
------------
the Company has been operated in the ordinary course of business, consistent
with past practice, and there has not been:
(i) any event or condition that has resulted in or could
reasonably be expected to result in an adverse change in the business,
operations, assets, condition (financial or otherwise), operating results,
liabilities, relations with employees, customers, suppliers or prospects of
the Company, or any casualty loss or damage to the assets or properties of
the Company, whether or not covered by insurance (a "Material Adverse
----------------
Change");
------
(ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock or other
securities of the Company, or any direct or indirect redemption, purchase
or other acquisition of any capital stock or other securities of the
Company, or any other payments of any nature directly or indirectly to or
for the benefit of any Shareholder or any Affiliate of the Company (whether
or not on or with respect to any shares of capital stock or other
securities of the Company owned by such Shareholder or Affiliate), other
than salaries and benefits paid in the ordinary course of business,
consistent with past practice;
(iii) any general uniform increase in the compensation of
employees (including any increase pursuant to any bonus, pension, profit-
sharing or other plan or
14
commitment) of the Company, or any increase in or prepayment of any such
compensation payable to or to become payable to any director, officer or
key employee;
(iv) any acquisition or disposition of assets or properties
owned by the Company, other than the sale or other disposition of
inventories for fair value in the ordinary course of business, consistent
with past practice;
(v) any agreement or commitment on the part of the Company to
merge, amalgamate or consolidate with or into, or otherwise acquire, any
other Person or division thereof;
(vi) any change in depreciation or amortization policies or
rates previously adopted, any change in income or expense recognition or
bad debt reserve, write-down or write-off policies previously adopted, any
write-up or write-down of inventory or other assets or any other change in
other accounting or in Tax reporting or methods or practices followed by
the Company;
(vii) any change in the manner in which products or services of
the Company are marketed (including any change in prices), any change in
the manner in which the Company extends discounts or credit to customers,
or any change in the manner or terms by which the Company collects accounts
receivable;
(viii) any failure by the Company to make scheduled capital
expenditures or investments, or any failure to pay trade accounts payable
or any other Liability of the Company when due; or
(ix) any Contract or other understanding or arrangement (other
than this Agreement and the Related Documents), whether in writing or
otherwise, to take any of the actions specified in the foregoing clauses
(i) through (viii).
5.9 Tax Matters.
(a) Except as set forth on Schedule 5.9(a), the Company and each
---------------
other Person included in any consolidated or combined Tax Return and part of an
affiliated group, within the meaning of Section 1504 of the Internal Revenue
Code of 1986, as amended (the "Code"), of which the Company is or has been a
----
member:
(i) has timely paid or caused to be paid all Taxes required
to be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return);
(ii) has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns required
to be filed by it with the appropriate Governmental Entities in all
jurisdictions in which such Tax Returns are required to be filed; and
(iii) has not requested or caused to be requested any extension
of time within which to file any Tax Return, which Tax Return has not since
been filed.
15
(b) The Company has previously delivered to the Purchaser true,
correct and complete copies of all Tax Returns filed by or on behalf of the
Company for all completed Tax years of the Company that remain open for audit or
review by the relevant Taxing authority. All such Tax Returns were true,
correct and complete.
(c) Except as set forth in Schedule 5.9(c):
---------------
(i) the Company has not been notified by the Internal Revenue
Service or any other Taxing authority that any issues have been raised (and
no such issues are currently pending) by the Internal Revenue Service or
any other Taxing authority in connection with any Tax Return of the
Company, there are no pending Tax audits with respect to the Company, and
no waivers of statutes of limitations related to Taxes have been given or
requested with respect to the Company;
(ii) full and adequate provision has been made (A) on the
Latest Balance Sheet for all Taxes payable by the Company for all periods
ending on or prior to the Latest Balance Sheet Date, and (B) on the books
and records of the Company for all Taxes payable by the Company for all
periods beginning on or after the Latest Balance Sheet Date;
(iii) the Company has not incurred any Tax Liability from and
after the Latest Balance Sheet Date other than Taxes incurred in the
ordinary course of business, consistent with past practice;
(iv) the Company (A) is not, or has not made an election to be
treated as, a "consenting corporation" under Section 341(f) of the Code, or
(B) is not, or has not been, a "personal holding company" within the
meaning of Section 542 of the Code;
(v) the Company has complied in all respects with all
applicable Laws relating to the collection or withholding of Taxes
(including sales Taxes and the withholding of Taxes from the wages of
employees);
(vi) the Company is not, or has not ever been, a party to any
Tax sharing, indemnity of similar agreement with any Person;
(vii) the Company has not incurred any Liability to make or
possibly make any payments, either alone or in conjunction with any other
payments, that:
(A) are not deductible under, or would otherwise
constitute a "parachute payment" within the meaning of, Section
280G of the Code (or any corresponding provision of domestic or
foreign income Tax Law); or
(B) are or may be subject to the imposition of an excise
Tax under Section 4999 of the Code;
(viii) the Company has not agreed to, or is not required to,
make any adjustments or changes either on, before or after the Closing
Date, to its accounting methods pursuant to Section 481 of the Code, and
the Internal Revenue Service has not proposed any such adjustments or
changes in the accounting methods of the Company;
16
(ix) no claim has ever been made by any Taxing authority in a
jurisdiction in which the Company does not file Tax Returns that the
Company is, or may be subject to, taxation by that jurisdiction; and
(x) neither the Company, nor any Shareholder is a foreign
Person within the meaning of Section 1.1445-2(b) of the rules and
regulations promulgated under Section 1445 of the Code.
5.10 Title to Assets, Properties and Rights and Related Matters.
(a) The Company has good and marketable title (or a valid
leasehold interest) to all of the assets, properties and interests in
properties, real, personal or mixed, reflected on the Latest Balance Sheet or
acquired after the Latest Balance Sheet Date (except for assets or properties
sold or otherwise disposed of since the Latest Balance Sheet Date in the
ordinary course of business, consistent with past practice, and accounts
receivable and notes receivable paid in full subsequent to the Latest Balance
Sheet Date in the ordinary course of business, consistent with past practice),
free and clear of all Encumbrances, of any kind or character, except for those
Encumbrances set forth on Schedule 5.10(a) and Permitted Encumbrances. Such
----------------
assets are in good operating condition and repair (normal wear and tear
excepted), are sufficient to operate the Business as presently conducted and as
presently proposed to be conducted, are suitable for the uses for which they are
used in the Business, and are not subject to any condition that materially
interferes with the economic value or use thereof. With respect to any leased
assets, such assets are in such condition as to permit the surrender thereof to
the lessors thereunder on the date hereof without any cost or expense for repair
or restoration as if the related leases were terminated or expired on the date
hereof in the ordinary course of business, consistent with past practice.
(b) Schedule 5.10(b) contains a true, correct and complete list of
----------------
all tangible personal property owned by the Company as of the Closing Date.
Except for any inventory, supplies, equipment, tractors, trailers and
automobiles in transit in the ordinary course of business, consistent with past
practice, all tangible personal property listed on Schedule 5.10(b) is located
----------------
on the Company's premises listed on Schedule 5.11(a).
----------------
5.11 Real Property - Owned or Leased.
(a) Schedule 5.11(a) contains a list and brief description of all
----------------
of the real property owned, leased, subleased or otherwise occupied by the
Company. The description of each parcel of real property subject to one or more
leases (the "Leased Property") includes the names of the lessor and the lessee
---------------
and the basic terms thereof. The lease rate charged to the Company for each
parcel of Leased Property that is leased by the Company from a Shareholder or
from an Affiliate of the Company is not greater than the fair market value
rental that would be obtained by the Company in an arms' length transaction with
a Person that is not an Affiliate. The real property listed on Schedule 5.11(a)
----------------
constitutes all real property used or occupied by the Company in connection with
the Business.
(b) With respect to the real property listed on Schedule 5.11(a),
----------------
except as set forth on Schedule 5.11(b):
----------------
17
(i) no portion of the real property is subject to any pending
condemnation or other Proceeding, and, to the best knowledge of the Seller
Group, there is no threatened condemnation or other Proceeding with
respect thereto;
(ii) the physical condition of the real property is sufficient
to permit the continued conduct of the Business as presently conducted and
as presently proposed to be conducted, subject to the provision of usual
and customary maintenance and repairs performed in the ordinary course of
business, consistent with past practice, with respect to similar
properties of like age and construction;
(iii) the Company is the fee owner of the real property or the
owner and holder of all the leasehold estates purported to be granted by
the leases associated with the Leased Property, as applicable;
(iv) there are no Contracts to which the Company, or any of
its Affiliates is a party, granting to any party or parties the right of
use or occupancy of any portion of the real property;
(v) there are no parties (other than the Company) in
possession of any portion of the real property; and
(vi) no notice of any increase in the assessed valuation of
any portion of the real property and no notice of any contemplated special
assessment with respect to any portion of the real property has been
received by the Company, and, to the best knowledge of the Seller Group,
there is no threatened increase in assessed valuation or threatened
special assessment pertaining to any portion of the real property.
5.12 Intellectual Property.
(a) Except as set forth on Schedule 5.12(a):
----------------
(i) the Company owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of,
all Intellectual Property Rights used in, necessary for, or required for
the conduct of the Business as presently conducted and as presently
proposed to be conducted (collectively, the "Owned Requisite Rights"),
----------------------
other than those Intellectual Property Rights for which the Company has a
valid license, all of which are listed on Schedule 5.12(a) (collectively,
----------------
the "Licensed Requisite Rights"; and together with the Owned Requisite
-------------------------
Rights, the "Requisite Rights"), and such rights to use, sell, license,
----------------
dispose of and bring actions are exclusive with respect to the Owned
Requisite Rights;
(ii) the Company has not granted any Person the right to use
any of the Owned Requisite Rights;
(iii) there exists no default, or any event which upon the
giving of notice or the passage of time, or both, would give rise to a
claim of a default by the Company under the licenses granting the Company
the Licensed Requisite Rights;
18
(iv) the Company has taken all commercially reasonable and
practicable steps designed to safeguard and maintain (A) the secrecy and
confidentiality of the Company's Confidential Information, and (B) the
proprietary rights of the Company in all of the Requisite Rights;
(v) the Company has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property Rights of any Person or committed any acts of unfair competition
or received from any Person in the past five years any notice, charge,
complaint, claim or assertion thereof, and no such charge, complaint,
claim or assertion is impliedly threatened by an offer to license from
another Person; and
(vi) the Company has not sent to any Person in the past five
years, or otherwise communicated to any Person, any notice, charge,
complaint, claim or other assertion of any present, impending or
threatened interference with, infringement upon, misappropriation of, or
other conflict with any Intellectual Property Rights of the Company by
such other Person or any acts of unfair competition by such other Person,
nor, to the best knowledge of the Seller Group, is any such interference,
infringement, misappropriation, conflict or act of unfair competition
occurring or threatened.
(b) Schedule 5.12(b) contains a true, correct and complete list of
----------------
all applications, filings and other formal actions made or taken pursuant to any
Laws by the Company to perfect or protect its interests in its Intellectual
Property Rights.
5.13 Agreements, No Defaults, Etc.
(a) Schedule 5.13(a) contains a true, correct and complete list
----------------
and a brief description of all Contracts to which the Company is a party and (x)
that were entered into or made outside the ordinary course of business,
consistent with past practice, or (y) that were entered into or made in the
ordinary course of business, consistent with past practice, and are described in
clauses (i) through (xiii) of the next sentence of this Section 5.13. Except as
set forth on Schedule 5.13(a), the Company is not a party to any of the
----------------
following Contracts:
(i) distributorship, dealer, sales, advertising, agency,
manufacturer's representative, or any other Contract relating to the
payment of a commission;
(ii) any Contract relating to the employment of any officer,
employee or consultant or any other type of Contract or other
understanding or arrangement with any officer, employee or consultant,
including any Contract or other understanding or arrangement relating to
severance payments;
(iii) any indenture, mortgage, promissory note, loan agreement,
pledge agreement, guaranty or conditional sale or other Contract relating
to the borrowing of money, a line of credit or a Capital Lease;
(iv) any Contract for charitable contributions in excess of
$5,000 individually or $10,000 in the aggregate;
19
(v) any Contract for capital expenditures in excess of
$10,000 individually or $50,000 in the aggregate;
(vi) any Contract for the sale of any assets, properties or
rights other than the sale of services or products in the ordinary course
of business, consistent with past practice;
(vii) any Contract pursuant to which the Company is a lessee of
or holds or operates any machinery, equipment, motor vehicles, office
furniture, fixtures, products, merchandise or other personal property
owned by any other Person in excess of $10,000 individually or $50,000 in
the aggregate;
(viii) any Contract relating to the lending or investing of
funds;
(ix) any Contract relating to any form of intangible property,
including any Intellectual Property Rights;
(x) any Contract that restricts the Company from engaging in
any aspect of the Business or any other business anywhere in the world;
(xi) any Contract or group of related Contracts with the same
Person or group of Affiliated Persons (excluding purchase orders entered
into in the ordinary course of business, consistent with past practice,
that are to be completed within three months of entering into such
purchase orders) for the purchase or sale of products or services under
which the undelivered or unperformed balance or portion thereof (including
the aggregate undelivered or unperformed balance or portion under any such
Contracts between the same Person and the Company) has a selling price in
excess of $50,000;
(xii) any Contract for the acquisition or disposition of a
Person or a division of a Person made within the preceding five years
(whether or not such acquisition or disposition was consummated); or
(xiii) any other Contract material to the Business.
(b) The Contracts disclosed on Schedule 5.4(b), the leases (and
---------------
any other Contracts) disclosed on Schedule 5.11(a), the licenses (and any other
----------------
Contracts) disclosed on Schedule 5.12(a), the insurance policies (and any other
----------------
Contracts) disclosed on Schedule 5.16(a), the Company Employee Plans (and any
----------------
other Contracts) disclosed on Schedule 5.18(a), and the Contracts disclosed on
----------------
Schedule 5.21 are incorporated by reference onto Schedule 5.13. The Contracts
------------- -------------
disclosed on Schedule 5.13, together with the Contracts incorporated by
-------------
reference onto Schedule 5.13, are collectively referred to as the "Material
------------- --------
Contracts."
---------
(c) All Material Contracts (i) are in full force and effect, (ii)
constitute legal, valid and binding obligations of the Company and, to the best
knowledge of the Seller Group, the other parties thereto, and (iii) are
enforceable in accordance with their terms against the Company and, to the best
knowledge of the Seller Group, the other parties thereto, in each case subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a
20
proceeding at law or in equity). The Company has performed all of the
obligations required to be performed by it to date pursuant to the terms of the
Material Contracts, and there exists no default, or any event which upon the
giving of notice or the passage of time, or both, would give rise to a claim of
a default in the performance by the Company or, to the best knowledge of the
Seller Group, any other party to any of the Material Contracts of their
respective obligations thereunder. The Purchaser has been furnished with true,
correct and complete copies of all written Material Contracts and Schedule
--------
5.13(a) (including Contracts incorporated by reference thereon) contains true,
-------
correct and complete descriptions of all oral Contracts listed on Schedule
--------
5.13(a) (including Contracts incorporated by reference thereon).
-------
(d) Schedule 5.13(d) contains a true, correct and complete list of
----------------
all Funded Indebtedness of the Company, in each case showing the aggregate
principal amount thereof (and the aggregate amount of any undrawn commitments
with respect thereto), the name of the lender, and the name of the respective
borrower and any other Person that directly or indirectly guaranteed such Funded
Indebtedness.
5.14 Litigation, Etc.
(a) Except as disclosed on Schedule 5.14(a), there are no (i)
----------------
Proceedings pending or, to the best knowledge of the Seller Group, threatened
against the Company, whether at law or in equity, civil or criminal in nature,
or before or by any Governmental Entity or arbitrator, nor, to the best
knowledge of the Seller Group, does there exist any basis therefor, or (ii)
Orders of any Governmental Entity or arbitrator with respect to, involving or
against the Company. The Company has delivered to the Purchaser all material
documents and correspondence relating to the matters disclosed on Schedule
--------
5.14(a).
-------
(b) Schedule 5.14(b) lists each matter described in Section 5.14(a)
----------------
that (i) resulted in any criminal sanctions against the Company, or (ii) was in
existence within the last five years and resulted in payments in excess of
$10,000 by the Company (whether as a result of a judgment, civil fine,
settlement or otherwise).
5.15 Compliance with Laws.
The Company (a) has been and continues to be in compliance in all
material respects with all Laws, Orders and Permits applicable to it and the
Business, and (b) has all material Permits used or necessary in the conduct of
the Business. All of the Permits referred to in the preceding sentence are
listed on Schedule 5.15 and are in full force and effect. No violations with
-------------
respect to any of the Permits listed on Schedule 5.15 have occurred or are or
-------------
have been recorded, and no Proceeding is pending or, to the best knowledge of
the Seller Group, threatened to revoke or limit any such Permits. No
investigation or review by any Governmental Entity with respect to the Company
is pending or, to the best knowledge of the Seller Group, threatened, nor has
any Governmental Entity notified the Company of its intention to conduct the
same. To the best knowledge of the Seller Group, there is no proposed change in
any applicable Law that would require the Company to obtain any Permit not
listed on Schedule 5.15 in order to conduct the Business as presently conducted
-------------
and as presently proposed to be conducted. The Company has not received any
opinion or memorandum or legal advice from legal counsel to the effect that it
is exposed, from a legal standpoint, to any Liability or disadvantage that may
be material to its business, financial condition, operations, property or
affairs. No member of the Seller Group is
21
aware of any proposed Law that would prohibit or restrict the Company from, or
otherwise materially and adversely affect the Company in, conducting the
Business in any jurisdiction in which the Company is presently conducting
business or is presently proposing to conduct business.
5.16 Insurance.
(a) Schedule 5.16(a) contains a true, correct and complete list of
----------------
all policies of liability (including "bobtail"), theft, fidelity, life, fire,
product liability, cargo, workers' compensation, health and other forms of
insurance held by or on behalf of the Company (specifying the insurer, amount of
coverage, basis of coverage (i.e., "occurrence" or "claims made"), type of
insurance, policy number and any pending claims thereunder). All such coverages
have been maintained at all times during the course of the operation of the
Business. The Company is insured against all risks usually insured against by
Persons conducting similar businesses and operating similar properties in the
localities where the Business is conducted and the properties of the Company are
located under policies of such types and in such amounts as are customarily
carried by such Persons.
(b) Except as set forth on Schedule 5.16(b), with respect to each
----------------
policy of insurance listed on Schedule 5.16(a): (i) all premiums with respect
----------------
thereto are currently paid and are not subject to adjustment, (ii) the Company
is not in default in any respect with respect to its obligations under such
policy, (iii) to the best knowledge of the Seller Group, no basis exists that
would give any insurer under any such policy the right to cancel or unilaterally
reduce or limit the stated coverages contained in such policy, (iv) there are no
outstanding claims currently pending under such policy that could be expected to
cause an increase in the insurance rates of the Company, and no facts or
circumstances exist that might be expected to relieve the insurer under such
policy of its obligations to satisfy in full any claim thereunder, and (v) the
Company has not received any notice that any such policy has been or shall be
canceled or terminated or will not be renewed on substantially the same terms as
are now in effect or that the premium on such policy shall be increased on the
renewal thereof.
5.17 Labor Relations; Employees.
(a) Schedule 5.17(a) sets forth a list of all directors, officers and
----------------
key employees of the Company as of the date hereof, together with their
respective titles (if any) and positions held, their current compensation
(including salary, wages, bonuses and commissions), and the respective dates on
which they commenced employment. To the extent any such employee is on a leave
of absence, Schedule 5.17(a) indicates the nature of such leave of absence and
----------------
such employee's anticipated date of return to active employment. No officer or
key employee listed on Schedule 5.17(a) has given the Company notice, and, to
----------------
the best knowledge of the Seller Group, no officer or key employee listed on
Schedule 5.17(a) has any plans or intends to terminate his or her employment
----------------
with the Company. No former officer or key employee has left the service of the
Company within the last six months.
(b) Schedule 5.17(b) sets forth the aggregate number of employees,
----------------
other non-supervisory personnel, independent contractors and owner/operators
that work for the Company, specifying the number that belong to a union or are
otherwise covered by an employment agreement or a collective bargaining
agreement, identified by terminal location or facility.
22
(c) Except as set forth on Schedule 5.17(c), (i) the Company
----------------
generally enjoys good relations with all of its employees, and there is no labor
strike, dispute or grievance, or work slowdown or stoppage actually pending or,
to the best knowledge of the Seller Group, threatened against or involving the
Company, and (ii) the Company is not a party to or bound by any collective
bargaining agreement, union Contract or similar agreement, no such Contract or
agreement is currently being negotiated by the Company, no labor union has taken
any action with respect to organizing the employees of the Company, and no
representation question exists with respect to any such employees.
(d) The Company and each of its ERISA Affiliates have complied in all
respects with all Laws relating to the hiring and retention of all employees,
leased employees and independent contractors relating to wages, hours, Company
Employee Plans, workers' compensation, unemployment, equal opportunity,
collective bargaining, and the payment of social security and other Taxes.
(e) Schedule 5.17(e) sets forth a true, correct and complete list of
----------------
any and all unfair labor practice charges or other Proceedings before the
National Labor Relations Board, Equal Opportunity Employment Commission charges,
employment discrimination lawsuits, wrongful discharge lawsuits, Occupational
Safety and Health Administration citations and litigation, wage and hour charges
and litigation, and employment related litigation that are presently pending, or
to the best knowledge of the Seller Group, threatened at law or in equity,
involving the Company. Schedule 5.17(e) also sets forth a true, correct and
----------------
complete list of those charges, lawsuits, citations, litigation and Proceedings
falling within the above categories that have been settled or otherwise disposed
of within the previous two years.
(f) Except as set forth in Schedule 5.17(f), the Company is not a
----------------
joint employer or alter ego, as construed under the National Labor Relations
Act, as amended, with or of any of its suppliers, distributors, customers or
other Persons with which it has any Contract or other understanding or
arrangement, including any owner/operator with whom the Company has a Contract
or other understanding or arrangement, or any other Person with which the
Company has a leasing arrangement (collectively referred to for the purposes of
this Section 5.17(f) as "Third Parties"), and no Third Parties are alter egos of
-------------
the Company. The Company (i) does not exercise management power or authority
over the operations or personnel of any Third Party, (ii) does not supervise the
employees of any Third Party, or (iii) is not responsible for, or does not have
the authority to establish, implement or effectively recommend the labor
relations or employment policies or actions, including wages, hours, working
conditions or any terms of employment, for any employee of any Third Party.
There is no interchange of personnel, no common boards of directors and no
common officers, managers or employees between the Company and any Third Party.
The Company does not provide any administrative services for any Third Party
that is not required by Law or that is not provided in a bona fide, arms-length
transaction at fair market value. Any administrative services provided by the
Company for any Third Party have been detailed on Schedule 5.17(f).
----------------
(g) Except as set forth on Schedule 5.17(g), the Company's Contracts
----------------
and other understandings with owner/operators and independent contractors
establish a bona fide arrangement where such individuals are independent
contractors to, and are not employees of, the Company, and there are not any
disputes, claims, charges or allegations pending or, to the best knowledge of
the Seller Group, threatened at law or in equity before any Governmental
23
Entity that challenges the independent contractor nature of such Contract or
other understanding or arrangement.
5.18 ERISA Compliance.
(a) Schedule 5.18(a) contains a true, correct and complete list of
----------------
all Employee Benefit Plans of the Company (collectively, the "Company Employee
----------------
Plans"), (i) that cover any current or former employees, contract employees,
-----
independent contractors or consultants of or to the Company or any spouses,
family members or beneficiaries thereof (A) that are maintained, sponsored or
contributed to by the Company or (B) with respect to which the Company is
obligated to contribute or has any Liability, or (ii) with respect to which the
Company has any Liability on account of the maintenance or sponsorship thereof
or contribution thereto by any present or former ERISA Affiliate of the Company.
(b) Except as set forth on Schedule 5.18(b), with respect to each
----------------
Company Employee Plan:
(i) such Company Employee Plan has been established,
maintained, operated and administered in accordance with its terms and in
compliance with ERISA, the Code, and all other applicable Laws (including
with respect to reporting and disclosure);
(ii) all required, declared or discretionary (consistent with
past practice) payments, premiums, contributions, reimbursements or
accruals for all periods ending prior to or as of the date hereof have
been made or properly accrued on the Latest Balance Sheet, or with
respect to accruals properly made after the Latest Balance Sheet Date, on
the books and records of the Company and all amounts withheld from
employees have been timely deposited into the appropriate trust or
account;
(iii) there is no unfunded Liability relating to such Company
Employee Plan that is not reflected on the Latest Balance Sheet, or with
respect to accruals properly made after the Latest Balance Sheet Date, on
the books and records of the Company;
(iv) neither the Company, any of its ERISA Affiliates, nor any
other "disqualified person" or "party in interest" (as such terms are
defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to such Company Employee Plan, has breached
the fiduciary rules of ERISA or engaged in a prohibited transaction that
could subject any of the foregoing Persons to any Tax or penalty imposed
under Section 4975 of the Code or Section 502(i), Section 502(j) or
Section 502(l) of ERISA;
(v) no Proceeding (other than routine claims for benefits) is
pending or, to the best knowledge of the Seller Group, threatened against
or relating to such Company Employee Plan or any fiduciary thereof, and
there is, to the best knowledge of the Seller Group, no basis for any
such Proceeding against any such Company Employee Plan;
(vi) each Company Employee Plan, if intended to be "qualified"
within the meaning of Section 401(a) of the Code, has been determined by
the Internal Revenue
24
Service to be so qualified and the related trusts are exempt from Tax
under Section 501(a) of the Code, and nothing has occurred that has or
reasonably could be expected to adversely affect such qualification or
exemption;
(vii) except as may be required under Laws of general
application, no Company Employee Plan obligates the Company to provide
any employee or former employee, or their spouses, family members or
beneficiaries, any post-employment or post-retirement health or life
insurance, accident or other "welfare-type" benefits;
(viii) each such Company Employee Plan that is subject to the
requirements of the Consolidated Omnibus Budget Reconciliation of 1985,
as amended ("COBRA"), and the Health Insurance Portability and
-----
Accountability Act, as amended ("HIPAA"), has been maintained in
-----
compliance with COBRA and HIPAA, including all notice requirements, and
no Tax payable on account of Section 4980B or any other section of the
Code has been or is expected to be incurred;
(ix) neither the Company, any of its Subsidiaries, nor any of
their respective ERISA Affiliates is or has ever maintained or been
obligated to contribute to a Multi-employer Plan (as defined in Section
3(37) of ERISA), a Multiple Employer Plan (as defined in Section 413 of
the Code), or a Defined Benefit Pension Plan (as defined in Section 3(35)
of ERISA);
(x) no benefit payable or that may become payable by the
Company, or any or its respective ERISA Affiliates pursuant to such
Company Employee Plan will constitute an "excess parachute payment"
within the meaning of Section 280G of the Code, which is or may be
subject to the imposition of a Tax under Section 4999 of the Code or that
would not be deductible by reason of Section 280G of the Code;
(xi) each such Company Employee Plan that is intended to meet
the requirements of Section 125 of the Code meets such requirements and
each program of benefits for which employee contributions are provided
pursuant to elections made under such Company Employee Plan meets the
requirements of the Code applicable thereto;
(xii) there has not been any act or omission by the Company, or
any of its respective ERISA Affiliates that has given rise to or could
give rise to any fines, penalties or related charges under ERISA or the
Code for which the Company, or any of its ERISA Affiliates could be
liable;
(xiii) all reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied with respect to each Company
Employee Plan;
(xiv) the Company has not made or agreed to make, and is not
required to make (in order to bring any Company Employee Plan into
compliance with ERISA or the Code) any changes in benefits that would
materially increase the costs of maintaining any Company Employee Plan;
(xv) there has not been any act or omission by the Company, or
any of its ERISA Affiliates, that has given rise to or could give rise to
any fines, penalties or
25
related charges under ERISA or the Code for which the Company, or any of
its ERISA Affiliates, could be liable;
(xvi) the Company has timely deposited and transmitted all
amounts withheld from employees for contributions or premium payments for
each Company Employee Plan into the appropriate trusts or accounts; and
(xvii) each Company Employee Plan that allows loans to plan
participants has been operated in accordance with its terms, the plan's
written loan policy and all applicable laws. In addition, all outstanding
loans from such Company Employee Plans are current as of the Closing
Date, and there are no loans in default.
(c) The Purchaser has been provided with true, correct and complete
copies, to the extent applicable, of all documents pursuant to which each
Company Employee Plan is maintained and administered, the two most recent annual
reports (Form 5500 and attachments) and financial statements therefor, all
governmental rulings, determinations and opinions (and pending requests
therefor), and, if any Company Employee Plan provides post-employment or post-
retirement health and life insurance, accident or other "welfare-type" benefits,
the most recent valuation of the present and future obligations under such
Company Employee Plan. The foregoing documents accurately reflect all of the
terms of such Company Employee Plan (including any agreement or provision that
would limit the ability of the Company to make any prospective amendments or to
terminate such Company Employee Plan).
5.19 Environmental Matters.
(a) Except as set forth on Schedule 5.19(a), neither the Company, nor
----------------
any of its Affiliates has received any written or oral notice, report or other
information (i) regarding any actual or alleged violation of any Environmental,
Health and Safety Laws, or any Liabilities, including any investigatory,
remedial or corrective obligations, relating to (A) the Company, any of its
respective Affiliates, or any of their predecessors, (B) the Business, or (C)
any of the Company's currently or formerly owned or leased properties or
operations, or (ii) that the Company is potentially responsible under any
Environmental, Health and Safety Laws for response costs, corrective action or
natural resource damages, as those terms are defined under the Environmental,
Health and Safety Laws, at any location.
(b) Schedule 5.19(b) sets forth a true, correct and complete list of
----------------
all properties and facilities previously owned, leased or operated by the
Company or any of its predecessors at any time (together with the Leased
Properties, the "Covered Properties"). There has been no release, discharge,
------------------
spill or disposal of any substance at any of the Covered Properties so as to
give rise to any Liability of the Company under any Environmental, Health and
Safety Laws. Except as set forth on Schedule 5.19(b), there is not now, nor has
----------------
there ever been, any asbestos-containing material in any form or condition,
underground storage tank, above-ground storage tank, landfill, waste pile,
surface impoundment, disposal area, or article or equipment containing
polychlorinated biphenyls on or at any of the Covered Properties.
(c) Neither the Company, any of its Affiliates, nor any of their
respective predecessors has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any substance, or
owned or operated any property or facility
26
(and no such property or facility is contaminated by any such substance) in a
manner that has given or would give rise to Liability pursuant to any
Environmental, Health and Safety Laws, including any Liability for response
costs, corrective action costs, personal injury, property damage, natural
resources damage or attorney fees, or any investigative, corrective or remedial
obligations pursuant to any Environmental, Health and Safety Laws.
(d) No facts, events or conditions relating to the past or present
operations of the Company, any of its Affiliates, any of their respective
predecessors, or any of the Covered Properties will prevent, hinder or limit
continued compliance by the Company with any Environmental, Health and Safety
Laws, or give rise to any investigative, corrective or remedial obligations
pursuant to any Environmental, Health and Safety Laws, or give rise to any other
Liability pursuant to any Environmental, Health and Safety Laws, including any
relating to on-site or off-site releases or threatened releases of materials,
substances or wastes, personal injury, property damage or natural resources
damage.
(e) Neither this Agreement nor the consummation of the transactions
contemplated by this Agreement or any of the Related Documents will result in
any obligations for site investigation or cleanup, or notification to or consent
of any Governmental Entity or other third party, pursuant to any of the so-
called "transaction-triggered" or "responsible property transfer" Environmental,
Health and Safety Laws.
(f) The Company has provided the Purchaser with true, correct and
complete copies of all reports and studies within the possession or control of
the Company with respect to past and present environmental conditions or events
at any of the Covered Properties (all of which are listed on Schedule 5.19(b)),
----------------
and, to the best knowledge of the Seller Group, there are no other environmental
reports or studies with respect thereto.
5.20 Brokers.
The Company has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees or similar
compensation or transaction based payments in connection with the transactions
contemplated by this Agreement or any of the Related Documents.
5.21 Related Party Transactions.
Except as set forth on Schedule 5.21, and except for compensation to bona
-------------
fide employees of the Company for services rendered in the ordinary course of
business, consistent with past practice, no current or former Affiliate of the
Company or any "Associate" (as defined in the rules promulgated under the
Securities Exchange Act of 1934, as amended) of any thereof, is now, or has been
during the last five fiscal years, (i) party to any transaction or Contract with
the Company (including any Contract or other understanding or arrangement
providing for the furnishing of services by, or the rental of real or personal
property from, or otherwise requiring payments to, any such Affiliate or
Associate), or (ii) the direct or indirect owner of an interest in any Person
that is a present or potential competitor, supplier or customer of the Company
(other than non-affiliated holdings in publicly held companies). Except as set
forth on Schedule 5.21, the Company is not a guarantor or otherwise liable for
-------------
any actual or potential Liability of its Affiliates or their Associates. Except
as set forth on Schedule 5.21, the Company does not (x)
-------------
27
own or operate any vehicles, boats, aircraft, apartments or other residential or
recreational properties or facilities for executive, administrative or sales
purposes, or (y) own or pay for any social club memberships, whether or not for
the benefit of the Company, and/or any of its executives.
5.22 Accounts and Notes Receivable.
Except as set forth on Schedule 5.22, and except for allowances for
-------------
doubtful accounts reflected on the Latest Balance Sheet, all accounts receivable
and notes receivable owing to the Company as of the date hereof constitute, and
as of the Closing shall constitute, valid and enforceable claims arising from
bona fide transactions in the ordinary course of business, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar Laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a knowledge of the Seller Group, there are no asserted
claims, refusals to pay or other rights of set-off against any thereof. Except
as set forth on Schedule 5.22 (including those items categorized as "legal" on
-------------
such Schedule), there is (i) no account debtor or note debtor that is delinquent
by more than thirty (30) days for payments due from such account debtor or note
debtor in excess of $10,000 in the aggregate, (ii) no account debtor or note
debtor that has refused, or, to the best knowledge of the Seller Group,
threatened to refuse, to pay its obligations to the Company for any reason, or
has otherwise made a claim of set-off or similar claim (other than in amounts
not in excess of $5,000 per account debtor or note debtor, or $10,000 in the
aggregate), and (iii) to the best knowledge of the Seller Group, no account
debtor or note debtor that owes the Company amounts in excess of $10,000 in the
aggregate is insolvent or bankrupt. Those items categorized as "legal" on
Schedule 5.22 constitute all items that (x) have been placed in the hands of
-------------
third party collection agents, (y) are owed by account debtors or note debtors
with respect to whom bankruptcy or insolvency or other creditor protection
proceedings have been commenced, and/or (z) are owed by account debtors or note
debtors who have admitted to the Company an inability to pay all or any portion
of any such accounts or notes at any time.
5.23 Bank Accounts; Powers of Attorney.
Schedule 5.23 sets forth a true and complete list of (i) all bank
-------------
accounts and safe deposit boxes of the Company and all Persons who are
signatories thereunder or who have access thereto, and (ii) the names of all
Persons holding general or special powers of attorney from the Company and a
summary of the terms thereof (excluding ministerial powers of attorney granted
to representatives of the Company that are terminable at will).
5.24 Suppliers and Vendors.
Except as set forth on Schedule 5.24, no material supplier or vendor to
-------------
the Company has canceled or otherwise terminated, or, to the best knowledge of
the Seller Group, threatened to cancel or otherwise terminate, its relationship
with the Company or has decreased, limited or otherwise modified, or, to the
best knowledge of the Seller Group, threatened to decrease, limit or otherwise
modify, the services, supplies or materials it provides to the Company.
28
5.25 Customers.
Except as set forth on Schedule 5.25, no customer of the Company to which
-------------
more than $50,000 of annual sales were attributable during any of the preceding
three fiscal years has notified the Company that it intends, or, to the best
knowledge of the Seller Group, has threatened, to terminate or materially
curtail its relationship and dealings with the Company.
5.26 Conflicts of Interest.
Neither the Company, any Shareholder, nor any officer, employee, agent or
other Person acting on their behalf has, directly or indirectly, given or agreed
to give, any money, gift or similar benefit (other than legal price concessions
to customers in the ordinary course of business, consistent with past practice)
to any customer, supplier, employee or agent of a customer or supplier, or
official or employee of any Governmental Entity or other Person who was, is, or
may be in a position to help or hinder the Business (or assist in connection
with any actual or proposed transaction) that (i) might subject the Company to
any damage or penalty in any Proceeding, (ii) if not given in the past, would
have resulted in a Material Adverse Change, or (iii) if not continued in the
future, reasonably could be expected to result in a Material Adverse Change.
There is not now, and there has never been, any employment by the Company of, or
beneficial ownership in the Company by, any governmental or political official
in any jurisdiction in which the Company has conducted, presently is conducting,
or presently is proposing to conduct business.
5.27 Year 2000.
The Company has not experienced any effects within the Business as a
result of the "Y2K" issue (that is, the risk that computer applications used by
the Company may be unable to recognize and perform property date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). All computer applications that are material to the Business are able to
perform properly date-sensitive functions for all dates before and after January
1, 2000.
5.28 Disclosure.
Neither this Agreement, including the Schedules, Annexes, attachments and
Exhibits hereto, nor any other written material delivered by or on behalf of the
Company, or any Shareholder to the Purchaser or any of its representatives,
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, taken as a whole,
in light of the circumstances in which they were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to each member of the Seller Group
as of the date hereof as follows:
29
6.1 Organization; Corporate Authority.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation and has
all requisite power and authority (corporate or otherwise) to own, lease and
operate its assets and properties and to carry on its business as presently
conducted and as presently proposed to be conducted. The Seller has been
furnished with true, correct and complete copies of the Purchaser's Charter
Documents, in each case as amended and in effect on the date this representation
is being made and is deemed made hereunder.
6.2 Authority; Authorization; Execution and Delivery; Enforceability; No
Conflict.
(a) The Purchaser has all requisite power and authority (corporate
and otherwise) to execute, deliver and perform its obligations under this
Agreement and each Related Document to which it is or will be a party and to
consummate the transactions contemplated hereby and thereby. The Purchaser's
execution and delivery of this Agreement and each Related Document to which it
is or will be a party, and the performance by the Purchaser of its obligations
hereunder and thereunder, have been duly and validly authorized by all requisite
action on the part of the Purchaser (including its board of directors and all
committees thereof and its shareholders). This Agreement and each Related
Document to which the Purchaser is or will be a party has been, or upon the
Purchaser's execution hereof and thereof will be, duly and validly executed and
delivered by the Purchaser and constitutes, or upon the Purchaser's execution
and delivery hereof and thereof will constitute, a valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar Laws affecting creditors'
rights and remedies generally, and, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(b) Neither the execution and delivery by the Purchaser of, and
performance of its obligations under, this Agreement or any of the Related
Documents to which it is or will be a party, nor the consummation by the
Purchaser of the transactions contemplated hereby or thereby, nor the compliance
by the Purchaser with any of the provisions hereof or thereof, will (i) conflict
with, or result in any violation of, or cause a default (with or without notice
or lapse of time or both) under, any provision of the Purchaser's Charter
Documents, (ii) conflict with, or result in any violation of, or cause a default
(with or without notice or lapse of time or both) under, or give rise to any
right of termination, amendment, cancellation or acceleration of any obligations
contained in, or the loss of any benefit under, any term, condition or provision
of any provision of any Contract to which the Purchaser is a party, or by which
the Purchaser or any of its assets or properties is or may be bound, (iii)
violate any Law applicable to the Purchaser, or (iv) result in an Encumbrance on
or against any assets, rights or properties of the Purchaser, or on or against
any capital stock or other securities of the Purchaser, or give rise to any
claim against the Company or the Purchaser.
6.3 Consents.
Except as set forth on Schedule 6.3, no Permit, authorization, consent or
------------
approval of or by, or notification of or filing with, any Person (governmental
or otherwise) is required for, as a
30
result of, or in connection with the execution, delivery and performance by the
Purchaser of this Agreement or any of the Related Documents to which it is or
will be a party or the consummation of the transactions contemplated hereby or
thereby.
6.4 Brokers.
The Purchaser has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees or similar
compensation or transaction based payments in connection with the transactions
contemplated by this Agreement or any of the Related Documents.
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Non-Competition Covenant.
(a) Each Shareholder acknowledges and agrees that as a mutual
condition to the respective obligations of the parties at the Closing, and as a
material inducement to the Purchaser to enter into and perform its obligations
hereunder and in consideration of the payments and other consideration to be
received by the Shareholders under this Agreement and the Related Documents,
such Shareholder shall not, without the prior written consent of the Purchaser,
at any time during the period beginning on the Closing Date and ending on the
fifth anniversary thereof (the "Restrictive Period"), (i) directly or indirectly
------------------
engage in, represent in any way, or be connected with, any Competing Business
(as defined below), whether such engagement shall be as a director, an officer,
an owner, an employee, a partner, an Affiliate or other participant in such
Competing Business, (ii) assist others in engaging in any Competing Business in
the manner described in clause (i) above, (iii) induce any employees of the
Purchaser or any of its Subsidiaries or other Affiliates, or any employees of
the Company, at any time during the Restrictive Period to terminate their
employment with the Purchaser or any of its Subsidiaries or other Affiliates, or
to terminate their employment with the Company, or to engage in any Competing
Business, or (iv) induce any customer, vendor or agent or any other Person with
which the Purchaser or any or its Subsidiaries or other Affiliates, or with
which the Company, has a business relationship, contractual or otherwise, at any
time during the Restrictive Period to terminate or alter such business
relationship. This covenant is considered an integral part of this Agreement.
The foregoing restriction shall not apply to the ownership of publicly traded
Securities that represent less than five percent (5%) of the ownership interests
of the issuer.
(b) As used herein, the term "Competing Business" means (i) any
------------------
business conducted in (A) any county in the State of California, including
Alameda County, Alpine County, Xxxxxx County, Butte County, Calaveras County,
Colusa County, Contra Costa County, Del Norte County, El Dorado County, Fresno
County, Xxxxx County, Humboldt County, Imperial County, Inyo County, Xxxx
County, Kings County, Lake County, Lassen County, Los Angeles County, Madera
County, Marin County, Mariposa County, Mendocino County, Merced County, Modoc
County, Mono County, Monterey County, Napa County, Nevada County, Orange County,
Placer County, Plumas County, Riverside County, Sacramento County, San Xxxxxx
County, San Bernardino County, San Diego County, San Francisco County, San
Xxxxxxx
31
County, San Xxxx Obispo County, San Mateo County, Santa Xxxxxxx County, Santa
Xxxxx County, Santa Xxxx County, Shasta County, Sierra County, Siskiyou County,
Xxxxxx County, Sonoma County, Stanislaus County, Xxxxxx County, Tehama County,
Trinity County, Tulare County, Tuolumne County, Ventura County, Yolo County, and
Yuba County, and (B) every other state, province, or other political subdivision
of the United States, Canada, Mexico, Japan, China or Europe that is engaged in
the business of providing transportation services to third party shippers and
customers, or (ii) any business described in the foregoing clause (i) if such
business or the services or products provided or sold by it are competitive,
directly or indirectly, with the Business on the date hereof or on the Closing
Date (or with respect to which there are fixed plans on the date hereof or on
the Closing Date for the provision or sale of the same by the Business).
Anything contained in the immediately preceding sentence to the contrary
notwithstanding, any entity that has separate divisions or business units, one
or more of which are engaged in a business described above, will not be deemed a
Competing Business with respect to those portions of such entity that are not
engaged in a business described above so long as such Shareholder's association
with any such separate divisions or business units (fully taking into account
his, her or its functions and the nature of his, her or its work at such
division or business unit) does not involve existing customers of the Company or
relate in any material respect to that portion of such business which would be a
Competing Business hereunder.
(c) If, at the time of enforcement of this Section 7.1, a court holds
that the restrictions stated herein are unreasonable under the circumstances
then existing, the parties agree that the maximum period, scope or geographical
area reasonable under such circumstances shall be substituted for the stated
period, scope or geographical area. Additionally, with respect to each county
in the State of California, the covenant not to compete set forth in Section
7.1(a) is intended as a separate covenant with respect thereto. If any one of
such covenants is declared invalid for any reason, such determination shall not
affect the validity of the remainder of the covenants or any covenant covering
territory other than the State of California. The other covenants set forth in
Section 7.1(a) shall remain in effect as if the provision had been executed
without the invalid covenants. The parties hereto hereby declare that they
intend that the remaining covenants of the provision continue to be effective
without any covenants that have been declared invalid. The parties hereto
acknowledge that money damages would be an inadequate remedy for any breach of
this Section 7.1. Therefore, in the event of a breach or threatened breach of
this Section 7.1, the Purchaser and/or its successors or assigns may, in
addition to other rights and remedies existing in its or their favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
relief in order to enforce or prevent any violations of the provisions of this
Section 7.1 (without posting a bond or other security).
7.2 Disclosure of Information.
(a) As used in this Agreement, the term "Confidential Information"
------------------------
means, with respect to any Person, all information (whether written or oral)
furnished (whether before or after the date hereof) by such Person or its
owners, members, partners, directors, officers, employees, Affiliates,
representatives (including its financial advisors, attorneys and accountants) or
agents (collectively, "Representatives") to any other Person or its
---------------
Representatives, and all analyses, compilations, forecasts, studies or other
documents prepared by such other Person or its Representatives in connection
with the transactions contemplated by this Agreement that contain or reflect any
such information; provided, however, that the term
-----------------
32
"Confidential Information" shall not include information that (i) is or becomes
publicly available other than as a result of a disclosure by any Person or its
Representatives in violation of this Agreement, or (ii) is or becomes available
to such other Person on a non-confidential basis from a source that is not
prohibited from disclosing such information by any legal, contractual or
fiduciary obligation; provided further, however, that for purposes of this
-------- ------- -------
Section 7.2, from and after the Closing, Confidential Information of the Company
shall be deemed Confidential Information of the Purchaser and shall, as of such
time, no longer be deemed Confidential Information of the Company, as
applicable.
(b) The Purchaser will keep all Confidential Information of the
Company confidential and will not (except as required by applicable Law,
regulation or legal process, and then only after compliance with the last
sentence of this Section 7.2(b)) without the prior written consent of the
Company, disclose any of such Confidential Information in any manner whatsoever,
directly or indirectly, and will not use any Confidential Information of the
Company except for the purposes contemplated by this Agreement; provided,
--------
however, that the Purchaser may reveal Confidential Information of the Company
-------
to its Representatives (i) who need to know such Confidential Information for
the purposes contemplated by this Agreement, (ii) who are informed by the
Purchaser of the confidential nature of the Confidential Information, and (iii)
who agree to act in accordance with the terms of this Section 7.2(b). The
Purchaser will cause its Representatives to observe the terms of this Section
7.2(b), and will be responsible for any breach hereof by any of its
Representatives. In the event that the Purchaser or any of its Representatives
is requested pursuant to, or required by, applicable Law, regulation or legal
process to disclose any Confidential Information of the Company, the Purchaser
will notify the Company promptly so that it may seek a protective order or other
appropriate remedy or, in its sole and absolute discretion, waive compliance
with the terms of this Section 7.2(b). In any event, the Purchaser will furnish
only that portion of the Confidential Information of the Company that it is
advised by counsel is legally required and will exercise all commercially
reasonable efforts to obtain reliable assurance, to the extent it is possible to
obtain the same, that confidential treatment will be afforded to such
Confidential Information.
(c) The Company and each of the Shareholders will keep all
Confidential Information of the Purchaser confidential and will not (except as
required by applicable Law, regulation or legal process, and then only after
compliance with the last sentence of this Section 7.2(c)), without the prior
written consent of the Purchaser, disclose any of such Confidential Information
in any manner whatsoever, directly or indirectly, and will not use any
Confidential Information of the Purchaser except for the purposes contemplated
by this Agreement; provided, however, that the Company and the Shareholders may
-------- -------
reveal Confidential Information of the Purchaser to his, her or its
Representatives (i) who need to know such Confidential Information for the
purposes contemplated by this Agreement, (ii) who are informed by the Company or
such Shareholder of the confidential nature of the Confidential Information, and
(iii) who agree to act in accordance with the terms of this Section 7.2(c). The
Company and each Shareholder will cause his, her or its Representatives to
observe the terms of this Section 7.2(c), and will be responsible for any breach
hereof by any of his, her or its Representatives. In the event that the
Company, any Shareholder or any of their respective Representatives is requested
pursuant to, or required by, applicable Law, regulation or legal process to
disclose any Confidential Information of the Purchaser, the Company or such
Shareholder will notify the Purchaser promptly so that it may seek a protective
order or other appropriate remedy or, in its sole and absolute discretion, waive
compliance with the terms of
33
this Section 7.2(c). In any event, the Company or such Shareholder will furnish
only that portion of the Confidential Information of the Purchaser that he, she
or it is advised by counsel is legally required and will exercise all
commercially reasonable efforts to obtain reliable assurance, to the extent it
is possible to obtain the same, that confidential treatment will be afforded to
such Confidential Information.
(d) Each of the parties hereto recognizes and acknowledges that a
breach of his, her or its covenants in Section 7.2(b) or Section 7.2(c), as the
case may be, will cause irreparable and material loss and damage to the other
parties, the amount of which cannot be determined readily and as to which such
other parties will not have an adequate remedy at law or in damages.
Accordingly, in addition to any remedy such other parties may have in damages by
an action at law, such other parties shall be entitled to the issuance of an
injunction restraining any such breach or threatened breach or any other remedy
at law or in equity for any such breach.
7.3 Use of Proprietary Name.
From and after the Closing, no Shareholder shall use the names "GTS,"
"GTS Transportation Services," or any derivation thereof for any purpose.
7.4 Certain Employee Matters.
On the Closing Date the employees of the Company that are actively
employed by the Company in the Business on the Closing Date shall continue their
employment on terms and conditions similar to those provided by the Company
prior to the Closing Date (any such employees who continue their employment
being referred to herein as the "Hired Employees"), and the Purchaser shall
---------------
initially provide benefits to the Hired Employees, effective as to group health
insurance benefits on the Closing Date and effective as to other employee
benefits as soon as practicable after the Closing Date, in each case that are
reasonably comparable on an overall basis to the benefits provided by the
Company prior to the Closing Date to such employees, subject in the case of the
Management Shareholders to the terms and conditions of their respective
Employment Agreements, as applicable, entered into at the Closing. Nothing
contained in this Agreement shall confer upon any Hired Employee any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement,
including any right to employment or continued employment or to any benefits
that may be provided, directly or indirectly, under any employee benefit plan,
policy or arrangement of the Purchaser, nor shall anything contained in this
Agreement constitute a limitation on or restriction against the right of the
Purchaser to amend, modify or terminate any such plan, policy or arrangement at
any time and from time to time.
7.5 Reservation of Purchaser's Shares.
The Purchaser shall reserve under the Purchaser's 1999 Stock Option Plan
(the "Plan") eight thousand (8,000) shares of common stock, $.01 par value, of
----
the Purchaser for issuance to the Company's employees (other than the Management
Shareholders) upon such employees' exercise of stock options, if any, granted to
such employees under the Plan. The Purchaser's board of directors, in its sole
and absolute discretion, will determine the grantees and all of the
terms and conditions of such stock options, including the number of option
shares, vesting provisions and exercise prices.
ARTICLE VIII
CLOSING OBLIGATIONS
8.1 Closing Obligations of the Seller Group.
At the Closing, the Seller Group shall cause the following documents and
certificates to be executed and delivered to the Purchaser:
(a) Opinion of the Seller Group's Counsel. The Seller Group shall
-------------------------------------
deliver to the Purchaser an opinion of Xxxxxxxxx & Xxxxxxxxxx, counsel for the
Seller Group, dated the Closing Date, substantially in the form of Exhibit A
---------
attached hereto.
(b) Consents and Approvals. The Seller Group shall deliver to the
----------------------
Purchaser duly executed copies of all consents and approvals required for or in
connection with (i) the execution and delivery by the Company and each
Shareholder of this Agreement and each of the Related Documents to which each of
them is a party, and the consummation of the transactions contemplated hereby
and thereby, in form and substance reasonably satisfactory to the Purchaser and
its counsel, and (ii) the continued conduct of the Business as previously
conducted (including any consent identified on Schedule 5.3), in form and
------------
substance reasonably satisfactory to the Purchaser and its counsel.
(c) Related Documents. The Seller Group shall cause each of the
-----------------
following documents (each, a "Related Document," and collectively, the "Related
---------------- -------
Documents") to be executed and/or delivered by the parties thereto at the
---------
Closing:
(i) General Release. Each of the Shareholders shall enter into
---------------
an Agreement and General Release in favor of the Company substantially in
the form of Exhibit B attached hereto (the "General Release");
--------- ---------------
(ii) Xxxxx Employment Agreement. Xxxx Xxxxx shall execute and
--------------------------
deliver an employment agreement with the Company substantially in the
form of Exhibit C attached hereto (the "Xxxxx Employment Agreement");
--------- --------------------------
(iii) Xxxxx Option Agreement. Xxxx Xxxxx and the Purchaser
----------------------
shall execute and deliver an option agreement substantially in the form
of Exhibit D attached hereto (the "Xxxxx Option Agreement");
--------- ----------------------
(iv) Xxxxx Employment Agreement. Xxxxxxx Xxxxx shall execute
--------------------------
and deliver an employment agreement with the Company substantially in the
form of Exhibit E attached hereto (the "Xxxxx Employment Agreement"); and
--------- --------------------------
(v) Xxxxx Option Agreement. Xxxxxxx Xxxxx and the Purchaser
----------------------
shall execute and deliver an option agreement substantially in the form
of Exhibit F attached hereto (the "Xxxxx Option Agreement").
--------- ----------------------
35
(d) Seller Certificates. The Seller Group shall cause each of the
-------------------
following certificates to be executed and/or delivered, as the case may be, by
the Person who or which is the subject thereof:
(i) a certificate of the secretary of the Company, dated as of
the Closing Date, certifying (A) that true, correct and complete copies
of the Company's Charter Documents as in effect on the Closing Date are
attached thereto, (B) as to the incumbency and genuineness of the
signatures of each officer of the Company executing this Agreement and
the Related Documents on behalf of the Company; and (C) the genuineness
of the resolutions (attached thereto) of the board of directors or
similar governing body of the Company authorizing the execution, delivery
and performance of this Agreement and the Related Documents to which the
Company is a party and the consummation of the transactions contemplated
hereby and thereby;
(ii) certificates dated within ten (10) days of the Closing
Date of the secretaries of state of the states in which the Company is
organized and qualified to do business, certifying as to the good
standing and non-delinquent Tax status of such Person;
(iii) a certificate signed by a principal executive officer of
the Company and each Shareholder, dated as of the Closing Date, and
certifying as to the amount of Funded Indebtedness existing on the
Closing Date; and
(iv) certificates of each Shareholder and a principal executive
officer of the Company, each dated as of the Closing Date, certifying
that such Shareholder and the Company, as applicable, are not foreign
persons within the meaning of Section 1445 of the Code.
(e) Spousal Consents. Each Shareholder shall deliver a Spousal
----------------
Consent executed by his spouse in the form attached hereto as Exhibit G.
---------
8.2 Closing Obligations of the Purchaser.
At the Closing, the Purchaser shall cause the following documents and
certificates to be executed and delivered to the Seller Group:
(a) Opinion of the Purchaser's Counsel. The Purchaser shall deliver
----------------------------------
to the Seller Group an opinion of Holland & Knight LLP, counsel for the
Purchaser, dated the Closing Date, substantially in the form of Exhibit H
---------
attached hereto.
(b) Consents and Approvals. The Purchaser shall deliver to the Seller
----------------------
Group duly executed copies of all consents and approvals required for or in
connection with the execution and delivery by the Purchaser of this Agreement
and each of the Related Documents to which it is a party, and the consummation
of the transactions contemplated hereby and thereby, in form and substance
reasonably satisfactory to the Seller Group.
(c) Related Documents. The Purchaser shall cause each of the Related
-----------------
Documents to which the Purchaser is a party to be executed and/or delivered by
the Purchaser at the Closing.
36
(d) Purchaser Certificates. The Purchaser shall cause each of the
----------------------
following certificates to be executed and/or delivered, as the case may be, by
the Person who or which is the subject thereof:
(i) a certificate of the secretary of the Purchaser, dated as
of the Closing Date, certifying (A) that true, correct and complete
copies of the Purchaser's Charter Documents as in effect on the Closing
Date are attached thereto, (B) as to the incumbency and genuineness of
the signatures of each officer of the Purchaser executing this Agreement
and the Related Documents on behalf of the Purchaser; and (C) the
genuineness of the resolutions (attached thereto) of the board of
directors or similar governing body of the Purchaser authorizing the
execution, delivery and performance of this Agreement and the Related
Documents to which the Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby; and
(ii) certificates dated within ten (10) days of the Closing
Date of the secretaries of state of the states in which the Purchaser is
organized, certifying as to the good standing and non-delinquent Tax
status of the Purchaser.
ARTICLE IX
INDEMNIFICATION
9.1 Generally.
(a) Subject to the further provisions of this Article IX, the Seller
Indemnifying Persons jointly and severally shall indemnify the Purchaser
Indemnified Persons for, and hold each of them harmless from and against, any
and all Purchaser Losses arising from or in connection with any of the
following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of the Company contained in this Agreement or any Related
Document or in any certificate delivered by the Company in connection
herewith or therewith at or before the Closing (or any facts or
circumstances constituting any such untruth, inaccuracy or breach); and
(ii) the breach of any covenant or agreement of the Company
contained in this Agreement or any Related Document.
(b) Subject to the further terms of this Article IX, each Shareholder
shall, severally and not jointly, indemnify the Purchaser Indemnified Persons
for, and hold each of them harmless from and against, any and all Purchaser
Losses arising from or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of such Shareholder contained in Article IV of this Agreement or
any Related Document or in any certificate delivered by such Shareholder
(in his, her or its capacity as a shareholder of the Company) in
connection herewith or therewith at or before the Closing (or any facts
or circumstances constituting any such untruth, inaccuracy or breach);
and
37
(ii) the breach of any covenant or agreement of such
Shareholder contained in this Agreement or any Related Document.
(c) Subject to the further terms of this Article IX, the Purchaser
shall indemnify the Seller Indemnified Persons for, and hold each of them
harmless from and against, any and all Seller Losses arising from or in
connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of Purchaser contained in this Agreement or any Related Document
or in any certificate delivered by the Purchaser in connection herewith
or therewith at or before the Closing (or any facts or circumstances
constituting any such untruth, inaccuracy or breach); and
(ii) the breach of any covenant or agreement of the Purchaser
contained in this Agreement or any Related Document.
9.2 Assertion of Claims.
No claim for indemnification shall be brought under Section 9.1 for a
breach of a representation or warranty unless the Indemnified Persons, or any of
them, at any time prior to the applicable Survival Date, give the Indemnifying
Persons (a) written notice of the existence of any such claim, specifying the
nature and basis of such claim and the amount thereof, to the extent known, or
(b) written notice pursuant to Section 9.3 of any Third Party Claim, the
existence of which might give rise to such a claim for indemnification. Upon
the giving of such written notice as aforesaid, the Indemnified Persons, or any
of them, shall have the right to commence legal proceedings subsequent to the
Survival Date for the enforcement of their rights under Section 9.1.
9.3 Notice and Defense of Third Party Claims.
The obligations and liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of liability by third parties (each, a
"Third Party Claim") shall be subject to the following terms and conditions:
-----------------
(a) The Indemnified Persons shall give prompt written notice to the
Indemnifying Persons of any Third Party Claim that might give rise to any Loss
by the Indemnified Persons, stating the nature and basis of such Third Party
Claim, and the amount thereof to the extent known; provided, however, that no
-------- -------
delay on the part of the Indemnified Persons in notifying any Indemnifying
Persons shall relieve the Indemnifying Persons from any liability or obligation
hereunder unless (and then solely to the extent that) the Indemnifying Person
thereby is prejudiced by the delay. Such notice shall be accompanied by copies
of all relevant documentation with respect to such Third Party Claim, including
any summons, complaint or other pleading that may have been served, any written
demand or any other document or instrument.
(b) If the Indemnifying Persons acknowledge in a writing delivered to
the Indemnified Persons that such Third Party Claim is properly subject to their
indemnification obligations hereunder, and the Indemnifying Persons demonstrate
to the Indemnified Persons' reasonable satisfaction that the Indemnifying
Persons have the financial resources to meet such
38
indemnification obligations, then the Indemnifying Persons shall have the right
to assume the defense of any Third Party Claim at their own expense and by their
own counsel, which counsel shall be reasonably satisfactory to the Indemnified
Persons; provided, however, that the Indemnifying Persons shall not have the
-------- -------
right to assume the defense of any Third Party Claim, notwithstanding the giving
of such written acknowledgment, if (i) the Indemnified Persons have been advised
by counsel that there are one or more legal or equitable defenses available to
them that are different from or in addition to those available to the
Indemnifying Persons, and, in the reasonable opinion of the Indemnified Persons,
counsel for the Indemnifying Persons could not adequately represent the
interests of the Indemnified Persons because such interests could be in conflict
with those of the Indemnifying Persons, (ii) such action or proceeding involves,
or could have a material effect on, any matter beyond the scope of the
indemnification obligation of the Indemnifying Persons, or (iii) the
Indemnifying Persons have not assumed the defense of the Third Party Claim in a
timely fashion.
(c) If the Indemnifying Persons assume the defense of a Third Party
Claim (under circumstances in which the proviso to Section 9.3(b) is not
applicable), the Indemnifying Persons shall not be responsible for any legal or
other defense costs subsequently incurred by the Indemnified Persons in
connection with the defense thereof. If the Indemnifying Persons do not
exercise their right to assume the defense of a Third Party Claim by giving the
written acknowledgment referred to in Section 9.3(b), or are otherwise
restricted from so assuming by the proviso to Section 9.3(b), the Indemnifying
Persons nevertheless shall be entitled to participate in such defense with their
own counsel and at their own expense. If the defense of a Third Party Claim is
assumed by the Indemnified Persons pursuant to clause (i) or clause (ii) of the
proviso to Section 9.3(b), the Indemnified Persons shall not be entitled to
settle such Third Party Claim without the prior written consent of the
Indemnifying Persons, which consent shall not be unreasonably withheld or
delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim, (i) the Indemnified Persons shall be entitled to
participate in such defense with their own counsel at their own expense, and
(ii) the Indemnifying Persons shall not make any settlement of any claims
without the prior written consent of the Indemnified Persons, which consent
shall not be unreasonably withheld or delayed.
9.4 Survival of Representations and Warranties.
(a) Subject to the further provisions of this Section 9.4, the
representations and warranties of the Seller Group contained in Article V or in
any certificate or other writing delivered in connection with this Agreement
shall survive the Closing, and shall expire and be of no further force or effect
on the second anniversary of the Closing Date; provided, however, that the
-------- -------
representations and warranties contained in Article IV, Section 5.1, Section
5.2, Section 5.3, Section 5.4, Section 5.5, Section 5.10 and Section 5.20 shall
survive the Closing indefinitely and the representations and warranties
contained in Section 5.9, Section 5.15, Section 5.18 and Section 5.19 shall
survive the Closing until ninety (90) days after the expiration of the
applicable statutes of limitations for claims applicable to the matters covered
thereby. Subject to the further provisions of this Section 9.4, the
representations and warranties of the Shareholders contained in Article IV or in
any certificate or other writing delivered in connection with this Agreement and
the representations and warranties of the Purchaser contained in Article VI or
in any certificate or other writing delivered in connection with this Agreement
shall survive the Closing
39
indefinitely. The covenants and other agreements of the Seller Group and the
Purchaser contained in this Agreement shall survive the Closing until they are
performed in full or otherwise expire or are terminated by their terms. For
convenience of reference, the date upon which any representation or warranty
contained herein shall terminate, if any, is referred to as the "Survival Date."
-------------
(b) From and after the Closing, no Shareholder shall have any
recourse against the Company for any breach of any representation, warranty,
covenant or agreement of the Company set forth in this Agreement or in any
certificate or other writing delivered by the Company in connection with this
Agreement.
9.5 Limitations on Indemnification.
(a) Indemnity Baskets for the Shareholders. From and after the
--------------------------------------
Closing, the Purchaser Indemnified Persons shall not have the right to be
indemnified pursuant to Section 9.1(a) and/or Section 9.1(b) unless and until
the Purchaser Indemnified Persons (or any member thereof) shall have incurred on
a cumulative basis aggregate Losses in an amount exceeding $200,000 (the
"Shareholder Basket"), whereupon the Purchaser Indemnified Persons (or any
------------------
member thereof) shall be entitled to indemnification for all Losses incurred by
the Purchaser Indemnified Persons (or any member thereof); provided, however,
-------- -------
that in no event shall the limitations set forth in this Section 9.5(a) apply
with respect to (i) any breaches of those representations and warranties set
forth in Article IV, Section 5.1, Section 5.2, Section 5.3, Section 5.4, Section
5.5, Section 5.7 Section 5.9, Section 5.10, Section 5.18, Section 5.19 or
Section 5.20 (collectively, the "Excluded Seller Representations"), or (ii) any
-------------------------------
willful or knowing breach or any fraudulent or intentional acts or intentional
misrepresentations of any member of the Seller Group; and provided further,
-------- -------
however, that the amount of the Shareholder Basket shall be reduced, dollar for
-------
dollar, by the amount of any Losses suffered or incurred by the Purchaser
Indemnified Persons arising from or in connection with (A) the lawsuit filed by
GST Corporation; against the Company in the State of Tennessee disclosed on
Schedule 5.14(a) to this Agreement; (B) the establishment, operation or
----------------
maintenance of the Company's 401(k) Plan disclosed on Schedule 5.18(a) to this
----------------
Agreement; and (C) the pending claim by United Distillers and Vintners described
on Schedule 5.16(b) hereto.
----------------
(b) Indemnity Limitations for the Shareholders. From and after the
------------------------------------------
Closing, the sum of all Losses pursuant to which indemnification is payable by
any Shareholder pursuant to Section 9.1(a) and/or Section 9.1(b) shall not
exceed his, her or its pro rata share of the Aggregate Consideration; provided,
--------
however, that in no event shall the limitations set forth in this Section 9.5(b)
-------
apply with respect to (i) the Excluded Seller Representations, or (ii) any
willful or knowing breach of such representations or warranties or any
fraudulent or intentional acts or intentional misrepresentations of any
Shareholder.
(c) Indemnity Baskets for the Purchaser. From and after the Closing,
-----------------------------------
the Seller Indemnified Persons shall not have the right to be indemnified
pursuant to Section 9.1(c) unless and until the Seller Indemnified Persons (or
any member thereof) shall have incurred on a cumulative basis aggregate Losses
in an amount exceeding $100,000, whereupon the Seller Indemnified Persons (or
any member thereof) shall be entitled to indemnification for all Losses incurred
by the Seller Indemnified Persons (or any member thereof); provided, however,
-------- -------
that in no event shall the limitations set forth in this Section 9.5(c) apply
with respect to any willful or
40
knowing breach of such representations or warranties or any fraudulent or
intentional acts or intentional misrepresentations of the Purchaser.
(d) Indemnity Limitations for the Purchaser. From and after the
---------------------------------------
Closing, the sum of all Losses pursuant to which indemnification is payable by
the Purchaser pursuant to Section 9.1(c) shall not exceed the Aggregate
Consideration; provided, however, that in no event shall the limitations set
-------- -------
forth in this Section 9.5(d) apply with respect to any willful or knowing breach
of such representations or warranties or any fraudulent or intentional acts or
intentional misrepresentations of the Purchaser.
9.6 Satisfaction of Indemnification Obligations.
The obligations of the Seller Indemnifying Persons to indemnify the
Purchaser Indemnified Persons for Purchaser Losses (including those incurred as
a result of the indemnification events set forth in Section 9.1(a) and Section
9.1(b)) shall be paid in cash by the Seller Indemnifying Persons to the
Purchaser Indemnified Persons by wire transfer of immediately available funds to
the accounts or accounts specified by the applicable Purchaser Indemnified
Persons for such purposes. Anything in this Agreement to the contrary
notwithstanding, in the event of any breach or default of any provision of this
Agreement or any Related Document by any member of the Seller Group, the
Purchaser Indemnified Persons shall have, in addition to its indemnification
rights pursuant to this Article IX, the right and option to set-off against
amounts owed (including the Earn Out Amount) by any member of the Purchaser
Indemnified Persons to any Seller Indemnifying Person (a) any amount owed by any
member of the Seller Group to any member of the Purchaser Indemnified Persons
under this Agreement, the Related Documents or otherwise, and (b) any Purchaser
Losses, including those incurred as a result of the indemnification events set
forth in Section 9.1(a) and Section 9.1(b). In the event of the election by the
Purchaser Indemnified Persons (or any member thereof) to exercise any right of
set-off pursuant to this Section 9.6, the Purchaser shall deliver a written
notice to each Seller Indemnifying Person specifying the specific right of set-
off to be exercised and the amount thereof.
9.7 Recourse Against Options and Shares.
Anything in this Agreement to the contrary notwithstanding, in the event of
a breach or default of any provision of this Agreement or any Related Document
by any member of the Seller Group, the Purchaser Indemnified Persons shall have,
in addition to its indemnification rights pursuant to this Article IX, the right
and option to (a) cancel any and all unexercised Options, and (ii) repurchase
any and all shares of the Purchaser's common stock acquired by any and all
members of the Seller Group pursuant to the exercise of Options at a repurchase
price equal to the original price paid to the Purchaser for such shares. In the
event of the election by the Purchaser Indemnified Persons (or any member
thereof) to exercise any right under this Section 9.7, the Purchaser shall
deliver a written notice to each member of the Seller Group specifying the
specific right to be exercised and the amount thereof.
41
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment.
This Agreement may not be altered or otherwise amended except pursuant to
an instrument in writing signed by each party, except that any party may waive
any obligation owed to it by another party under this Agreement. No waiver by
any party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.2 Entire Agreement.
This Agreement and the other agreements and documents referenced herein
(including the Schedules, Annexes and Exhibits (in their executed form) attached
hereto) and any other document or agreement contemporaneously entered into with
this Agreement contain all of the agreements among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior
agreements or understandings among the parties with respect thereto (including
the Letter of Intent dated on or about May 23, 2000 and the Extension of the
Letter of Intent dated on or about July 25, 2000, by and between the Company and
the Purchaser).
10.3 Severability.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
10.4 Benefits of Agreement.
All of the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Except as expressly provided herein, this Agreement shall
not confer any rights or remedies upon any Person other than the foregoing.
Anything contained herein to the contrary notwithstanding, (a) this Agreement
shall not be assignable by any member of the Seller Group without the express
written consent of the Purchaser and (b) the Purchaser may, without the consent
of any other party hereto, (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and designate one or more of its
Affiliates to perform its obligations hereunder, and (ii) assign any or all of
its rights and interests hereunder as security for any obligations arising in
42
connection with the financing of the transactions contemplated hereby, in any or
all of which cases the Purchaser nonetheless shall remain responsible for the
performance of its obligations hereunder.
10.5 Expenses; Sales and Transfer Taxes.
Except as otherwise provided in this Agreement, the Purchaser on the one
hand and the Seller Group on the other hand shall each bear their own expenses
incurred in connection with this Agreement and the Related Documents (including
the legal, accounting and due diligence fees, costs and expenses incurred by
such party).
10.6 Remedies.
The parties each shall have and retain all rights and remedies existing in
their favor under this Agreement, at law or in equity, including rights to bring
actions for specific performance, injunctive and other equitable relief
(including the remedy of rescission) to enforce or prevent a breach or violation
of any provision of this Agreement, and all such rights and remedies shall, to
the extent permitted by applicable Law, be cumulative and a party's pursuit of
any such right or remedy shall not preclude such party from exercising or
pursuing any other available right or remedy.
10.7 Notices.
All notices or other communications pursuant to this Agreement shall be in
writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to the Company, to:
GTS Transportation Services, Inc.
0000 Xxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx Xxxxx
Telephone No.: (000) 000-0000 or
(000) 000-0000
Facsimile No.: (000) 000-0000
with a copy, if prior to the Closing, to:
Xxxxxxxxx & Kozachenko
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000)000-0000
43
and with a copy, if after the Closing, to the Purchaser
at its address below;
(ii) if to any Shareholder, to:
such shareholder at his address set forth on Annex I
with a copy to:
Xxxxxxxxx & Kozachenko
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000)000-0000
(iii) if to the Purchaser, to:
Pacer International, Inc.
0000 Xxxxx Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Apollo Management, L.P.
1301 Avenue of the Americas, 00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. Xxxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Holland & Knight LLP
00 Xxxxx Xxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
All such notices and other communications shall be deemed to have been given and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of delivery by telecopy, on the date of such delivery, (iii) in
the case of delivery by nationally-recognized,
44
overnight courier, on the Business Day following dispatch, and (iv) in the case
of mailing, on the third Business Day following such mailing.
10.8 Counterparts and Facsimile Execution.
This Agreement may be executed in two or more counterparts, and each such
counterpart shall be deemed to be an original instrument. All such counterparts
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
(by facsimile or otherwise) to the other parties, it being understood that all
parties need not sign the same counterpart. Any counterpart or other signature
hereupon delivered by facsimile shall be deemed for all purposes as constituting
good and valid execution and delivery of this Agreement by such party.
10.9 Governing Law.
(a) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE DOMESTIC LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF
CALIFORNIA, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA TO BE APPLIED.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH THAT APPLICABLE LAWS, EVIDENTIARY RULES AND
JUDICIAL PROCEDURES APPLY OR THAT APPLICABLE LAWS AND ARBITRATION RULES IN CASES
IN WHICH THE PARTIES HAVE EXPRESSLY AGREED TO SUBMIT ANY SUCH DISPUTES TO
BINDING ARBITRATION APPLY, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY
A JUDGE APPLYING SUCH APPLICABLE LAWS, EVIDENTIARY RULES AND JUDICIAL
PROCEDURES, OR BY AN ARBITRATOR APPLYING APPLICABLE LAWS AND ARBITRATION RULES
IN SUCH CASES WHERE THEY HAVE EXPRESSLY AGREED TO BINDING ARBITRATION.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. THE PARTIES
HERETO AGREE THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL
COURTS LOCATED IN THE CITIES OF OAKLAND OR SAN FRANCISCO, CALIFORNIA, AND ANY
APPELLATE COURT FROM ANY THEREOF.
10.10 Jurisdiction and Venue.
(a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for himself, herself or itself and his, her or its property, to the
exclusive jurisdiction of any
00
Xxxxxxxxxx xxxxx xxxxx xx xxxxxxx xxxxx xx xxx Xxxxxx Xxxxxx of America sitting
in San Francisco or Oakland, California, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, any of the Related Documents or the transactions contemplated
hereunder or thereunder or for recognition or enforcement of any judgment
relating thereto, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such California state court or, to
the extent permitted by law, in any such federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent he, she or it may legally and effectively do so,
any objection that he, she or it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement, any of the Related Documents or the transactions contemplated
hereunder or thereunder in any California state or federal court of the United
States of America sitting in San Francisco or Oakland, California. Each of the
parties hereto hereby irrevocably waives, to the fullest extent he, she or it
may legally and effectively do so, the defense of an inconvenient forum to the
maintenance of such suit, action or proceeding in any such court.
(c) Each of the parties hereto hereby agree that the mailing by
certified or registered mail, return receipt requested, of any process required
by any such court shall constitute valid and lawful service of process against
them, without the necessity for service by any other means provided by law.
10.11 Mutual Contribution.
The parties to this Agreement and their respective counsel have
contributed mutually to the drafting of this Agreement. Consequently, no
provision of this Agreement shall be construed against any party on the ground
that a party drafted the provision or caused it to be drafted.
10.12 No Third Party Beneficiaries.
Except as expressly provided in this Agreement, this Agreement shall not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and permitted assigns.
10.13 Independence of Covenants and Representations and Warranties.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached shall not affect the incorrectness of or a breach
of a representation and warranty hereunder.
46
10.14 Interpretation; Construction.
The term "Agreement" means this Stock Purchase Agreement together with
---------
all Schedules, Annexes and Exhibits hereto, as the same may from time to time be
amended, modified, supplemented or restated in accordance with the terms hereof.
Certain capitalized terms used and not otherwise defined elsewhere in this
Agreement have the meanings given to them in Annex II attached hereto. In this
--------
Agreement, the term "best knowledge" of any Person means (i) the actual
--------------
knowledge of such Person, and (ii) that knowledge that should have been acquired
by such Person after making such due inquiry and exercising such due diligence
as a prudent businessperson would have made or exercised in the management of
his or her business affairs, including due inquiry of those directors, officers,
key employees and professional advisors (including attorneys, accountants and
consultants) of such Person who could reasonably be expected to have actual
knowledge of the matters in question. For purposes of the preceding sentence,
the knowledge, both actual and constructive, of each Shareholder and each other
director, officer and key employee of the Company shall be imputed to each
member of the Seller Group. The use in this Agreement of the word "including"
means "including, without limitation." The words "herein," "hereof,"
"hereunder," "hereby," "hereto," "hereinafter," and other words of similar
import refer to this Agreement as a whole, including the Schedules, Annexes and
Exhibits, as the same may from time to time be amended, modified, supplemented
or restated, and not to any particular article, section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to articles,
sections, subsections, paragraphs, subparagraphs, clauses, Schedules, Annexes
and Exhibits mean such provisions of this Agreement and the Schedules, Annexes
and Exhibits attached to this Agreement, except where otherwise stated. The
title of and the article, section and paragraph headings in this Agreement are
for convenience of reference only and shall not govern or affect the
interpretation of any of the terms or provisions of this Agreement. The use
herein of the masculine, feminine or neuter forms also shall denote the other
forms, as in each case the context may require. Where specific language is used
to clarify by example a general statement contained herein, such specific
language shall not be deemed to modify, limit or restrict in any manner the
construction of the general statement to which it relates. The language used in
this Agreement has been chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
Accounting terms used but not otherwise defined herein shall have the meanings
given to them under GAAP. Unless expressly provided otherwise, the measure of a
period of one month or year for purposes of this Agreement shall be that date of
the following month or year corresponding to the starting date, provided that if
--------
no corresponding date exists, the measure shall be that date of the following
month or year corresponding to the next day following the starting date. For
example, one month following February 18 is March 18, and one month following
March 31 is May 1.
* * * * *
47
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the date first written above.
The Purchaser:
-------------
PACER INTERNATIONAL, INC.
/s/ XX Xxxxxxxx
By:_______________________________________
XX Xxxxxxxx
Print Name:____________________________
Executive Vice President
Title:_________________________________
The Company:
-----------
GTS TRANSPORTATION SERVICES, INC.
/s/ Xxxxxxx Xxxxx
By:_______________________________________
Xxxxxxx Xxxxx
Print Name:____________________________
President
Title:_________________________________
The Shareholders:
----------------
/s/ Xxxx Xxxxx
__________________________________________
XXXX XXXXX
/s/ Xxxxxxx Xxxxx
__________________________________________
XXXXXXX XXXXX
ANNEX I
Shareholders
------------
Name and Address Number of Shares
---------------- ----------------
Xxxx Xxxxx 2,649
c/o GTS Transportation Services, Inc.
0000 Xxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000 or
(000) 000-0000
Facsimile No.: (000) 000-0000
Xxxxxxx Xxxxx 2,649
c/o GTS Transportation Services, Inc.
0000 Xxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000 or
(000) 000-0000
Facsimile No.: (000) 000-0000
ANNEX II
Certain Definitions
-------------------
"Acquisition Proposal" means any offer, proposal or indication of
--------------------
interest in (i) the direct or indirect acquisition or sale of all or any
material part of the Company (whether by stock sale or asset sale), (ii) a
merger, consolidation or other similar business combination, or a
reorganization, recapitalization or other similar transaction, directly or
indirectly involving the Company, (iii) the direct or indirect acquisition of
any capital stock or other securities of the Company, or (iv) any stock sale or
issuance or debt and/or equity financing directly or indirectly involving the
Company.
"Affiliate" means, with respect to any Person, (i) a partner, member,
---------
owner, shareholder, trustee, director or officer of such Person or of any Person
identified in clause (iii) below, (ii) a spouse, parent, sibling or descendant
of such Person (or spouse, parent, sibling or descendant of any partner, member,
owner, shareholder, trustee, director or officer of such Person or of any Person
identified in clause (iii) below), and (iii) any other Person that, directly or
indirectly through one or more intermediaries, Controls, is Controlled by or is
under common Control with such Person.
"Aggregate Consideration" means the sum of the Purchase Price and the
-----------------------
Funded Indebtedness as of the Closing Date.
"Arbitrating Accountants" means such independent "Big 5" public
-----------------------
accounting firm as shall be agreed upon by the Purchaser and the Shareholders'
Representative in writing or, if the Purchaser and the Shareholders'
Representative cannot so agree, by lot from among the independent "Big 5" public
accounting firms (other than the Purchaser's Accountants).
"BCI" means Beverage Canners International Corporation, a Delaware
---
corporation and customer of the Company.
"Business Day" means any day that is not a Saturday, Sunday or a day
------------
on which banking institutions in New York, New York are authorized or required
to be closed.
"Capital Lease" means any obligation to pay rent or other amounts
-------------
under any lease of (or other arrangement conveying the right to use) assets or
properties, whether real, personal or mixed, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of such
Person as of such date computed in accordance with GAAP.
"Charter Documents" means, (i) as to any corporation, the articles,
-----------------
certificate or memorandum of incorporation or association of such corporation,
the by-laws of such corporation, and each other instrument or other document
governing such corporation's existence and internal affairs, (ii) as to any
limited partnership, the certificate of limited partnership of such partnership,
the agreement of limited partnership of such partnership, and each other
instrument or other document governing such partnership's existence and internal
affairs, (iii) as to any limited liability company, the articles, certificate or
memorandum of organization of such limited liability company, the operating
agreement of such limited liability company, and each other instrument or other
document governing such limited liability company's existence and internal
II-1
affairs, and (iv) as to any trust, the agreement or other instrument creating
such trust and any and all other documents, instruments and certificates
granting (and limiting) the powers and authorities of such trust and the
trustee(s) thereof and governing the activities and operations of such trust and
the trustee(s) thereof, in each case in clauses (i) through (iv) above, as
amended and restated and in effect at the time in question.
"Commission" means the Securities and Exchange Commission, or any
----------
Governmental Entity succeeding to the functions thereof.
"Contract" means any loan or credit agreement, note, bond, mortgage,
--------
indenture, license, lease, sublease, grant of easement, right of way, purchase
order, sale order, service order, or other contract, agreement, commitment,
instrument, permit, concession, franchise or license, whether written or oral.
"Control" means, with respect to any Person, the possession, directly
-------
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
Contract or otherwise.
"Earn Out Period" means, with respect to the Company, the twelve-month
---------------
period commencing on January 1, 2001, and ending on December 31, 2001.
"Employee Benefit Plan" means (i) any qualified or non-qualified
---------------------
Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA), including
any Multi-employer Plan (as defined in Section 3(37) of ERISA), Multiple
Employer Plan (as defined in Section 413 of the Code), or Defined Benefit
Pension Plan (as defined in Section 3(35) of ERISA), (ii) any Employee Welfare
Benefit Plan (as defined in Section 3(1) of ERISA), or (iii) any employee
benefit, fringe benefit, compensation, severance, incentive, bonus, profit-
sharing, stock option, stock purchase or other plan, program or arrangement,
whether or not subject to ERISA and whether or not funded.
"Encumbrances" means and includes security interests, mortgages,
------------
liens, pledges, charges, easements, reservations, restrictions, rights of way,
servitudes, options, rights of first refusal, community property interests,
equitable interests, restrictions of any kind and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
"Environmental, Health and Safety Laws" means all Laws, Permits,
-------------------------------------
Orders, Contracts and common law relating to or addressing pollution or
protection of the environment, public health and safety, or employee health and
safety, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, in each case as amended and in effect from time
to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor legislation thereto, and the rules and regulations
promulgated thereunder, all as the same shall be in effect from time to time.
II-2
"ERISA Affiliate" means, with respect to any Person, any other Person
---------------
that is a member of a "controlled group of corporations" with, or is under
"common control" with, or is a member of the same "affiliated service group"
with such Person as defined in Section 414(b), 414(c), 414(m) or 414(o) of the
Code.
"Funded Indebtedness" means, without duplication, the aggregate amount
-------------------
(including the current portions thereof) of all (i) indebtedness for money
borrowed by the Company from other Persons (including any prepayment and similar
penalties) and purchase money indebtedness (other than accounts payable in the
ordinary course of business, consistent with past practice); (ii) indebtedness
of the type described in clause (i) above guaranteed, directly or indirectly, in
any manner by the Company or in effect guaranteed, directly or indirectly, in
any manner by the Company through a Contract or other understanding or
arrangement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the debtor, or to purchase indebtedness, or to purchase and pay for
property if not delivered or pay for services if not performed, primarily for
the purpose of enabling the debtor to make payment of the indebtedness or to
assure the owners of the indebtedness against loss (any such Contract or other
understanding or arrangement being referred to as a "Guaranty") (but the term
--------
"Guaranty" shall exclude endorsements of checks and other instruments in the
ordinary course or business, consistent with past practice); (iii) all
indebtedness of the type described in clause (i) above secured by any
Encumbrance upon assets or properties owned by the Company even though the
Company has not in any manner become liable for the payment of such
indebtedness; (iv) Capital Leases, and (v) all interest expense and other
charges accrued but unpaid, and all prepayment penalties and premiums, on or
relating to any of such indebtedness. Funded Indebtedness of the Company as of
the date hereof is set forth on Schedule 5.13(d).
----------------
"GAAP" means generally accepted accounting principles in the United
----
States, as promulgated by the American Institute of Certified Public
Accountants, consistently applied.
"Governmental Entity" means any domestic or foreign government or
-------------------
political subdivision thereof, whether on a federal, state, provincial or local
level and whether legislative, executive, judicial in nature, including any
agency, authority, board, bureau, commission, court, department or other
instrumentality thereof.
"Guaranty" has the meaning given to it in the definition of Funded
--------
Indebtedness.
"Income Taxes" means all income Taxes (including any Tax on or based
------------
upon net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits (including state Taxes imposed on
subchapter S corporations)).
"Indemnified Persons" means and includes the Seller Indemnified
-------------------
Persons and/or the Purchaser Indemnified Persons, as the case may be.
"Indemnifying Persons" means and includes the Seller Indemnifying
--------------------
Persons and/or the Purchaser Indemnifying Persons, as the case may be.
"Intellectual Property Rights" means all intellectual property rights,
----------------------------
including patents, patent applications, trademarks, trademark applications,
trade names, service marks, service xxxx applications, trade dress, logos and
designs, and the goodwill connected with the
II-3
foregoing, copyrights and copyright applications, know-how, trade secrets,
proprietary processes and formulae, confidential information, franchises,
licenses, inventions, instructions, marketing materials and all documentation
and media constituting, describing or relating to the foregoing, including
manuals, memoranda and records.
"Law" means any applicable domestic or foreign law, statute, treaty,
---
rule, directive, regulation, ordinance or similar provision having the force or
effect of law, whether on a federal, state, provincial or local level (including
all Environmental, Health and Safety Laws), or any applicable Order of any
Governmental Entity.
"Liability" means any actual or potential liability or obligation,
---------
whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, or liquidated or unliquidated, and whether due or to
become due, regardless of when asserted.
"Litigation Expense" means any out-of-pocket expenses incurred in
------------------
connection with investigating, defending or asserting any claim, legal or
administrative action, suit or Proceeding incident to any matter indemnified
against hereunder, including court filing fees, court costs, arbitration fees or
costs, witness fees, and fees and disbursements of outside legal counsel,
investigators, expert witnesses, accountants and other professionals.
"Losses" means any and all losses (including a diminution in the value
------
of the Company's capital stock), claims, shortages, damages, expenses (including
reasonable attorneys' and accountants' and other professionals' fees and
Litigation Expenses), assessments, Taxes (including interest and penalties
thereon), and insurance premium increases arising from or in connection with any
such matter that is the subject of indemnification under Article IX, as reduced
by (i) the amount actually recovered under insurance policies (net of
deductibles and incidental expenses resulting therefrom), and (ii) Tax benefits
actually realized under Tax Laws in respect of such Losses, net of all
reasonable costs and expenses of recovering any such Tax benefits. For purposes
of determining Tax benefits actually realized, there shall be included only
those Tax benefits resulting from such Loss that are actually realized before
the taxable year in which a payment for a Loss is received and Tax benefits
resulting from such Loss that are actually realized in the taxable year in which
a payment for a Loss is received, as increased by (x) the amount of any Taxes
---------
payable on such indemnification payment and (y) the amount of any Taxes payable
on the payment referred to in clause (x) hereof. For purposes of calculating
the amount of Losses incurred by the Purchaser Indemnified Persons for which the
Seller Indemnifying Person is obligated to indemnify the Purchaser Indemnified
Persons, such amount shall be computed as the product arrived at by multiplying
(i) the actual amount of Losses incurred by the Purchaser Indemnified Persons by
(ii) the quotient arrived at by dividing the Aggregate Consideration by the
consolidated operating income of the Company and its Subsidiaries for the twelve
(12) months ended December 31, 1999, calculated in accordance with GAAP applied
on a basis consistent with the preparation of the statement of income for the
fiscal year then ended that is included in the Annual Financial Statements. The
Purchaser and each member of the Seller Group hereby agree that the Purchase
Price shall be deemed to be decreased by the amount of any payment made by the
Seller Indemnifying Persons to the Purchaser with respect to Losses incurred by
the Purchaser Indemnified Persons for which the Seller Indemnifying Persons was
obligated to indemnify the Purchaser Indemnified Persons.
"Management Shareholders" means Xxxx Xxxxx and Xxxxxxx Xxxxx.
-----------------------
II-4
"Options" means, collectively, all options that are the subject of the
-------
Xxxxx Option Agreement and the Xxxxx Option Agreement.
"Orders" means judgments, writs, decrees, compliance agreements,
------
injunctions or judicial or administrative orders and determinations of any
Governmental Entity or arbitrator.
"Permits" means all permits, licenses, authorizations, registrations,
-------
franchises, approvals, consents, certificates, variances and similar rights
obtained, or required to be obtained, from a Governmental Entity.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due
----------------------
and payable or being contested in good faith by appropriate Proceedings and for
which there are adequate reserves on the books, (ii) workers' or unemployment
compensation liens arising in the ordinary course of business, and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business, consistent with past practice, securing amounts
that are not delinquent.
"Person" shall be construed as broadly as possible and shall include
------
an individual or natural person, a partnership (including a limited liability
partnership), a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization, a
business, a Governmental Entity, and any other entity.
"Proceeding" means any action, suit, investigation or proceeding
----------
before any Governmental Entity or arbitrator.
"Purchaser Indemnified Persons" means and includes the Purchaser and
-----------------------------
its Affiliates (including, following the Closing, the Company), their respective
successors and assigns, and the respective officers, directors and controlling
parties of each of the foregoing; provided, however, that any such Person who
-------- -------
was, prior to the Closing Date, an officer, director, employee, Affiliate,
successor or assign of the Company, or a Shareholder, shall not in such
capacity, be a Purchaser Indemnified Person with respect to a breach of this
Agreement or any Related Document based on facts or circumstances occurring, or
actions taken by such Person, at or prior to the Closing.
"Purchaser Indemnifying Persons" means the Purchaser and its
------------------------------
successors.
"Purchaser Losses" means any and all Losses sustained, suffered or
----------------
incurred by any Purchaser Indemnified Person arising from or in connection with
any matter that is the subject of indemnification under Article IX.
"Purchaser's Accountants" means PricewaterhouseCoopers LLP.
-----------------------
"Securities" means "securities" as defined in Section 2(1) of the
----------
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
II-5
"Seller Indemnified Persons" means and includes either (i) if the
--------------------------
Closing does not occur, the Company, each Shareholder, and their respective
Affiliates, directors, officers, personal representatives, estates, heirs,
successors and permitted assigns or (ii) if the Closing occurs, each Shareholder
and his personal representatives, estate, heirs, successors and permitted
assigns.
"Seller Indemnifying Persons" means each Shareholder and his personal
---------------------------
representative, estate, heirs, successors and permitted assigns.
"Seller Losses" means any and all Losses sustained, suffered or
-------------
incurred by any Seller Indemnified Person arising from or in connection with any
matter that is the subject of indemnification under Article IX.
"Subsidiary" means, with respect to any Person, any other Person (i)
----------
whose Securities having a majority of the general voting power in electing the
board of directors or equivalent governing body of such Person (excluding
Securities entitled to vote only upon the failure to pay dividends thereon or
the occurrence of other contingencies) are, at the time as of which any
determination is being made, owned by such Person either directly or indirectly
through one or more other entities constituting Subsidiaries, or (ii) a fifty
percent (50%) interest in the profits or capital of whom is, at the time as of
which any determination is being made, owned by such Person either directly or
indirectly through one or more other entities constituting Subsidiaries.
"Target Net Working Capital Amount" means ($[2,850,000]) (negative).
---------------------------------
"Tax Return" means any return, declaration, report, claim for refund,
----------
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Taxes" means, with respect to any Person, (i) all Income Taxes and
-----
all gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, alternative or add-on minimum taxes, customs
duties and other taxes, fees, assessments or charges of any kind whatsoever,
together with all interest and penalties, additions to tax, and other additional
amounts imposed by any taxing authority (domestic or foreign) on such Person,
and (ii) any liability for the payment of any amount of the type described in
the foregoing clause (i) as a result of (A) being a "transferee" (within the
meaning of Section 6901 of the Code or any other applicable Law) of another
Person, (B) being a member of an affiliated, combined or consolidated group, or
(C) a Contract or other understanding or arrangement.
II-6
ANNEX III
Company EBIT Amount
-------------------
As used in this Agreement, the term "Company EBIT Amount" means the
-------------------
operating income of the Company during the Earn Out Period, calculated in
accordance with GAAP applied on a basis consistent with the preparation of the
statements of income included in the Annual Financial Statements, subject to the
following adjustments (provided that the following adjustments shall be made
--------
without duplication in calculating the Company EBIT Amount):
(A) the Company EBIT Amount shall not include any deduction for federal,
state or local income taxes (whether paid or accrued) or any credit or income
item related to federal, state or local income taxes (whether paid or accrued);
(B) the Company EBIT Amount shall not include any deduction for interest
expense (whether paid or accrued) or any credit or income item for interest
income (whether received or accrued); and
(C) the Company EBIT Amount shall not include any extraordinary or one-
time income or gain that may be realized during the Earn Out Period.
III-1
