STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of October , 1997, by and among COVENANT TRANSPORT, INC., a Nevada
corporation ("Buyer"); Xxxxxxx Xxxxx a resident of Minnesota (the "Selling
Stockholder"); and Xxx Xxxxx Truck Lines, Inc., a Minnesota corporation (the
"Company").
RECITALS
1. The Selling Stockholder owns all of the issued and outstanding capital
stock of the Company, consisting of 177 shares of Common Stock, no par value per
share ("Common Stock").
2. The Selling Stockholder proposes to sell and Buyer proposes to purchase
100% of the issued and outstanding Common Stock.
3. The parties desire that the transaction be accomplished as stated
herein, in accordance with their respective representations, warranties, and
agreements, subject to the conditions contained herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the covenants, representations,
warranties, and agreements herein contained, and for other good and valuable
consideration, the parties agree as follows:
ARTICLE I
Definitions
For the purposes of this Agreement, unless otherwise provided, the
following terms, when capitalized, shall have the meanings ascribed to them
below:
1.1 "Affiliate" means any person or entity controlling, controlled by, or
under common control with another person or entity, as well as the following:
all officers, directors, and persons owning 10% or more of the equity interests
of an entity.
1.2 "August 31 Balance Sheet" means a balance sheet of the Company prepared
according to GAAP as of August 31, 1997. Such balance sheet shall reflect all
adjustments and accruals as are normally made at year-end on a pro-rata basis,
including specifically those adjustments necessary to reflect the addition to
retained earnings of period 13 "green fee" adjustments from the operating
statement for eight months ended August 31, 1997.
1.3 "Authority" means each and every federal, state, local, and foreign
judicial, governmental, quasi-governmental, or regulatory agency, official or
department; every arbitrator, mediator, and other similar official; and every
other entity to whose jurisdiction or decision making authority a party has
submitted.
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1.4 "Benefit Plans" means all contracts, plans, arrangements, policies, and
understandings providing for any compensation or benefit other than base wages
or salaries that are maintained by the Company or affect its employees or
independent contractors, regardless of whether defined as an "employee benefit
plan" under ERISA or subject to any provision of ERISA, including, without
limitation: all pension, profit-sharing, retirement, thrift, 401(K), ESOP, and
other similar plans and arrangements (defined benefit and defined contribution);
all health, welfare, and disability insurance (including self-insurance),
workers' compensation, supplemental unemployment, severance, vacation, and
similar plans and arrangements; and all bonus, stock option, incentive
compensation, stock appreciation rights, phantom stock, overtime guaranty,
employment contract, employee handbook, and other similar plans or arrangements.
1.5 "Closing" and "Closing Date" have the meanings set forth in Section 3.1
hereof.
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1.6 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor federal tax law.
1.7 "Contract" means any mortgage, indenture, agreement, contract,
commitment, lease, plan, license, permit, insurance policy or binder,
authorization, or other instrument, document, or understanding, oral or written.
1.8 "Environmental Laws" has the meaning ascribed in Section 4.3(u).
1.9 "GAAP" means generally accepted accounting principles, consistently
applied throughout all periods, provided, that interim, unaudited financial
statements lack footnotes and other presentation items.
1.10 "Historical Financial Statements" has the meaning ascribed to it in
Section 4.3(f).
1.11 "Judgment" means any judgment, order, writ, injunction, decree, or
award by any Authority, as well as all settlements of actions or claims.
1.12 "Law" means any constitution, statute, Judgment, law, ordinance, rule,
regulation, or other pronouncement by any Authority (including, without
limitation, the following types: environmental, energy, safety, health, zoning,
antidiscrimination, antitrust, employment, Tax, and employee benefit (including
ERISA)).
1.13 "Lien" means any mortgage, lien, pledge, security interest, mechanics'
or materialmens' or similar lien, conditional sale agreement, charge, claim,
right, condition, restriction, or other encumbrance or defect of title of any
nature whatsoever (including, without limitation, any assessment, charge, or
other type of notice which is levied or given by any Authority and for which a
lien could be filed).
1.14 "Noncompetition Agreement" means the agreement between Buyer and the
Selling Stockholder and Buyer and Xxxxxxx Xxxxx in substantially the form
attached hereto as Exhibit A that provides Xxxxxxx Xxxxx and Xxxxxxx Xxxxx will
refrain from competition with Buyer directly or indirectly, for a period of five
years following the later of the Closing Date or termination of their employment
with Buyer or any Affiliate of Buyer.
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1.15 "Permits" has the meaning ascribed in Section 4.3(t).
1.16 "Proceeding" means any action, suit, litigation, arbitration,
investigation, hearing, notice of violation, order, claim, citation, charge,
demand, complaint, review, or penalty assessment, in each case whether formal or
informal, administrative, civil or criminal, at law or in equity, and whether or
not in front of any Authority.
1.17 "Real Estate" means the real estate and improvements thereof, and all
rights and appurtenances thereto, currently owned by the Company, all as legally
described on Exhibit B.
1.18 "Rights" means all patents, trademarks, copyrights, franchises,
licenses, permits, easements, computer software programs, rights (including,
without limitation, rights to trade secrets and proprietary information and
know-how), certificates, approvals, and other authorizations including those
issued by or filed with any Authority, and any applications for any of the
foregoing.
1.19 "Taxes" shall mean all taxes, charges, fees, levies, or other
assessments of whatever kind or nature, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupancy, or property taxes, customs duties, fees,
assessments, or charges of any kind whatsoever (together with any interest and
any penalties, additions to tax, or additional amounts) imposed by any
Authority.
ARTICLE II
Stock Purchase and Sale
2.1 Transfer of Common Stock. Subject to the terms and conditions of this
Agreement, at the Closing, the Selling Stockholder shall sell, convey, transfer,
assign, and deliver to Buyer, and Buyer shall acquire, 100% of the issued and
outstanding Common Stock, free and clear of Liens. As provided in Section 4.3(i)
hereof, certain assets will be excluded from the sale and transfer contemplated
hereunder.
2.2 Purchase Price. As consideration for the purchase of the Common Stock,
Buyer agrees to pay the Selling Stockholder Five Million Two Hundred Thousand
Dollars ($5,200,000) (the "Purchase Price").
2.3. The Selling Stockholder represents and warrants as follows: The entire
authorized capital stock of the Company consists of 177 shares of Common Stock,
all of which shares are issued and outstanding and owned by the Selling
Stockholder. The Company does not have any stockholders or issued and
outstanding stock, whether voting or non-voting, common or preferred, other than
the Selling Stockholder and the aforesaid shares owned by the Selling
Stockholder. The Selling Stockholder is the record and beneficial owner of the
Common Stock, free and clear of all Liens. All of such shares have been duly
authorized and validly issued, are fully paid and non-assessable, and are free
of all adverse claims. There are no outstanding or authorized (i) options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other Contracts or commitments that could require the Company (or any
successor, parent, or acquiror of the Company) to issue, sell, or otherwise
cause to become outstanding any capital stock or other
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securities or obligations; (ii) stock appreciation, phantom stock, profit
participation, or similar rights; or (iii) voting trusts, proxies, rights of
first refusal, registration rights, transfer restrictions, or other Contracts
relating to the capital stock or other securities or obligations of the Company.
2.4 Release of Selling Stockholder. From and after the Closing the Buyer
shall either promptly repay the indebtedness of the Company to third-parties
that is reflected on the August 31 Balance Sheet or indebtedness arising since
such date that the Selling Stockholder, Xxxxxxx Xxxxx, or Xxx Xxxxx has
personally guaranteed or, vigorously seek to obtain a release of such
guarantors, including by offering Buyer as a guarantor on such indebtedness.
Buyer shall indemnify such guarantors against any liability under such
guaranties, including any attorney fees and expenses incurred by Selling
Stockholder in responding to or defending claims made under such guaranties.
2.5 Financial Reporting Effective Date. Anything to the contrary
notwithstanding, for all financial reporting purposes the effective date of the
transaction shall be deemed to be October 1, 1997.
ARTICLE III
Closing
3.1 Date. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the headquarters of Buyer located at 000
Xxxxxxxxxx Xxxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, on the date hereof (the
"Closing" or "Closing Date").
3.2 Delivery of Certificates Other Agreements. The Selling Stockholder
shall have delivered certificates representing 100% of the Company's outstanding
Common Stock, duly endorsed for transfer to Buyer or accompanied by stock powers
duly executed in blank. The Noncompetition Agreement, Consent, Stock Option
Agreement, and each other document required to be executed in connection with
this Agreement been duly executed and delivered by each party thereto.
3.3 Delivery of Purchase Price. At the Closing, the Buyer shall deliver the
Purchase Price to the Selling Stockholder by cashier's check or wire transfer of
immediately available funds.
3.4 Opinion of Counsel for the Company and the Selling Stockholder. Counsel
for the Company and the Selling Stockholder shall deliver to Buyer its written
opinion, dated as of the Closing Date, covering matters such as the organization
and existence of the Company, the authorization, execution, binding nature, and
enforceability of this Agreement, the validity of the shares to be transferred
to Buyer, and such other matters customarily addressed in transactions of this
nature in form and substance reasonably satisfactory to the parties and their
counsel.
3.5 Opinion of Counsel for Buyer. Counsel for Buyer shall deliver to the
Company and the Selling Stockholder its written opinion, dated as of the Closing
Date, covering matters such as the organization and existence of Buyer, the
authorization, execution, binding nature, and enforceability of this Agreement,
and such other matters customarily addressed in transactions of this nature in
form and substance reasonably satisfactory to the parties and their counsel.
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ARTICLE IV
Representations and Warranties
4.1 General Statement. The parties hereto represent and warrant to each
other that the statements contained in this Article IV are correct and complete
as of the Closing Date. The survival of all such representations and warranties
shall be in accordance with Section 6.2 hereof. All representations and
warranties of the parties are made subject to the exceptions which are noted in
the schedules attached hereto (the "Schedules"). Copies of all documents
referenced in the Schedules shall be attached thereto or delivered separately.
4.2 Representations and Warranties of Buyer. Buyer represents and warrants
to the Selling Stockholder, that:
(a) Corporate Status. Buyer is a corporation, duly organized,
validly existing, and in good standing under the laws of the State of
Nevada, with all requisite power and authority to carry on its business.
(b) Authority. Buyer has full right, power, and authority to execute
and deliver this Agreement and to consummate and perform the transactions
contemplated hereby. The execution and delivery of this Agreement and
every other Contract contemplated hereunder by Buyer and the consummation
and performance of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate and other
proceedings. This Agreement has been duly executed and delivered by Buyer
and constitutes the legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
(c) Validity of Contemplated Transaction. The execution and delivery
of this Agreement by Buyer does not, and the performance of this Agreement
by Buyer will not (i) violate or conflict with any existing Law or any
Judgment which is applicable to Buyer; or (ii) conflict with, result in a
breach of, or constitute a default under the articles of incorporation or
other charter documents, or bylaws of Buyer. No authorization, approval,
or consent of, and no registration, filing, or notice to any Authority is
required in connection with the execution, delivery, and performance of
this Agreement by Buyer except those which have been obtained.
(d) Brokers or Finders. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement and will indemnify and hold harmless the
Company and the Selling Stockholder from any such payment alleged to be
due by or through Buyer as a result of the action of Buyer or its officers
or agents.
(e) Buyer's Knowledge. Buyer does not have knowledge that any of the
Company's or the Selling Stockholder's representations and warranties is
incorrect in any material respect.
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4.3 Representations and Warranties of the Selling Stockholder. The Selling
Stockholder represents and warrants to Buyer that to the actual knowledge of the
Selling Stockholder:
(a) Corporate Status. The Company is a corporation, duly organized,
validly existing, and in good standing under the laws of the State of
Minnesota, with all requisite power, authority, and Permits to carry on
its business as it has been and is now being conducted and to own, lease,
and operate its properties used in connection therewith. Minnesota is the
only state in which the Company employs people or owns or leases property.
The Company conducts its business only under its own name. Except for
Theilman Transportation Services, Inc. and Xxxxx Brokerage, Inc., the
Selling Stockholder's interest in which will be divested by him prior to
January 1, 1998, or will be dissolved prior to such date the Company has
no subsidiaries and no entities affiliated through common ownership or
otherwise that conduct any business related to that conducted by the
Company.
(b) Intentionally omitted.
(c) Officers; Directors; Bank Accounts. Schedule 4.3(c) lists all
directors and officers of the Company, all bank accounts, lock boxes, safe
deposit boxes, and borrowing authority of the Company, specifying with
respect to each, the name and address of the bank or other financial
institution and the account number and all persons having signing
authority or authority to withdraw therefrom or thereon.
(d) Authority. The Company and the Selling Stockholder, as
appropriate, have full right, power, and authority to execute and deliver
this Agreement and every other Contract contemplated hereunder and to
consummate and perform the transactions contemplated hereby. The execution
and delivery of this Agreement and every other Contract contemplated
hereunder by the Company and the Selling Stockholder and the consummation
and performance of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate and other
proceedings. This Agreement has been duly executed and delivered by the
Company and the Selling Stockholder and constitutes the legal, valid, and
binding obligation of each, enforceable against each, in accordance with
its terms.
(e) Validity of Contemplated Transactions. The execution and
delivery of this Agreement and every other Contract contemplated hereby by
the Company and the Selling Stockholder do not, and the performance of
this Agreement and every other Contract contemplated hereby by the Company
and the Selling Stockholder will not (i) violate or conflict with any
existing Law or any Judgment which is applicable to the Company or the
Selling Stockholder; or (ii) conflict with, result in a breach of,
constitute a default under, result in acceleration of, create in any
person the right to accelerate, terminate, modify, or cancel, or require
any notice under the articles of incorporation or other charter documents,
bylaws, or any securities of the Company or any Contract, other than those
set forth on Schedule 4.3(e) to which the Company or the Selling
Stockholder is a party or by which either is otherwise bound. Except as
set forth on Schedule 4.3(e), no authorization, approval, or consent of,
and no registration, filing, or notice to any Authority or other
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party to any Contract is required in connection with the execution,
delivery, and performance of this Agreement by the Company or the Selling
Stockholder.
(f) Financial Statements. The Company and the Selling Stockholder
have delivered to Buyer the annual, audited financial statements of the
Company as of December 31, 1993, 1994, 1995, and 1996, together with the
unaudited financial statements as of and for the periods ended March 31,
1997, June 30, 1997, and August 31, 1997 (collectively, the "Historical
Financial Statements"). Except as set forth on Schedule 4.3(f), the
Historical Financial Statements, including all balance sheets and
statements of income, cash flows, and retained earnings, and all notes
thereto, have been prepared in accordance with GAAP, present fairly the
financial condition and results of operations of the Company, changes in
stockholders' equity and cash flows of and for all periods reflected
therein, are correct and complete, and are consistent with the books and
records of the Company, which books and records are correct and complete.
All accounts receivable of the Company that are reflected on the balance
sheets included in the Historical Financial Statements represent, and the
accounts receivable reflected on the August 31 Balance Sheet and all
accounts receivable incurred since such date shall represent, valid
obligations arising from sales actually made or services actually
performed in the ordinary course of business. Except as set forth on
Schedule 4.3(f), there is no contest, claim, or right of set-off, other
than returns or adjustments in the ordinary course of business, under any
Contract with any obligor of an accounts receivable relating to the amount
or validity of such accounts receivable.
(g) Absence of Undisclosed Liabilities. Except as set forth on
Schedule 4.3(g), the Company has no liabilities or obligations, accrued or
unaccrued, contingent or absolute, liquidated or unliquidated, and whether
due or to become due, except for (i) liabilities disclosed on the face of
the August 31 Balance Sheet, and (ii) liabilities arising in the ordinary
course of business since such date (none of which arises from or relates
to any breach of contract or warranty, tort, infringement, or violation of
Law, or would have to be disclosed on any Schedule to this Agreement) that
will be fully reserved or accrued as of the Closing Date.
(h) Absence of Changes or Events. Except as disclosed on Schedule
4.3(h), since December 31, 1996, there has not been any materially adverse
change in the business, operations, results of operations, or future
prospects of the Company. Without limiting the generality of the
foregoing, since that date, the Company has not:
(i) declared, set aside, or paid any dividend or made any
other distribution or payment in respect of its capital stock;
redeemed, purchased, or otherwise acquired any of its capital stock;
issued any capital stock or other securities; granted any stock
option or right to purchase shares of capital stock or any other
securities of the Company; issued any security convertible into
capital stock; or granted any registration rights concerning its
securities;
(ii) discharged or satisfied any Lien or paid any material
liabilities, other than in the ordinary course of business
consistent with past practice, or failed to pay or discharge any
liabilities when due;
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(iii) sold, assigned, or transferred or agreed to sell,
assign, or transfer any of its assets or any interest therein, other
than trades or disposals of assets in the ordinary course of
business for which replacement assets of equal or greater value were
purchased; provided, however, that in any event the Company has not
disposed of any of the tractors or trailers listed on the September
29, 1997 revenue equipment list provided to Buyer and attached as
Schedule 4.3(h)(iii);
(iv) created, incurred, assumed, or guaranteed any
indebtedness for money borrowed or any other indebtedness or
obligation of any nature (absolute or contingent), or mortgaged,
pledged, or subjected to any Lien, any of its assets;
(v) acquired any substantial assets, properties, securities,
or interests of another person;
(vi) reduced or canceled any amounts owed to it;
(vii) settled any claims against it except for claims the
settlement of which are reflected on the August 31 Balance Sheet;
(viii)granted or entered into any agreement or policy with any
employee that grants severance or termination pay, increases
compensation (other than driver pay increases implemented in August,
1997 and compensation increases arising in the ordinary course of
business), increases benefits under any current Benefit Plan (other
than increased benefits arising in the ordinary course of business),
or creates any continuing employment relationship, other than under
the Noncompetition Agreement;
(ix) experienced any labor unrest or union organizing
activity;
(x) suffered any adverse change in its business, other than
events affecting the truckload industry generally;
(xi) changed any of the accounting principles which it follows
or the methods of applying such principles;
(xii) amended, terminated, or entered into any Contract other
than in the ordinary course of business, consistent with past
practice (it being understood that for purposes of this Section
4.3(h)(xii) with respect to transportation contracts only, the
representation and warranty is made only with respect to the
Company's top twenty (20) contracts by revenue);
(xiii)suffered to its assets any material damage, destruction,
or loss, whether or not covered by insurance, that has not been
fully repaired;
(xiv) amended its articles of incorporation or bylaws or made
any changes in its authorized or issued capital stock or other
securities;
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(xv) directly or indirectly engaged in any transaction,
arrangement, or Contract with any officer, director, partner,
shareholder, or other insider or affiliate;
(xvi) entered into any transactions outside the ordinary
course of business; or
(xvii)agreed, whether orally or in writing, to do any of the
foregoing.
(i) Asset Schedule. Schedule 4.3(i) sets forth all material assets
owned by the Company and reflected on the August 31 Balance Sheet or
purchased by the Company since such date, together with the cost,
depreciated book value, and tax basis thereof. Schedule 4.3(i) lists
assets that will be excluded from the transaction, retained by the Selling
Stockholder, and not be the property of the Company or the Buyer.
(j) Title and Condition of Assets. All of the Company's owned and
leased assets (other than tractors and trailers, which are addressed
below) that were listed on the August 31 Balance Sheet or purchased by the
Company since such date are in sufficient repair and condition and
adequate for the ordinary course of operation of the Company's business as
presently conducted, ordinary wear and tear excepted, and all leased
assets are in compliance with any applicable lease provisions. Neither the
Company nor the Selling Stockholder has received notice from any Authority
of a Proceeding in the nature of condemnation or eminent domain relating
to any of the property which the Company owns, leases, or utilizes in its
operations, including the Real Estate. Except as set forth on Schedule
4.3(j), the Company possesses good and marketable title to all of its
owned assets and a valid leasehold interest in all leased assets, free and
clear of all Liens, except Liens for current taxes not yet due and
payable. The Company does not use any assets in its business other than
assets owned by it or assets leased under valid and continuing leases that
are identified on Schedule 4.3(o). There are no developments affecting any
of the Company's properties or assets, owned or leased, that might
materially detract from the value of such property or assets, interfere
with any present or intended use of such property or assets, or adversely
affect the marketability of such property or assets. All buildings,
plants, and structures owned or used by the Company lie wholly within the
boundaries of the Real Estate and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other third party. The
buildings, plants, structures, and equipment owned or used by the Company
are structurally sound, are in sufficient operating condition and repair,
and are adequate for the uses to which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance
or repairs except for ordinary, routine maintenance and repairs that are
not material in nature or cost. The building, plants, structures, and
equipment owned or used by the Company are sufficient for the continued
conduct of the Company's businesses after the Closing Date in
substantially the same manner as conducted prior to the Closing Date. All
parts, tires, and other inventory that are listed on the August 31 Balance
Sheet or purchased by the Company since such date is usable in the
Company's fleet and not obsolete. All Liens on the Real Estate have been
properly recorded on the August 31 Balance Sheet.
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(k) Additional Warranties Concerning Tractors and Trailers. All
tractors and trailers operated by the Company are in sufficient operating
condition for use in the ordinary course of business and meet all
Department of Transportation requirements, and have been maintained in
material compliance with all applicable manufacturers' specifications and
warranties. Except as set forth on Schedule 4.3(k), all tractors and
trailers have been operated at all times in material compliance with
applicable leases or other financing documents (it being understood that
for the purpose of this sentence, material means an event of default is
declared under such leases and financing documents). Except as set forth
on Schedule 4.3(k), all leased tractors and trailers satisfy the "turn-in"
requirements under applicable leases such that there would not be any
penalty, reconditioning fee, or other amount owed if such leased tractors
and trailers were returned at the Closing Date. Except as set forth on
Schedule 4.3(k), each leased tractor (and if applicable, leased trailers)
has been operated within the mileage allowance of the applicable lease,
prorated for the portion of the lease period that has expired. Except as
set forth on Schedule 4.3(k), there are no late fees, penalties, or other
amounts owing under any tractor or trailer lease or other financing
document, other than any current month payment that is not yet due.
(l) Tax Matters. With respect to Taxes:
(i) The Company has filed, within the time and in the manner
prescribed by law, all returns, declarations, reports, estimates,
information returns, and statements (the "Returns") required to be
filed under applicable Laws, and all such Returns are true, correct,
and complete. Except as set forth on Schedule 4.3(l)(i), the Company
has within the time and in the manner prescribed by Law, paid all
Taxes that are due and payable with respect to the Company. The
Company has established on its books and records, reserves, charges,
and accruals that are adequate for the payment of all Taxes not yet
due and payable that are attributable to periods prior to the
Closing. There are no Liens for Taxes upon the assets of the Company
except for Liens for Taxes not yet due and payable.
(ii) None of the Returns of the Company is presently under
audit by any Authority nor has a deficiency for any Taxes been
proposed, asserted, or assessed against the Company. There are no
outstanding waivers or comparable consents regarding the application
of the statute of limitations with respect to any Tax or Return that
have been given by or on behalf of the Company.
(iii) The Company has complied in all respects with all
applicable Laws relating to the payment and withholding of Taxes and
has, within the time and in the manner prescribed by applicable Law,
withheld, collected, and paid over to the proper governmental
authorities all amounts required to be so withheld, collected, and
paid over under all applicable Laws.
(m) Litigation. Schedule 4.3(m) contains a list of all Proceedings
pending or threatened against the Company. Except as specifically noted on
Schedule 4.3(m), there is no Proceeding pending or threatened against the
Company in individual or aggregate amounts in excess of applicable
insurance limits; or against the Company or the Selling Stockholder that,
if adversely determined, could adversely affect the Company or the
consummation of the transactions contemplated by this Agreement. Except as
set forth on
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Schedule 4.3(m), the Selling Stockholder is not aware of facts that he
reasonably believes are substantially likely to result in a Proceeding
being brought against the Company or the Selling Stockholder.
(n) Insurance. Schedule 4.3(n) contains a list of, and the Company
and the Selling Stockholder has furnished to Buyer true and complete
copies of, all insurance policies and fidelity bonds covering the
Company's assets, business, properties, operations, employees, officers,
and directors, and other matters for which the Company carries insurance
and describes any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder. Except as set forth in
Schedule 4.3(n), there is no claim by any insured pending under any of
such policies or bonds as to which coverage has been questioned, denied,
or disputed by the underwriters of such policies or bonds. All premiums
payable under all such policies and bonds have been paid, and the Company
is otherwise in full compliance with the terms and conditions of all such
policies and bonds in all material respects (it being understood that any
non-compliance that results in coverage being denied or in a dollar impact
to Buyer is material). As to all claims that might be covered by such
policies or bonds, the Company has promptly and within any prescribed time
period notified the insuring or bonding party in the proper manner. Such
policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect continuously
for the past ten years, and remain in full force and effect. Such policies
of insurance and bonds are of the type and in amounts customarily carried
by persons conducting similar businesses. Except as set forth in Schedule
4.3(n), there is no threatened termination of, or premium increase with
respect to, any of such policies or bonds.
(o) Material Contracts. Schedule 4.3(o) contains a list of all
material Contracts to which the Company is a party, including but not
limited to: any Contract that is not by its terms cancelable on notice of
not longer than 30 days without liability or penalties, or which, if
performed, would involve the payment by the Company of more than $25,000;
any Contract restricting or limiting the Company from carrying on its
business or competing in any line of business; any Contract involving a
joint venture, partnership, or other profit or loss sharing arrangement;
any Contract with the Selling Stockholder or any affiliated persons or
entities; any Contract relating to indebtedness for borrowed money,
deferred purchase price of property, or the guaranty of the obligations of
any person; any Contract concerning leased assets used by the Company; any
Contract respecting Rights; any Contract respecting the Real Estate; any
power of attorney or similar instrument and any other Contract not made in
the ordinary course of business. Anything to the contrary notwithstanding,
only the Company's top ten (10) transportation contracts by revenue need
be included on Schedule 4.3(o). Each Contract disclosed in any Schedule or
required to be disclosed pursuant to this Section 4.3(o) is a valid and
binding agreement of the parties thereto, is in full force and effect, no
party thereto is in default thereunder, and there exists no condition that
with notice or lapse of time or both would constitute a default
thereunder.
(p) Employee Benefit Plans and Arrangements. Schedule 4.3(p)
identifies each of the Company's Benefit Plans, copies of which,
amended to date, have been furnished to Buyer. No Benefit Plan is a
multi-employer or a defined benefit plan. Neither the Company, any
affiliate, nor any predecessor of either has ever been a party to or
sponsored
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a multi-employer or defined benefit plan. The Company and all Benefit Plan
fiduciaries have fully complied with their obligations with respect to all
Benefit Plans. There has been no prohibited transaction with respect to
any other Benefit Plan. Each Benefit Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has been
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since inception. Each trust created under any Benefit Plan is exempt from
tax under Section 501(a) of the Code and has been exempt from tax from
creation. The Company has received determination letters from the Internal
Revenue Service for each such Benefit Plan at inception and after each
amendment. Each Benefit Plan has been maintained in compliance with its
terms and all applicable Laws. There has not been any event that would
threaten the tax-qualified status of any Benefit Plan. All payments and
contributions due or accrued under each Benefit Plan, determined in
accordance with the terms of such plans and prior funding and accrual
practices, have been paid, and are reflected as a liability on the
Company's balance sheet. The "plan year" of each Benefit Plan is the
calendar year. The Company has no current or projected liability with
respect to post-employment or post-retirement welfare benefits for former
or retired employees.
(q) Employees; Independent Contractors. The Company is not a party
to any collective bargaining agreement relating to its employees, nor does
any such agreement determine the terms and conditions of employment of any
employee. There are no agreements, plans, or policies which would give
rise to any severance, termination, change-in-control, or other similar
payment to the the Company's employees as a result of the consummation of
the transactions contemplated hereunder. The Company does not have any
employment agreements with employees. The Company maintains files on all
employee and independent contractor truck drivers. Each employee and
independent contractor driver of the the Company meets all Department of
Transportation ("DOT") requirements, and all driver files contain all
required materials. All independent contractors providing equipment and/or
services to the Company have been retained under valid contracts that
comply with DOT leasing rules and qualify for independent contractor
status under existing IRS rules and interpretations. A copy of the form of
contract used for any owner-operators of rolling stock has been delivered
to Buyer. The Company has taken no action in respect of its employees that
would require notice or create liability under the Worker Adjustment and
Retraining Notification Act, and the Company has no present plan to take
such action.
(r) Safety Rating. The Company has received and maintains a
"satisfactory" safety rating from the DOT. Except as set forth on Schedule
4.3(r), there is no investigation, audit, or other proceeding pending or
threatened by the DOT.
(s) Rights. All Rights owned, licensed, or otherwise used by the
Company are listed on Schedule 4.3(s). The Company owns or uses such
Rights under valid license in the operation of its business. The Company's
interest in each of such Rights, to the extent possible, has been
registered under applicable state and federal Laws. The Company has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Rights of third parties. The Company has not received
any charge, complaint, demand, or notice alleging any such interference,
infringement, misappropriation, violation, or conflict (including any
claim that the Company must license or refrain from using any Rights of
third parties).
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(t) Compliance With Laws; Permits. Except as set forth on Schedule
4.3(t), the Company has owned, leased, and used all of its properties and
assets, and has conducted its business, in compliance in all material
respects with all applicable Laws. Except for a charged violation of law
in 1991 and miscellaneous traffic tickets that have been settled, neither
the Company nor the Selling Stockholder has been charged with any
violation of Law except for any non-compliance which would be immaterial
(it being understood that for the purpose of this sentence, immaterial
means having no dollar impact). No Proceeding is pending or threatened by
any Authority with respect to any violation of Law by the Company or the
Selling Stockholder. No Judgment is unsatisfied against the Company or the
Selling Stockholder, and the Company is not subject to any stipulation,
order, consent, or decree arising from an action before any Authority. The
Company possesses all permits, licenses, franchises, interstate and
intrastate operating rights, and other approvals of Authorities
(collectively, "Permits") required to operate its business, such Permits
are in full force and effect, any applications for renewal have been duly
filed on a timely basis, no Proceeding is pending or threatened to revoke
or limit any Permit, and the Company is operating in compliance with all
Permits.
(u) Environment, Health, and Safety.
(i) Each of the Company, its Affiliates, and any predecessors
of either has complied with all Laws concerning pollution or
protection of the environment, public health and safety, and
employee health and safety, including Laws relating to emissions,
discharges, releases, or threatened release of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes (including petroleum and any fraction or derivative
thereof) into ambient air, surface water, ground water, or lands, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or hauling of such
substances (collectively, "Environmental Laws"). No Proceeding has
been filed or commenced against the Company, any Affiliate, or any
predecessor of either alleging any failure to comply with any
Environmental Laws. Without limiting the generality of the preceding
sentence, each of the Company, its Affiliates, and any predecessors
of either has obtained and been in compliance with all of the terms
and conditions of all Permits which are required under, and has
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws.
(ii) The Company does not have any liability (and neither the
Company, any Affiliate, nor any predecessor of either has handled or
disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance
or condition, or owned, operated, or used any property or facility
in any manner that could form the basis for any present or future
Proceeding against the Company giving rise to any liability) for
damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee
or other individual, or for any reason under any Environmental Law.
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(iii) All properties and equipment used in the business of the
Company, its Affiliates, and any predecessors of either have been
free of asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzofurans, and other
extremely hazardous substances as defined by any Law.
(iv) Except as set forth on Schedule 4.3(u), any fuel storage
tanks located at properties owned or used by the Company in its
business comply in all respects with applicable Laws, do not leak,
are registered with the appropriate state agency (and all required
actions in connection therewith have been taken) in the manner
permitting the Company to take advantage of any state liability
limitation, insurance, or similar program relating to fuel storage
tanks, and such tanks are not scheduled for removal in the next five
years.
(v) The Company has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or
monitoring concerning the Company or any property owned or used by
the Company concerning compliance with Environmental Laws.
(v) Disclosure. The representations and warranties of the Selling
Stockholder contained in this Agreement taken together with the contents
of every document delivered in connection herewith, and the items
disclosed during due diligence, do not contain any untrue statement of a
material fact and do not omit to state any fact necessary to make any
statement herein or therein not misleading or necessary to a correct
presentation of all material aspects of the Company's business and the
matters contemplated under this Agreement.
(w) Brokers or Finders. The Company, the Selling Stockholder, and
their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
ARTICLE V
Covenants and Agreements
5.1 Approvals and Consents. Each party to this Agreement shall use its best
efforts to obtain (and assist the other in obtaining), as soon as reasonably
practicable, all permits, authorizations, consents, waivers and approvals from
third parties or Authorities necessary to consummate this Agreement and the
transactions contemplated hereby or thereby.
5.2 Additional Agreements. At or prior to the Closing, (a) the appropriate
parties shall execute the Noncompetition Agreement; (b) Xxxxxxx Xxxxx shall
consent to the terms of the Agreement and all transactions contemplated
hereunder, waive any marital, community property, or other beneficial interest
in the shares of Common Stock purchased by the Buyer hereunder, and irrevocably
agree to be bound by this Agreement with respect to such interest (the
"Consent"); and (c) the Company and the Selling Stockholder shall execute a
stock option agreement with the terms customary to Buyer's option holders
granting the Selling Stockholder an option to purchase 25,000 shares of the
Buyer's Class A Common Stock (the "Stock Option Agreement") and deliver to the
Selling Stockholder the terms of his at-will employment.
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5.3 Stockholder Liability. At the Closing, the Selling Stockholder shall
retire in full all obligations (including interest) owed to the Company,
regardless of whether such amounts are then due under applicable documents
evidencing such indebtedness or whether evidenced in writing at all. The Selling
Stockholder and Xxxxxxx Xxxxx shall execute a full and final waiver and release
of any and all claims against the Company arising on or prior to the date hereof
in a form satisfactory to Buyer. In addition, the Selling Stockholder shall use
his best efforts to cause his family members to execute a full and final waiver
and release of any and all claims arising on or prior to the date hereof against
the Company in form satisfactory to Buyer. To the extent any such release is not
obtained or is ineffective, the Selling Stockholder shall indemnify the Buyer
for the full extent of any Loss.
ARTICLE VI
Miscellaneous
6.1 Costs and Expenses; Fees. Each party shall be solely responsible for
and bear all of its own respective expenses incurred at any time in connection
with pursuing or consummating the Agreement and the transactions contemplated by
the Agreement, including, but not limited to, fees and expenses of business
brokers, legal counsel, accountants, and other facilitators and advisors.
6.2 Survival of Representations, Warranties, Covenants, and Agreements.
Except for the representations and warranties contained in Section 2.3, which
shall continue after the Closing, the representations and warranties of the
Selling Stockholder contained in this Agreement shall terminate at the Closing.
The foregoing notwithstanding, Buyer shall be entitled to recover the full
extent of any loss, including fees and expenses of attorneys and other experts,
(a) suffered by Buyer in the event the Selling Stockholder had actual knowledge
that such representations and warranties were untrue in a material respect at
Closing (it being understood that the Selling Stockholder shall not be
attributed with knowledge of the Company and its officers and employees unless
the information has been communicated to him, and (b) arising from the
assignment of the Lease with Ford Motor Credit relating to a 1997 Ford Taurus,
or purchase of the 1997 Dodge Dakota pickup owned by the Company. The
obligations of the Selling Stockholder and Xxxxxxx Xxxxx under the
Noncompetition Agreements, the obligations of Xxxxxxx Xxxxx under the Consent
and the obligations of the Selling Stockholder under Article V shall survive the
Closing and continue until any limitation therein.
6.3 Complete Agreement, etc. All Exhibits and Schedules referred to herein,
and all documents executed in connection with this Agreement are intended to be
and hereby are specifically made a part of this Agreement. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby, and any and all previous agreements and
understandings between or among the parties regarding the subject matter hereof,
whether written or oral, are superseded by this Agreement. It shall not be
amended or modified except by a written instrument duly executed by each of the
parties hereto.
6.4 Assignment and Binding Effect. This Agreement shall not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other parties and any assignment without consent shall be void; provided,
that Buyer may assign its rights hereunder to any subsidiary but shall remain
liable for its obligations hereunder in the event of any such
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assignment. Subject to the foregoing, all of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors and assigns of any party. Nothing expressed or referred to in
this Agreement will be construed to give any person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
6.5 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
6.6 Attorneys' Fees. Should any party hereto breach any term of this
Agreement, the defaulting party shall pay to the non-defaulting party all
attorneys' fees and other costs and fees incurred by the non-defaulting party in
enforcing this Agreement, and such amounts shall be included in any judgment
obtained in enforcing this Agreement.
6.7 Time. Time is of the essence in connection with this Agreement and each
and every provision hereof. Any extension of time granted for the performance of
any duty under this Agreement shall not be considered an extension of time for
the performance of any other duty under this Agreement.
6.8 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telegram or by
certified mail, postage prepaid, and sent by telecopier as follows:
If to Buyer, to: Xxxxx X. Xxxxxx
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxxx, XX 00000
Phone: 423/000-0000
Fax: 423/000-0000
With a required copy to: Xxxx X. Xxxxxxx, Esq.
Xxxxxxx Law Firm, P.C.
000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Selling Stockholder, toRussell Xxxxx
X.X. 0, Xxx 000X
Xxxxxxxx, XX 00000
Phone: 612/000-0000
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With a required copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx and Xxxxxx
2200 First National Bank Building
000 Xxxxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
Phone: 612/000-0000
Fax: 612/000-0000
or to such other address as the addressee shall have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval, or other communication shall be deemed to have been given as
of three days following deposit in the mail or the date so personally delivered
or telecopied.
6.9 Cooperation. Subject to the terms and conditions herein provided, the
parties hereto shall use their best efforts to take, or cause to be taken, such
action, to execute and deliver, or cause to be executed and delivered, such
additional documents and instruments and to do, or cause to be done, all things
necessary, proper, or advisable under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
6.10 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of Tennessee.
6.11 Headings, Gender, and Person. All section headings contained in this
Agreement are for convenience and reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority, or any other entity.
6.12 Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
6.13 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first written.
COVENANT TRANSPORT, INC., XXX XXXXX TRUCK LINES, INC.,
a Nevada corporation a Minnesota corporation
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxx
Xxxxx X. Xxxxxx, President Xxxxxxx Xxxxx, President
SELLING STOCKHOLDER
Xxxxxxx Xxxxx, Individually
The following attachments of the Agreement are omitted herein but the Registrant
agrees to furnish supplementally a copy to the Commission upon request:
Exhibit A Noncompetition Agreement
Exhibit B Owned Real Property
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