EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
by and among
ROAD RESCUE, INC.,
(Road Rescue)
SPARTAN MOTORS, INC.,
(Buyer)
and
SPARTAN ROAD RESCUE, INC.
(MergerSub)
and joined in by
XXXXXXX X. XXXXXXXXX AND THE
OTHER SHAREHOLDERS OF ROAD RESCUE
(Shareholders)
Dated as of January 7, 1998
TABLE OF CONTENTS
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ARTICLE 1 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Articles of Incorporation and Bylaws of Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 Officers and Directors of Surviving Corporation . . . . . . . .1
1.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 2 VOTING AND CONVERSION OF SHARES . . . . . . . . . . . . . . . .2
2.1 Effect on Shares and MergerSub's Capital Stock. . . . . . . . .2
2.2 Post-Closing Adjustment to Merger Consideration . . . . . . . .2
2.3 Stock Price Adjustment. . . . . . . . . . . . . . . . . . . . .4
2.4 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . .5
2.5 Place and Date of Closing . . . . . . . . . . . . . . . . . . .5
2.6 Consummation of the Merger. . . . . . . . . . . . . . . . . . .5
2.7 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.8 Closing Obligations . . . . . . . . . . . . . . . . . . . . . .6
2.9 Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . .7
2.10 Stub Period . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS . . . . . .8
3.1 Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . .8
3.2 Organization and Good Standing. . . . . . . . . . . . . . . . .8
3.3 Capitalization of Road Rescue . . . . . . . . . . . . . . . . .8
3.4 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 No Conflict with Other Instruments or Proceedings . . . . . . .9
3.6 Compliance with Laws and Other Regulations. . . . . . . . . . .9
3.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . .9
3.8 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . 10
3.9 Absence of Certain Changes or Events. . . . . . . . . . . . . 10
3.10 Customers and Suppliers . . . . . . . . . . . . . . . . . . . 11
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 12
3.13 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Personal Property . . . . . . . . . . . . . . . . . . . . . . 13
3.16 Condition of Assets . . . . . . . . . . . . . . . . . . . . . 13
3.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . 13
3.18 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.19 Employee Relations. . . . . . . . . . . . . . . . . . . . . . 14
3.20 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 14
3.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . 14
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3.22 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.23 Product Liabilities and Warranties. . . . . . . . . . . . . . 16
3.24 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.25 Permits and Licenses. . . . . . . . . . . . . . . . . . . . . 16
3.26 Qualified Investor. . . . . . . . . . . . . . . . . . . . . . 16
3.27 Acknowledgments Regarding Buyer's Restricted Common
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.28 Applications, Proxy Materials, Etc. . . . . . . . . . . . . . 17
3.29 Books and Records . . . . . . . . . . . . . . . . . . . . . . 17
3.30 Relationships with Related Persons. . . . . . . . . . . . . . 18
3.31 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . 18
3.32 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.33 No Dissenters Rights. . . . . . . . . . . . . . . . . . . . . 18
3.34 Accuracy of Statements. . . . . . . . . . . . . . . . . . . . 18
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 19
4.1 Buyer's Organization and Good Standing. . . . . . . . . . . . 19
4.2 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . 19
4.3 Financial Statements. . . . . . . . . . . . . . . . . . . . . 19
4.4 Buyer's Capital Stock . . . . . . . . . . . . . . . . . . . . 19
4.5 Capitalization of MergerSub . . . . . . . . . . . . . . . . . 20
4.6 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 Private Placement Memorandum. . . . . . . . . . . . . . . . . 20
4.8 Issuance of Buyer's Common Stock. . . . . . . . . . . . . . . 20
4.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 Access and Investigation. . . . . . . . . . . . . . . . . . . 20
5.2 Operation of the Business . . . . . . . . . . . . . . . . . . 20
5.3 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Required Approvals. . . . . . . . . . . . . . . . . . . . . . 21
5.5 Notification. . . . . . . . . . . . . . . . . . . . . . . . . 21
5.6 No Negotiation. . . . . . . . . . . . . . . . . . . . . . . . 21
5.7 No Competition. . . . . . . . . . . . . . . . . . . . . . . . 22
5.8 Resale Restrictions . . . . . . . . . . . . . . . . . . . . . 22
5.9 Buyer's Post-Closing Filings. . . . . . . . . . . . . . . . . 22
5.10 Release of Claims . . . . . . . . . . . . . . . . . . . . . . 23
5.11 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.12 Stock to Cash Ratio; Tax Consequences . . . . . . . . . . . . 23
5.13 Past Returns. . . . . . . . . . . . . . . . . . . . . . . . . 23
5.14 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE . . . . . 24
6.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 24
6.2 Road Rescue's and the Shareholders' Performance . . . . . . . 24
6.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 24
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6.5 Additional Documents. . . . . . . . . . . . . . . . . . . . . 24
6.6 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 24
6.7 No Claim Regarding Sale Proceeds. . . . . . . . . . . . . . . 24
6.8 No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . 25
6.9 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10 Senior Management Certificates. . . . . . . . . . . . . . . . 25
ARTICLE 7 CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE . . . . . 25
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 25
7.2 Buyer's Performance . . . . . . . . . . . . . . . . . . . . . 25
7.3 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Additional Documents. . . . . . . . . . . . . . . . . . . . . 25
7.5 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 Release of Guaranties . . . . . . . . . . . . . . . . . . . . 26
7.7 Xxxxxxx Documents . . . . . . . . . . . . . . . . . . . . . . 26
7.8 Xxxxxxxxx Loans . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Termination Events. . . . . . . . . . . . . . . . . . . . . . 26
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Indemnification and Reimbursement by Shareholders . . . . . . 27
9.2 Indemnification and Reimbursement by Buyer. . . . . . . . . . 27
9.3 Limitations on Indemnification. . . . . . . . . . . . . . . . 28
9.4 Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . 29
9.5 Assertion of Claims . . . . . . . . . . . . . . . . . . . . . 30
9.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 10 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 Survival of Representations, Warranties, Covenants,
and Indemnities . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Assignment and Benefits . . . . . . . . . . . . . . . . . . . 30
10.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 31
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 Appointment of Representative . . . . . . . . . . . . . . . . 31
10.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 32
10.8 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 32
10.9 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 32
10.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 32
10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 33
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made as
of January 7, 1998 between SPARTAN MOTORS, INC., a Michigan corporation
("BUYER"), SPARTAN ROAD RESCUE, INC., a Minnesota corporation
("MERGERSUB"), and ROAD RESCUE, INC., a Minnesota corporation ("ROAD
RESCUE"), and is joined in by XXXXXXX X. XXXXXXXXX and the other
undersigned shareholders of Road Rescue (each a "SHAREHOLDER" and
collectively, the "SHAREHOLDERS"). Road Rescue and MergerSub are sometimes
collectively referred to as the "CONSTITUENT CORPORATIONS."
Road Rescue is engaged in the manufacture of emergency
vehicles, including ambulances, rescue vehicles, and critical care units
from its facilities in Saint Xxxx, Minnesota (the "BUSINESS"). Buyer
desires to become affiliated with Road Rescue through the merger of
MergerSub with and into Road Rescue. The Shareholders own all of the
outstanding shares of Road Rescue's capital stock and join in this
Agreement to make certain representations and covenants and to jointly and
severally guaranty the prompt performance of Road Rescue's obligations
under this Agreement.
ARTICLE 1 THE MERGER
1.1 THE MERGER. At the Effective Time (as defined below), Road
Rescue shall be merged with and into MergerSub (the "MERGER"), and
MergerSub shall be the surviving corporation (the "SURVIVING CORPORATION").
At the Effective Time, the separate existence of Road Rescue shall cease.
The name of the Surviving Corporation shall be "Road Rescue." The Merger
shall have the effect on Road Rescue and MergerSub as Constituent
Corporations of the Merger as provided under the Minnesota Business
Corporation Act (the "ACT").
1.2 EFFECTIVE TIME. The Merger shall become effective at the time
(the "EFFECTIVE TIME") of filing of, or at such later time specified in the
articles of merger (the "ARTICLES OF MERGER"), in the form required by and
executed in accordance with the Act, filed with the Minnesota Secretary of
State (the "SECRETARY OF STATE").
1.3 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION.
The Articles of Incorporation and Bylaws of MergerSub shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation until thereafter
amended as provided by the Act.
1.4 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. Subject to
applicable law, the executive officers and directors of MergerSub
immediately prior to the Effective Time shall be the initial executive
officers and directors, respectively, of the Surviving Corporation.
1.5 FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider that any other actions or things
are necessary to fully effectuate this Agreement, the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of
each of the Constituent Corporations or otherwise, all such documents and
to take all such actions and things as may be necessary or desirable to do
so; provided, however, that Buyer and MergerSub shall indemnify and hold
harmless the Shareholders for any such action.
ARTICLE 2 VOTING AND CONVERSION OF SHARES
2.1 EFFECT ON SHARES AND MERGERSUB'S CAPITAL STOCK. In the
aggregate, the Shareholders are entitled to receive One Million Seven
Hundred One Thousand Dollars ($1,701,000) in cash and 240,133 shares of
Buyer's Common Stock (as defined below), as set forth below and subject to
adjustments in Sections 2.2 and 2.3 (collectively, the "MERGER
CONSIDERATION"):
2.1.1 ROAD RESCUE'S COMMON STOCK. As of the Effective Time,
each share of Road Rescue's common stock, $0.10 par value (each a
"SHARE" and collectively the "SHARES" or "ROAD RESCUE'S COMMON STOCK")
outstanding immediately prior to the Effective Time (other than any
Shares in the treasury of Road Rescue, or held by any wholly owned
subsidiary of Road Rescue, which Shares shall be canceled) shall be
converted into the right to receive (a) $1,701,000 divided by the
number of Shares outstanding immediately prior to the Closing, net to
the holder in cash, less $405,000 divided by the number of Shares
outstanding immediately prior to the Closing attributed to the "Escrow
Fund" (as defined below) and (b) a number of restricted shares of
Buyer's common stock, $0.01 par value ("BUYER'S COMMON STOCK") equal
to 240,133 divided by the number of Shares outstanding immediately
prior to the Closing, payable to the holder of such Shares, without
interest thereon; provided that all Buyer's Common Stock issued to
each Shareholder under this Agreement shall be a "restricted
security," as that term is defined in Securities and Exchange
Commission ("SEC") Rule 144, promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT").
2.1.2 CASH IN LIEU OF FRACTIONAL SHARES. Notwithstanding the
above, certificates representing fractional shares of Buyer Common
Stock shall be not issued. In lieu of any such fractional shares, a
Shareholder who would otherwise have been entitled to a fraction of a
share will be paid an amount in cash (without interest) equal to such
fraction of a share multiplied by $7.50.
2.1.3 MERGERSUB'S COMMON STOCK. As of the Effective Time,
each share of common stock of MergerSub, $0.01 par value ("MERGERSUB
COMMON STOCK"), outstanding immediately prior to the Effective Time
2
shall be converted into one full share of common stock, $0.01 par
value, of the Surviving Corporation.
2.2 POST-CLOSING ADJUSTMENT TO MERGER CONSIDERATION.
2.2.1 DEFINITION. For purposes of this Section 2.1.4, the
term "1997 EBIT" shall mean the net income before interest and taxes
for Road Rescue for its fiscal year ending January 2, 1998, determined
in accordance with generally accepted accounting principles,
consistently applied; provided, however, that for purposes of
determining both the 1997 EBIT and the January 2, 1998 net worth of
Road Rescue, the following shall apply:
(a) The aggregate reserve amount for obsolescence,
warranty, and accrued vacation shall be $410,000;
(b) All expenses of Road Rescue relating to the
negotiation and consummation of the transactions contemplated
by this Agreement shall be excluded and not deducted; and
(c) The compensation expense associated with the $100,000
bonus to certain Road Rescue employees authorized at the
December 18, 1997 Road Rescue board of directors meeting shall
be excluded and not deducted. If not paid at or prior to
Closing, Buyer shall cause the Surviving Corporation to pay
such $100,000 bonus and each other employee bonus accrued on
the January 2, 1998 financial statements (and included in the
calculation of 1997 EBIT), as directed by the Shareholder
Representative, as soon as practical following the Closing and
in any event, no later than 21 days following the Closing.
2.2.2 ADJUSTMENT PROCEDURE.
(a) Within thirty (30) days after the Closing Date, the
Shareholders (at their own expense) shall caused to be prepared
and delivered to Buyer their calculation of the 1997 EBIT.
Buyer and Road Rescue agree to cooperate fully with the
Shareholders and to provide the Shareholders with access to all
records of Road Rescue for purpose of computing the 1997 EBIT.
Buyer or its representatives shall have the right to review all
work papers and procedures used by the Shareholders to
calculate the 1997 EBIT.
(b) Within fourteen (14) days after the Shareholders'
delivery of their calculation of the 1997 EBIT, Buyer shall
notify the Shareholders in writing of its acceptance of such
calculation or its claims that the calculation is not accurate,
setting forth in reasonable detail the basis for such claim.
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If notice of disagreement is not given within such 14-day
period, then the 1997 EBIT as calculated and delivered by the
Shareholders to Buyer shall be used for determining the
adjustment payment, if any.
(c) If Buyer makes a claim of disagreement within such
14-day period, Buyer and the Shareholders shall use their best
efforts to resolve their dispute and agree upon a revised 1997
EBIT. If agreement cannot be reached within fifteen (15) days
of Buyer making its claim, the Shareholders and Buyer shall
jointly retain a mutually acceptable public accounting firm to
resolve the dispute. Such accounting firm shall resolve the
dispute within thirty (30) days of its appointment and its
decision as to the correct 1997 EBIT shall be final and binding
on all parties and shall be used for determining the adjustment
payment, if any. Fees and charges of such accounting firm
shall be paid one-half by the Shareholders and one-half by
Buyer.
2.2.3 ADJUSTMENT AMOUNT. If 1997 EBIT is greater than
$921,000, the aggregate merger consideration to be paid for the Shares
shall be increased by an amount equal to two times the difference
between 1997 EBIT less $921,000. If 1997 EBIT is less than $753,000,
the aggregate merger consideration to be paid for the Shares shall be
reduced by an amount equal to two times the difference between
$753,000 less the 1997 EBIT. If 1997 EBIT equals or is greater than
$753,000 and not greater than $921,000, no adjustment payment under
this Section shall be made.
2.2.4 PAYMENT TERMS. If the aggregate merger consideration
for the Shares is increased, the adjustment payment shall be paid as
follows: (i) 15 percent by an increase to the Escrow Fund pursuant to
an additional cash contribution by Buyer, (ii) 35 percent by a cash
payment by Buyer to the Shareholders, and (iii) 50 percent by the
issuance of additional shares of Buyer's Common Stock to the
Shareholders, with the number of shares of Buyer's Common Stock to be
so issued to be determined assuming a $7.50 per share value for
Buyer's Common Stock. If the aggregate merger consideration for the
Shares is decreased, the adjustment payment shall be paid as follows:
(i) 15 percent by a decrease to the Escrow Fund pursuant to a
distribution from the Escrow Fund to Buyer, (ii) 35 percent by a cash
payment from the Shareholders to Buyer, and (iii) 50 percent by the
cancellation of a portion of the Buyer's Common Stock previously
issued to the Shareholders, with the number of shares of Buyer's
Common Stock to be so canceled to be determined assuming a $7.50 per
share value for the Buyer's Common Stock.
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2.2.5 TIMING OF ADJUSTMENT PAYMENTS. Any adjustment payments
required to be made pursuant to this Section shall be made in
accordance with the following:
(a) If Buyer has not objected to the Shareholders'
calculation of the 1997 EBIT, the earlier of (a) twenty (20)
days after delivery to Buyer of the Shareholders' calculation
of the 1997 EBIT or (b) five (5) days after Buyer has indicated
that it has no objection to the Shareholders' calculation of
the 1997 EBIT; or
(b) If Buyer has objected to the Shareholders' calculation
of the 1997 EBIT, within five (5) days following final
agreement or a decision with respect to the 1997 EBIT as
provided above.
2.3 STOCK PRICE ADJUSTMENT.
2.3.1 PRICING PERIOD. The average of the per share closing
prices for each trading day during the 12 full calendar weeks ending
10 days before the one year anniversary of the Effective Time (the
"PRICING PERIOD") shall be deemed to be the "AVERAGE TRADING PRICE."
2.3.2 ADJUSTMENT. If, at the end of the Pricing Period, the
Average Trading Price does not equal or exceed $8.00 per share (the
"TARGET PRICE"), Buyer shall pay each Shareholder the difference
between the Target Price and the Average Trading Price then multiplied
by the number of shares of Buyer Common Stock received by that
Shareholder in the Merger.
2.3.3 METHOD OF PAYMENT. Payment shall be made in equal
amounts of cash and Buyer Common Stock, where the Buyer Common Stock
shall be valued at the average per share closing price of Buyer Common
Stock during the ten trading days immediately proceeding the end of
the Pricing Period. Payment of cash and the issuance of shares (if
any) shall be made within 10 days after the end of the Pricing Period.
The Shareholders acknowledge and agree that such shares of Buyer
Common Stock received under this Section shall be "restricted
securities" under Rule 144 and legended as such.
2.4 SHAREHOLDERS' MEETING.
2.4.1 ROAD RESCUE'S ACTIONS. Road Rescue, acting through its
board of directors (the "BOARD") shall, in accordance with applicable
law, duly call, give notice of, convene, and hold a special meeting of
its shareholders (the "SPECIAL MEETING") as soon as practicable
following the execution of this Agreement for the primary purpose of
considering and adopting this Agreement.
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2.4.2 SHAREHOLDER'S ACTIONS. Each Shareholder agrees that he
will vote all of the Shares then owned by such Shareholder in favor of
the approval and adoption of this Agreement.
2.4.3 BUYER'S ACTION. Buyer agrees that it will vote all of
its shares of MergerSub Common Stock in favor of the approval and
adoption of this Agreement.
2.5 PLACE AND DATE OF CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the
offices of Shareholders' counsel, on the later of (a) January 7, 1998;
(b) Buyer's satisfaction or written waiver of the condition set forth in
Section 6.9; or (c) such other time and place as the parties may agree.
Subject to the provisions of Article 8, failure to consummate the purchase
and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section will not result in the
termination of this Agreement and will not relieve any party of any
obligation hereunder. The date on which the Closing concludes shall be
referred to as the "CLOSING DATE."
2.6 CONSUMMATION OF THE MERGER. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Articles 6 and 7, the
parties shall execute and file the Articles of Merger with the Secretary of
State and take such other actions as may be required by law to make the
Merger effective as promptly as is practicable.
2.7 ESCROW FUND. Buyer and the Shareholders shall establish an
escrow fund of $405,000 in cash (the "ESCROW FUND") for the purpose of
satisfying the Shareholders' obligations under the Agreement. The Escrow
Fund shall be governed by an escrow agreement substantially similar to the
escrow agreement set forth in EXHIBIT 2.7 (the "ESCROW AGREEMENT").
2.8 CLOSING OBLIGATIONS.
2.8.1 BUYER'S OBLIGATIONS. At the Closing, Buyer shall
deliver:
(a) CASH. In the aggregate, cash of $1,701,000, less
$405,000 for the Escrow Fund (pro rata to each Shareholder) by
certified check or wire transfer to accounts specified by the
respective Shareholders.
(b) STOCK. In the aggregate, 240,131 shares of Buyer's
Common Stock; such shares shall be issued in the names of each
Shareholder, pro rata based on their respective ownership
interest in Road Rescue.
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(c) INDEMNIFICATION AGREEMENT. The Indemnification
Agreement described in Section 7.6, executed by MergerSub and
Buyer.
(d) LEGAL OPINION. The legal opinion described in Section
7.3 and those supplemental documents set forth in Section 7.4.
(e) ARTICLES OF MERGER. Articles of Merger, as required
by the Act and reasonably acceptable to counsel for the
Shareholders, executed by MergerSub.
(f) ESCROW FUNDS. The sum of $405,000 to the Escrow
Agent (as defined in the Escrow Agreement) by wire transfer or
certified check;
(g) ESCROW AGREEMENT. The Escrow Agreement, as executed
by Buyer.
(h) XXXXXXX DOCUMENTS. Pursuant to Section 7.7, Buyer
shall either (i) pay in full all amounts outstanding under the
"Xxxxxxx Documents" (as defined in Section 7.7), or (ii)
execute and deliver appropriate amendments with respect to each
of the Xxxxxxx Documents for their continuation and, in
connection therewith, obtain a complete release of any personal
guarantee obligations of Xxxxxxx X. Xxxxxxxxx relating to the
Xxxxxxx Documents.
(i) XXXXXXXXX LOANS. Pursuant to Section 7.8, an aggregate
cash payment shall be made by Buyer to Firstar Bank in an
amount equal to $482,015.73, which amount represents the total
of amounts previously advanced under the Xxxxxxxxx Loans, plus
interest.
2.8.2 SHAREHOLDERS' OBLIGATIONS. At or prior to the Closing,
the Shareholders shall deliver to Buyer:
(a) OLD CERTIFICATES. Certificates representing the
Shares, duly endorsed (or accompanied by duly executed stock
powers), with signatures guaranteed by a commercial bank or by
a member firm of the New York Stock Exchange, for transfer to
Buyer.
(b) SHAREHOLDER QUESTIONNAIRES. The Shareholder
Questionnaires described in Section 3.26, duly completed and
executed by each Shareholder.
(c) INDEMNIFICATION AGREEMENT. The Indemnification
Agreement described in Section 7.6, executed by the
Shareholders and related parties.
7
(d) LEGAL OPINION. The legal opinion described in Section
6.4 and those supplemental documents set forth in Section 6.5.
(e) ARTICLES OF MERGER. Articles of Merger, as required
by the Act and reasonably acceptable to counsel for the Buyer,
executed by Road Rescue.
(f) ESCROW AGREEMENT. The Escrow Agreement, executed by
the Shareholders.
(g) LEASE. The consent to the deemed assignment of the
lease of the real property located at 0000 Xxxxxx Xxxxxx, Xxxxx
Xxxx, Xxxxxxxxx (the "LEASE"), executed by the landlord.
(h) SENIOR MANAGEMENT CERTIFICATES. The certificates of
Senior Management, as described in the last paragraph of
Article 3.
2.9 CLOSING BALANCE SHEET. Within 90 days after the Closing, Buyer
may prepare a balance sheet, dated as of the Closing, reflecting the assets
and liabilities of Road Rescue (the "CLOSING BALANCE SHEET"). If prepared,
the Closing Balance Sheet shall be prepared in a manner that is consistent
with past practice and the books and records of Road Rescue and that fairly
presents Road Rescue's financial condition and results of operations as of
the Closing, subject to the clarifications and exceptions indicated in
Section 2.2.1 above.
2.10 STUB PERIOD. Road Rescue shall be required to file income tax
returns for the period between the end of its 1997 fiscal year and the
Effective Time (the "STUB PERIOD"). Based on current trends and past
experience, the parties anticipate the amount of income in the Stub Period
to be approximately $0. However, if there is income in the Stub Period,
Buyer shall cause the Surviving Corporation to distribute to the
Shareholders an amount sufficient to cover the Shareholders' passed-through
income taxes associated with Road Rescue's S-corporation income in the Stub
Period.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
The Shareholders, jointly and severally (provided Shareholder
liability to Buyer relating to all representations and warranties in this
Article shall be limited exclusively to as is provided under Article 9
hereof), represent and warrant to Buyer as follows:
3.1 DISCLOSURE SCHEDULE. Two identical copies of individually
numbered schedules (collectively, the "DISCLOSURE SCHEDULE") corresponding
8
to the sections of this Article have been prepared. To the knowledge of
the Shareholders, each individual schedule in the Disclosure Schedule
contains all applicable exceptions to the specifically identified section
contained in this Article and sets forth each exception in reasonable
detail; provided, however, that any specifically described exception in one
section of the Disclosure Schedule shall be considered disclosure for all
sections of the Disclosure Schedule and it shall not be necessary for such
exception in one section to be repeated. In such cases, the Shareholders
have used their best efforts to provide conspicuous cross-references. The
Shareholders have provided or otherwise made available to Buyer with true
and complete copies of all documents referenced in the Disclosure Schedule.
3.2 ORGANIZATION AND GOOD STANDING. Road Rescue is a corporation
duly organized, validly existing, and in good standing under the laws of
State of Minnesota. Road Rescue has all requisite corporate power and
authority to carry on it business as presently conducted. Road Rescue does
not own, and has no obligation to acquire, any interest in any other person
or entity.
3.3 CAPITALIZATION OF ROAD RESCUE. The authorized equity
securities of Road Rescue consists of 250,000 Shares, of which 724.0632
Shares are issued and outstanding (as of the date of this Agreement and
immediately prior to the Effective Time) and constitute all of the Road
Rescue's Common Stock. Each Shareholder's ownership of the Shares is set
forth below:
RECORD HOLDER CERTIFICATE NUMBER(S) TOTAL SHARES
------------- --------------------- ------------
Xxxxxxx X. Xxxxxxxxx 30, 31, 39 543.5293
Xxxx X. Xxxxxxxx 19, 26, 33 45.1335
Xxxxxx X. Xxxxx, Xx. 00, 00, 00 00.0000
Xxxx X. XxXxxxxx 21, 27, 34 45.1335
Xxxxx X. Xxxxxxxxxx 16, 24, 36, 40 22.5667
Xx. Xxxx X. Xxxxxxx 14, 22, 38 22.5667
Except as disclosed in Schedule 3.3 of the Disclosure Schedule: the
Shareholders are, and will be immediately prior to the Effective Time, the
record and beneficial owners and holders of all of the Shares, free and
clear of all encumbrances and adverse claims; there are no other issued or
outstanding equity securities or other securities of Road Rescue; no legend
or other reference to any purported encumbrance appears upon any Share
certificate; all of the Shares have been duly authorized and validly issued
and are fully paid and nonassessable; and there are no agreements relating
to the issuance, sale, or transfer of any equity securities or other
securities of Road Rescue.
9
3.4 ENFORCEABILITY. Road Rescue and each Shareholder have full
capacity, power, and authority to execute and perform this Agreement. This
Agreement is binding upon Road Rescue and each Shareholder and is
enforceable against Road Rescue and each Shareholder in accordance with its
terms.
3.5 NO CONFLICT WITH OTHER INSTRUMENTS OR PROCEEDINGS. Except as
disclosed in Schedule 3.5 of the Disclosure Schedule, the execution and
performance of this Agreement will not (a) result in a breach of or
constitute a default under any agreement or other obligation to which Road
Rescue or the Shareholders is now a party or by which they or any of their
assets may be bound or affected; (b) violate any law, rule, regulation,
license, or permit of any governmental body or any order or decree of any
court; (c) result in the imposition of any tax or encumbrance on Road
Rescue or any of its assets; or (d) affect in any way the terms of any of
Road Rescue's indebtedness. All consents, approvals, or authorizations of,
or declarations, filings, or registrations with, any third parties or
governmental bodies required of Road Rescue in connection with the
execution, delivery, and performance of this Agreement, as set forth in
Schedule 3.5 of the Disclosure Schedule, will be obtained or made by Road
Rescue before the Closing; provided, however, it is acknowledged and
understood that the government licenses and permits set forth in Schedule
3.5 that have been issued to Road Rescue may not be assignable and that it
may be necessary for Buyer to reapply for and separately obtain such
licenses and permits in connection with its conduct and operation of the
Business following the Closing.
3.6 COMPLIANCE WITH LAWS AND OTHER REGULATIONS. To the knowledge
of the Shareholders, Road Rescue is in full compliance with all laws,
rules, regulations and other requirements applicable to the conduct of Road
Rescue's business or its assets or properties, or any premises occupied by
Road Rescue.
3.7 FINANCIAL STATEMENTS. The audited financial statements of Road
Rescue as of and for the fiscal years ended January 3, 1997 and December
29, 1995, as reported on by Road Rescue's independent accountants, Divine,
Xxxxxxxx & Xxxxx, Ltd. of Minneapolis, Minnesota, including all schedules
and notes relating to such statements, are correct and complete in all
material respects. In addition, the unaudited balance sheet of Road Rescue
as of November 30, 1997, and the unaudited income statement for the eleven
(11) months then ended, including all schedules and notes relating to such
statements, are correct and complete in all material respects. True and
complete copies of such financial statements are attached to the Disclosure
Schedule. These statements fairly present Road Rescue's financial
condition and results of operations on the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied consistently throughout the periods
indicated, except as otherwise noted in such financial statements or the
10
notes thereto, and except that the unaudited interim financial statements
have been prepared without footnote disclosures (that, if presented, would
not differ materially from those included in the January 3, 1997 audited
financial statements of Road Rescue) and normal recurring year-end audit
adjustments, the effect of which will not, individually or in the
aggregate, be materially adverse to Road Rescue. The financial statements
referred to in this Section reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed
in the notes to such financial statements. In this Agreement, Road
Rescue's balance sheet as of November 30, 1997, is referred to as the
"BALANCE SHEET" and November 30, 1997, is referred to as the "BALANCE SHEET
DATE."
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on the
Balance Sheet or in Schedule 3.8 of the Disclosure Schedule, and except for
(a) liabilities incurred since the Balance Sheet Date in the ordinary
course of business that would not, individually or in the aggregate,
reasonably be expected to adversely affect Road Rescue or the Business, and
(b) financing liabilities and obligations, Road Rescue does not have any
debts, liabilities, or obligations of any nature, and there is no basis for
the assertion against Road Rescue of any debt, liability, or obligation.
No Shareholder or person related to such Shareholder has received notice of
a pending or threatened claim or dispute regarding the performance bonds
listed on Exhibit A of the Indemnity Agreement.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date, Road Rescue has conducted the Business in the ordinary course of
business and has maintained Road Rescue's records and books of account
relating to the Business in a manner that fairly and accurately reflects
Road Rescue's transactions, assets, and liabilities in accordance with
standard accounting practices consistently applied, and, since the Balance
Sheet Date, there has been no adverse change in the condition of the
Business, financial or otherwise, or in Road Rescue's business or
properties. In particular, and without limiting the foregoing, except as
disclosed in Section 3.9 of the Disclosure Schedule, since the Balance
Sheet Date, Road Rescue has not with respect to the Business: (a) paid or
otherwise satisfied any obligation except for claims, liabilities, and
obligations disclosed or reserved against on the Balance Sheet or incurred
since the Balance Sheet Date in the ordinary course of business or
consistent with past practice; (b) written down or written off any item of
inventory or any note or account receivable as uncollectible; (c) canceled
or waived any debt, claim, or right (absolute or contingent) having a value
or potential value in excess of $25,000; (d) subjected any assets to any
type of encumbrance or other restriction, other than encumbrances of record
as of the Balance Sheet Date; (e) sold or otherwise disposed of any assets
except in the ordinary course of business; (f) disposed of or permitted a
lapse of any license, permit, patent, trademark, trade name, or copyright;
(g) disposed of or disclosed to any person any trade secret, formula,
11
process, or know-how; (h) increased the compensation of, or declared or
agreed to pay a bonus to, any officer or employee, except regularly
scheduled increases in compensation to non-officer employees in the
ordinary course of business; (i) suffered a material loss of or a reduction
in working capital available for current or prospective operations (for
purposes of this Agreement, the term "WORKING CAPITAL" shall mean the
difference between current assets and current liabilities classified and
determined in accordance with GAAP); (j) entered into any agreement or
arrangement with, any director, officer, employee, or shareholder; (k) made
any capital expenditure, purchase order, or commitment in excess of $25,000
for additions to property, plant, equipment, or otherwise; (l) purchased or
placed a purchase order for inventory, supplies, or any other items, or
entered into any other agreement or transaction other than in the ordinary
course of business; (m) suffered any loss of or damage to physical property
or other assets not covered by insurance; (n) paid or incurred any
obligation to pay any dividends or other distributions with respect to Road
Rescue's capital stock; (o) issued or authorized capital stock of Road
Rescue; or (p) to the Shareholders' knowledge, violated any federal, state,
local, or foreign law, statute, ordinance, regulation, or order.
3.10 CUSTOMERS AND SUPPLIERS. Since the Balance Sheet Date, there
has not been any adverse change in Road Rescue's relationship with any of
their respective ten (10) largest customers, dealers, or suppliers, nor has
Road Rescue or the Shareholders received information from such customers,
dealers, or suppliers that an adverse change should be reasonably
anticipated as a result of this Agreement. Except as discussed on Section
3.10 of the Disclosure Schedule, there are no known claims against Road
Rescue to return merchandise in excess of an aggregate of Ten Thousand
Dollars ($10,000) by any one purchaser, or Twenty-five Thousand Dollars
($25,000) for all purchasers considered collectively.
3.11 TAXES. Except as disclosed on Section 3.11 of the Disclosure
Schedule:
3.11.1 FILINGS. Road Rescue has filed on a timely basis since
1992 all tax returns that are or were required to be filed pursuant
to any applicable federal, state, local, municipal, foreign,
international, or other administrative order, constitution, law,
ordinance, common law, rule, regulation, statute, or treaty
(collectively, a "LEGAL REQUIREMENT"). Road Rescue has delivered to
Buyer's representative copies of its complete and accurate tax returns
filed since 1992. Road Rescue has paid, or made provision for the
payment of, all taxes that have or may have become due pursuant to
those tax returns or otherwise, or pursuant to any assessment received
by Road Rescue.
3.11.2 AUDITS. Road Rescue has never had an audit with respect
to any of its tax returns in the past six years. All tax returns are
12
closed by the applicable statute of limitations for all taxable years
through 1992. Road Rescue has not given or been requested to give
waivers or extensions of any limitation period relating to the payment
of taxes of Road Rescue or for which Road Rescue may be liable.
3.11.3 RESERVES. The charges, accruals, and reserves with
respect to taxes on the books of Road Rescue are adequate (determined
in accordance with GAAP) and are at least equal to Road Rescue's
liability for taxes (provided no reserves or accrual has been made for
distributions to be made to Shareholders to cover taxes resulting from
the allocation to them of the S corporation income of Road Rescue)
during fiscal year 1997. There exists no proposed tax assessment
against Road Rescue. No consent to the application of Section
341(f)(2) of the Code has been filed with respect to any property or
assets held, acquired, or to be acquired by Road Rescue. All taxes
that Road Rescue is or was required by Legal Requirements to withhold
or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper person or entity.
3.11.4 S-CORP STATUS. Road Rescue, at all times since
December 31, 1989, has had, and will immediately prior to the Closing
have, in effect an effective election to be treated as an
S corporation under Section 1361 of the Code and under appropriate
state tax laws and regulations that recognize such an election. Road
Rescue has at all times since December 31, 1989 satisfied all
requirements for taxation as an S corporation for state and federal
purposes.
3.11.5 BUSINESS COMBINATIONS. Since December 31, 1989, Road
Rescue has not merged or consolidated with, or acquired stock of, or
assumed or became subject to any tax liabilities of, any corporation
taxed under Subchapter 1C of Subtitle A of the Code.
3.11.6 TRUE, CORRECT, AND COMPLETE. All tax returns filed by
(or that include on a consolidated basis) Road Rescue are true,
correct, and complete. There is no tax sharing agreement that will
require any payment by Road Rescue after the date of this Agreement.
During the consistency period (as defined in Section 338(h)(4) of the
Code with respect to the sale of the Shares to Buyer), neither Road
Rescue nor a target affiliate (as defined in Section 338(h)(6) of the
Code with respect to the sale of the Shares to Buyer) has sold or will
sell any property or assets to Buyer or to any member of the
affiliated group (as defined in Section 338(h)(5) of the Code) that
includes Buyer.
3.12 ACCOUNTS RECEIVABLE. Road Rescue has provided Buyer and its
representatives the opportunity to review Road Rescue's records regarding
accounts receivable, including an accounts receivable aging report as of
13
November 30, 1997. Such information provided by Road Rescue to Buyer or
its representatives regarding such accounts receivable is accurate and
complete.
3.13 INVENTORY. All inventory of Road Rescue, whether or not
reflected in the Closing Balance Sheet or the Balance Sheet, consists of a
quality and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which
have been or will be written off, written down, or reserved to net
realizable value on the Balance Sheet and Closing Balance Sheet. All
inventories not written off have been priced at the lower of cost or market
on a first in, first out basis. Work in process and finished goods are
valued using the absorption method of accounting in accordance with GAAP.
The quantities of each item of inventory (whether raw materials, work-in-
process, or finished goods) are not excessive, but are reasonable in the
present circumstances.
3.14 REAL PROPERTY. To the Shareholders' knowledge, no building or
improvement that Road Rescue owns or uses encroaches on any easement or
property owned by another and no building or improvement owned by another
encroaches on any property that Road Rescue owns or uses or on any easement
the benefit of which runs to Road Rescue. To the knowledge of the
Shareholders, Road Rescue is not in violation of any law, order,
regulation, or other requirement relating to any real property that Road
Rescue owns or uses. To the knowledge of the Shareholders, there are no
ground subsidences or slides on any real property that Road Rescue owns or
uses. Except as indicated in Section 3.14 of the Disclosure Schedule, all
buildings and improvements that Road Rescue owns or uses are in good
condition (normal wear and tear excepted), are structurally sound and not
in need of repairs and are adequately serviced by all necessary utilities.
3.15 PERSONAL PROPERTY. Except as disclosed in Schedule 3.15 of the
Disclosure Schedule, Road Rescue has good title to all personal property
owned by it, except as since sold or otherwise disposed of in the ordinary
course of business, subject to no lien, encumbrance, or other restriction.
Except as indicated on Section 3.15 of the Disclosure Schedule, all
personal property will be in the possession of Road Rescue on the Closing.
3.16 CONDITION OF ASSETS. The personal property (whether owned or
leased) of Road Rescue is in good condition and repair, normal wear and
tear excepted.
3.17 INTELLECTUAL PROPERTY. Section 3.17 of the Disclosure Schedule
correctly and completely lists all "Intellectual Property" (as defined
below) of Road Rescue. "INTELLECTUAL PROPERTY" includes: corporate names,
fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications, patents and patent
applications, copyrights, rights in mask works, and know-how, trade
14
secrets, confidential information, software, technical information, process
technology, plans, drawings, and blue prints. Road Rescue has not
infringed or unlawfully used any Intellectual Property of any other person
or entity. The manufacturing and engineering drawings, process sheets,
specifications, bills of material, trade secrets, "know-how," and other
like data are in a form and of a quality that Buyer can, following the
Closing, conduct the Business as previously conducted.
3.18 CONTRACTS. All agreements and other arrangements of Road
Rescue with a third party are valid and enforceable in accordance with
their terms. Neither Road Rescue nor any other party is in default or in
arrears under the terms of any of those agreements. Except as set forth on
Schedule 3.18 of the Disclosure Schedule, Road Rescue is not a party to:
(a) any other agreement with respect to any real property; (b) any joint
venture, distributor, dealer, advertising, agency, manufacturer's
representative, sales representative, sales agent, franchise, license, or
similar agreement; (c) any loan agreement, security agreement, mortgage,
indenture, or promissory note; (d) any consulting or employment agreement;
(e) any contract of guaranty or indemnification; (f) any contract
purporting to limit the freedom of Road Rescue to compete in any line of
business in any geographical area; or (g) any other contract that might
involve payment by or to Road Rescue in an amount in excess of $10,000 AND
that was entered into other than in the ordinary course of business.
Except for customers in the ordinary course of business, no person or
entity has any agreement or understanding for the purchase from Road Rescue
of any of its assets.
3.19 EMPLOYEE RELATIONS. Except as set forth in Schedule 3.19 of
the Disclosure Schedule: Road Rescue has not had, within the last three
years, any union organizational effort, claim of unfair labor practice,
wrongful discharge, employment discrimination, or sexual harassment
dispute; to the knowledge of the Shareholders, Road Rescue has complied
with all applicable laws, rules, and regulations respecting employment
practices, occupational safety, wages, and hours; and Road Rescue has not
been within the last five years a party to any contract or agreement with
any of Road Rescue's present or former employees with respect to length,
duration, or conditions of employment, compensation, or any other form of
remuneration. A copy of each employee handbook governing Road Rescue's
employees, and a copy of the employment application forms currently used by
Road Rescue are attached to the Disclosure Schedule. No key employee of
Road Rescue has notified Road Rescue of an intention to terminate
employment.
3.20 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 3.20
of the Disclosure Schedule, Road Rescue has never maintained any employee
pension benefit plans, employee welfare benefit plans, incentive
compensation plans, benefit plans for retired employees, or any other
employee benefit plans ("PLANS"). True, correct, and complete copies of
15
all Plan texts and all agreements in any way relating to the Plans have
been delivered to Buyer. To the knowledge of the Shareholders, all Plans
are and always have been, in compliance with all applicable laws and no
Plan has been involved in a prohibited transaction. Road Rescue has made
full and timely payment of all required contributions to the Plans and no
unfunded liability or accumulated funding deficiency exists with respect to
any Plan. In the past three years, Road Rescue has provided, and until the
Closing, shall provide, all notices required under COBRA.
3.21 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.21 of
the Disclosure Schedule:
3.21.1 ORDERS. There is no consent decree, consent order, or
other written agreement to which Road Rescue is a named party in
relation to any environmental matter and no such agreement is
necessary for Road Rescue's continued compliance with applicable
environmental laws and regulations. There have been no orders or
written notices issued to Road Rescue that have not been complied with
in all material respects and no investigations conducted, or other
proceedings taken by any person or entity or, to the Shareholders'
knowledge, threatened by any governmental entity under or pursuant to
any Environmental Law (as defined below) with respect to the Business
or its assets and Road Rescue has not received any written
communications from a governmental entity that have not been fully
complied with and cleared concerning alleged violations of any
Environmental Law or alleged Environmental Contamination (as defined
below).
3.21.2 PERMITS. Except as set forth in the environmental
reports listed on Section 3.21 of the Disclosure Schedule
(collectively, the "ENVIRONMENTAL REPORTS"), Road Rescue has received
all permits, licenses, and approvals, have kept all records, and have
made all filings and disclosures required by Environmental Laws. A
true and complete copy of each Environmental Report is included in the
Disclosure Schedule.
3.21.3 PROPERTIES. The only real properties that are
currently, or were previously, owned, operated, leased, or used by
Road Rescue are located at (a) 0000 Xxxxxx Xxxxxx, Xxxxx Xxxx,
Xxxxxxxxx, and (b) the locations set forth in Section 3.21 of the
Disclosure Schedule (collectively, the "PROPERTIES"). Except as
indicated in the Environmental Reports, the Properties are free of
Environmental Contamination, and no underground storage tanks or other
similar underground containers or depositories are, or to the
knowledge of the Shareholders, ever have been, present on any of the
Properties. To the knowledge of the Shareholders, none of the
Properties is listed on or being considered for listing on any list of
contaminated sites maintained under any Environmental Law or is
16
subject to or being considered for enforcement action under any
Environmental Law, and none of the Properties have been designated as
an area under the control of any conservation authority.
3.21.4 WASTE DISPOSAL. To the knowledge of the Shareholders,
Road Rescue has not been identified as a potentially responsible party
with respect to any site at which Road Rescue's wastes have been
treated, stored, or disposed. To the knowledge of the Shareholders,
no Hazardous Materials (as defined below), and no other materials
intended for use or generated by Road Rescue, have been or are used,
stored, treated, or otherwise disposed of, in violation of
Environmental Laws by Road Rescue or its agents. All Hazardous
Materials removed or emitted from any of the Properties as a result of
operations on the Properties were and are documented, transported, and
disposed of, in compliance with Environmental Laws. To the knowledge
of the Shareholders, no materials including, without limitation,
effluents, leachate, emissions, or Hazardous Materials, generated on
or emitted from any of the Properties have caused or will cause, in
whole or in part, any Environmental Contamination. Road Rescue has
not disposed of, permitted the disposal of, or knows of the disposal
of any waste or Hazardous Material on any of the Properties.
3.21.5 OTHER. To the knowledge of the Shareholders, the
Business as currently conducted does not constitute a nuisance and no
claim or allegation of nuisance has been made with respect to the
Business by any adjoining land owner or other person or entity.
3.21.6 DEFINITIONS. For purposes of this Section:
(a) "ENVIRONMENTAL LAW" means any federal, state, or local, statute,
ordinance, rule, or regulation relating to air quality, water quality,
solid waste management, Hazardous Materials, toxic substances, or the
protection of public health or protection or remediation of the
environment; (b) "HAZARDOUS MATERIAL" means any substance defined,
designated, or classified as hazardous, toxic, or radioactive, or that
is otherwise regulated by any Environmental Law; and
(c) "ENVIRONMENTAL CONTAMINATION" means the presence of any Hazardous
Material in, on, or under the air, soil, groundwater, or surface
water, so as to result in any liabilities, fines, penalties, or
remedial obligations under any Environmental Law or judicial
interpretations thereof.
3.22 LITIGATION. Except as disclosed in Section 3.22 of the
Disclosure Schedule: there is no pending or, to the knowledge of the
Shareholders, threatened, suit, proceeding or inquiry affecting Road Rescue
or the Shareholders (in their capacity as such), or any of the capital
stock, properties, assets, or business prospects of Road Rescue, or the
transactions contemplated by this Agreement; to the knowledge of the
Shareholders, there is no factual basis upon which any suit, proceeding, or
17
inquiry could be asserted or based, and there is no outstanding order or
decree of any court, governmental body, or arbitration tribunal against or
affecting Road Rescue or any of its capital stock, properties, assets, or
business prospects.
3.23 PRODUCT LIABILITIES AND WARRANTIES. The Disclosure Schedule
sets forth (a) a specimen copy of the form of written warranties covering
each product sold in the Business; and (b) a summary of any exception of
such warranty given to any customer of the Business that is still in
effect. The Shareholders have provided Buyer a true and complete summary
of Road Rescue's warranty experience over the past five calendar years.
Except as disclosed on Section 3.23 of the Disclosure Schedule, there have
been no personal injury product liability claims asserted against Road
Rescue during the last five years.
3.24 INSURANCE. All of the Road Rescue's insurance policies are
outstanding and in full force and, to the extent that they are due, all
premiums are currently paid, and all duties of the insured have been fully
discharged. The Disclosure Schedule contains a list and complete
description of all insurance policies and all other forms of insurance that
Road Rescue owns or holds. Road Rescue's present insurance coverage shall
remain in effect at least until the Closing.
3.25 PERMITS AND LICENSES. All permits, licenses, orders, and
approvals necessary to carry on the Business as presently conducted are
identified in the Disclosure Schedule and are in full force and effect and
have been complied with. All fees and charges incident to those permits,
licenses, orders, and approvals have been fully paid and are current, and
no suspension or cancellation of any such permit, license, order, or
approval has been to the best of the Shareholders' knowledge, threatened
or could result by reason of this Agreement.
3.26 QUALIFIED INVESTOR. Each Shareholder has delivered to Buyer a
duly executed Shareholder Questionnaire in the form attached as EXHIBIT
3.26 that is correct, complete, and not misleading; and is acquiring
Buyer's Common Stock for his own account for the purpose of investment and
not with a view to distribution or resale.
3.27 ACKNOWLEDGMENTS REGARDING BUYER'S RESTRICTED COMMON STOCK.
3.27.1 RESTRICTED. Each Shareholder has been advised that the
Buyer's Common Stock to be received in connection with this Agreement
has not been registered under the Securities Act, or registered or
qualified under any state securities law (a "BLUE SKY LAW"). Each
Shareholder understands that Buyer is relying on the representations
of the Shareholders for purposes of claiming exemptions from
registration under the Securities Act and applicable Blue Sky Laws and
that the basis for such exemptions may not be present if a Shareholder
18
intends to acquire the Buyer's Common Stock for resale on the
occurrence or non-occurrence of some predetermined event. No
Shareholder has any such intention.
3.27.2 RULE 144. Each Shareholder understands that the
Buyer's Common Stock received in connection with this Agreement will
be "restricted securities" as that term is defined in Rule 144 under
the Securities Act. Each Shareholder understands that Buyer is under
no obligation so to register or qualify the restricted shares under
the Securities Act or any Blue Sky Law.
3.27.3 LEGEND. Each Shareholder understands and agrees that
any certificates representing or relating to the restricted Buyer's
Common Stock may bear such legends as Buyer may consider necessary or
advisable to facilitate compliance with the Securities Act, Blue Sky
Laws, and any other securities law.
3.27.4 PRIVATE PLACEMENT MEMORANDUM. As of the Closing, each
Shareholder acknowledges receipt of the Private Placement Memorandum
and the exhibits thereto (collectively, the "PPM"), and acknowledges
that he has been furnished with such financial and other information
concerning Buyer and the business of Buyer as he considers necessary
in connection with the investment in the Buyer's Common Stock.
Further, no oral representations have been made or oral information
furnished to a Shareholder or his adviser(s) in connection with the
Buyer's Common Stock that are in any way inconsistent with the
statements made in the PPM.
3.28 APPLICATIONS, PROXY MATERIALS, ETC. To the knowledge of the
Shareholders, none of the information to be supplied by or on behalf of a
Shareholder or Road Rescue for inclusion in any document relating to this
Agreement or the Special Meeting will: (a) be false or misleading with
respect to any material fact; (b) omit to state any material fact necessary
to make the statements contained therein, in light of the circumstances in
which they are made, not misleading; or (c) fail to correct any statement
or omission in any earlier filing or communication to the extent necessary
to make the statements contained therein, in light of the circumstances in
which they are made at the respective times such documents are filed,
supplemented, or amended.
3.29 BOOKS AND RECORDS. All of the corporate record books and
shareholder records of Road Rescue (a) have been made available to Buyer
and (b) are complete and correct and have been maintained in accordance
with sound business practices. Since 1990, no meeting or written consent
of any shareholders, board of directors, or committee has been held for
which minutes are not contained in such minute books.
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3.30 RELATIONSHIPS WITH RELATED PERSONS. Other than Road Rescue's
business dealings with XXXXX, Inc., a Minnesota Corporation ("XXXXX"),
neither Road Rescue nor any Related Person (defined below) is, or since
January 1, 1996, has had an interest in, any entity that has (a) had
material business dealings or a material interest in any transaction with
Road Rescue, or (b) engaged in competition with Road Rescue. Except for
employment-related agreements and business dealings with XXXXX, no Related
Person is a party to any agreement with, or has any claim or right against,
Road Rescue. For the purposes of this Agreement, a "RELATED PERSON" shall
mean (i) any Shareholder; (ii) each director or officer of Road Rescue;
(iii) any entity in which Road Rescue holds a material interest; and (iv)
any spouse or member of the immediate family of the person described in
clause (i) or (ii).
3.31 MINIMUM NET WORTH. The Closing Balance Sheet, as of the
Closing, shall reflect a net worth (assets less liabilities) of at least
$813,000.
3.32 BROKERS. Neither Road Rescue nor the Shareholders have
retained or employed any broker, finder, investment banker, or other
person, or taken any action that would give any person any valid claim
against Buyer, the Shareholders, or Road Rescue for a commission, brokerage
fee, or other compensation.
3.33 NO DISSENTERS RIGHTS. With respect to the Merger, no
Shareholder has or will elect or otherwise pursue dissenters, appraisal,
or similar shareholder rights under the Act.
3.34 ACCURACY OF STATEMENTS. To the Shareholders' knowledge, no
representation or warranty made by Road Rescue or the Shareholders in this
Agreement, or any information, statement, certificate, or schedule
furnished, or to be furnished, to Buyer in connection with this Agreement,
contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary to make the statements not
misleading. The representations and warranties of Road Rescue and the
Shareholders shall be deemed to be made as of the date of this Agreement
and again as of the Closing.
For purposes of this Article 3, the phrases "TO THE KNOWLEDGE OF THE
SHAREHOLDERS" and "TO THE SHAREHOLDER'S KNOWLEDGE" shall mean to the actual
knowledge of each of the Shareholders and to the actual knowledge of Xxxxx
Xxxxxxx, Xxxxx Xxxx, Xxxx Xxxxxxxx, Xxxxx Xxxx, Xxxx Xxxxxxxx, and Xxxxx
Xxxxx ("SENIOR MANAGEMENT"). Road Rescue and the Shareholders shall cause
Senior Management to confirm by written certificate that, after a review of
this Agreement and the Disclosure Schedule and except as stated on such
certificate, none of the "knowledge" representations and warranties
contained in this Article 3, as modified by the Disclosure Schedule, are
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untrue. Copies of such Senior Management certificates shall be delivered
to Buyer at Closing.
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Road Rescue and the
Shareholders as follows:
4.1 BUYER'S ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Michigan.
4.2 ENFORCEABILITY. Buyer has full capacity, power, and authority
to enter into this Agreement and to carry out the transactions contemplated
by this Agreement. This Agreement is binding upon Buyer and is enforceable
against Buyer in accordance with its terms.
4.3 FINANCIAL STATEMENTS. The audited, consolidated financial
statements of Buyer and Buyer's subsidiaries as of and for the years ended
December 31, 1996, 1995, and 1994, as reported on by Buyer's independent
accountants, Deloitte & Touche LLP, including all schedules and notes
relating to such statements, as previously delivered to the Shareholders or
Road Rescue, are correct and complete in all material respects. These
statements fairly present Buyer's and Buyer's subsidiaries' financial
condition and results of operations on a consolidated basis on the dates
and for the periods indicated, and have been prepared in conformity with
GAAP applied consistently throughout the periods indicated, except as
otherwise noted in such financial statements or the notes thereto. The
financial statements referred to in this Section reflect the consistent
application of GAAP throughout the periods involved, except as disclosed
in the notes to such financial statements.
4.4 BUYER'S CAPITAL STOCK.
4.4.1 CLASSES AND SHARES. The authorized capital stock of
Buyer consists of (a) 23,900,000 shares of Buyer's Common Stock, of
which, as of November 1, 1997, a total of 12,555,960 shares were
legally issued and outstanding; and (b) 2,000,000 shares of preferred
stock, without par value (of which 130,000 shares are designated
Series A Preferred Stock), none of which are issued and outstanding as
of the date of this Agreement.
4.4.2 NO OTHER CAPITAL STOCK. As of the execution of this
Agreement: (a) other than Buyer's Common Stock, there is no security
issued and outstanding that represents or is convertible into capital
stock of Buyer; and (b) there are no outstanding subscriptions,
options, warrants, or rights to acquire any capital stock of Buyer, or
agreements to which Buyer is a party or by which it is bound to issue
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capital stock, except as set forth in, or as contemplated by, this
Agreement, except (i) stock options awarded pursuant to stock option
plans; (ii) provisions for the grant or sale of shares to, or for the
account of, employees and directors pursuant to benefit plans; (iii)
"Buyer Rights" issued pursuant to a Rights Agreement, dated as of June
4, 1997, between Buyer and American Stock Transfer & Trust Company,
presently associated with each share of Buyer's Common Stock; and (iv)
shares issuable to former shareholders of corporations previously
acquired by Buyer pursuant to the agreements governing such
acquisitions.
4.5 CAPITALIZATION OF MERGERSUB. Buyer is and will be immediately
prior to the Effective Time, the record and beneficial owner and holder of
the issues and outstanding shares of MergerSub Common Stock, free and
clear of all encumbrances and adverse claims. There are no other issued or
outstanding equity securities or other securities of MergerSub. MergerSub
has engaged in no business operations.
4.6 SEC FILINGS. In the last two years, Buyer has filed in a
timely manner all required filings with the SEC. All such filings, as
amended, were complete and accurate in all material respects as of the
dates of such filings, and contain no untrue statement of material fact, or
omit to state a material fact necessary to make the statements contained
therein, in the light of the circumstances in which they are made, not
misleading.
4.7 PRIVATE PLACEMENT MEMORANDUM. None of the information to be
supplied by Buyer for inclusion in the PPM will be false or misleading with
respect to any material fact, or will omit to state any material fact
necessary to make the statements therein not misleading at the time such
document is mailed or otherwise delivered and as of the date of the
Closing.
4.8 ISSUANCE OF BUYER'S COMMON STOCK. The shares of Buyer's Common
Stock to be issued in connection with this Agreement have been duly
authorized and, when issued as contemplated by this Agreement, will be
legally issued, fully paid, and nonassessable shares.
4.9 BROKERS. Buyer has not retained or employed any broker,
finder, investment banker, or other person, or taken any action, or entered
into any agreement or understanding that would give any broker, finder,
investment banker, or other person any valid claim against Buyer, the
Shareholders, or Road Rescue for a commission, brokerage fee, or other
compensation.
ARTICLE 5 COVENANTS
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement
and the Effective Time or such time as this Agreement is terminated
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pursuant to Article 8 (the "TERM OF THIS AGREEMENT"), Road Rescue shall (a)
afford Buyer and its representatives full and free access to its personnel,
properties, contracts, books and records, and other documents and data,
provided Buyer shall conduct its review to minimize disruption to Road
Rescue's business and operations, (b) furnish Buyer with copies of all such
documents and data as Buyer may reasonably request, and (c) furnish Buyer
with such additional information as Buyer may reasonably request. All
information provided to or otherwise received by Buyer relating to Road
Rescue shall be governed by that certain Confidentiality Agreement entered
into by and between Road Rescue and Buyer, dated August 27, 1997 (the
"CONFIDENTIALITY AGREEMENT").
5.2 OPERATION OF THE BUSINESS. During the Term of this Agreement,
Road Rescue shall: (a) conduct its business only in the ordinary course of
business; (b) use its best efforts to preserve intact its current business
organization, keep available the services of the current officers,
employees, and agents, and maintain the relations and goodwill with
suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with it; and (c) confer with Buyer concerning
operational matters of a material nature and otherwise report periodically
to Buyer concerning the status of its business, operations, and finances.
5.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, during the Term of this Agreement, neither Road Rescue nor
any Shareholder will take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of
the changes or events listed in Section 3.9 would be likely to occur.
5.4 REQUIRED APPROVALS. As promptly as practicable after the date
of this Agreement, Buyer, Shareholders, and Road Rescue shall make all
legal filings required to be made by them in order to consummate the
transactions contemplated by this Agreement. During the Term of this
Agreement, (a) the Shareholders and Road Rescue shall (i) cooperate with
Buyer with respect to all filings that Buyer elects to make or is required
to make in connection with the transactions contemplated by this Agreement,
and (ii) cooperate with Buyer in obtaining all consents required to
consummate the Merger; and (b) Buyer shall (i) cooperate with the
Shareholders and Road Rescue with respect to all filings that they elect
to make or are required to make in connection with the transactions
contemplated by this Agreement, and (ii) cooperate with the Shareholders
and Road Rescue in obtaining all consents required to consummate the Merger
5.5 NOTIFICATION. During the Term of this Agreement, each party
promptly will notify the other in writing of any fact or condition that
causes or constitutes a breach of any of their respective representations
and warranties as of the date of this Agreement, or if they become aware of
the occurrence of any fact or condition that would cause or constitute a
breach of any such representation or warranty had such representation or
23
warranty been made as of the time of occurrence or discovery of such fact
or condition. If any such fact or condition requires any change in the
Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, the Shareholders
will promptly supplement the Disclosure Schedule. During the same period,
each party will promptly notify the other of the occurrence of any breach
of any covenant in this Article 5 by them or of the occurrence of any event
that may make their satisfaction of the respective conditions in Articles 6
or 7 impossible or unlikely.
5.6 NO NEGOTIATION. During the Term of this Agreement, neither
Road Rescue nor any Shareholder shall solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide any
information to, or consider the merits of any unsolicited inquiries or
proposals from, any person or entity (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
ordinary course of business) of Road Rescue or any of the capital stock of
Road Rescue or any merger or business combination involving Road Rescue.
5.7 NO COMPETITION. As an inducement for Buyer to enter into this
Agreement and as additional consideration for the consideration to be paid
to the Shareholders under this Agreement, Xx. Xxxxxxxxx agrees that:
5.7.1 NO COMPETITION. For a period of three years after the
Effective Time, he shall not, directly or indirectly, engage or invest
in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be
employed by or in any way associated with or render services or advice
to, any business whose products or activities compete in whole or in
part with the current products or current activities of Road Rescue
(I.E., pre-Merger), anywhere within the United States; provided, that
he may purchase or otherwise acquire up to (but not more than) one
percent (1%) of any class of securities of any such enterprise,
excluding Buyer (but without otherwise participating in the activities
of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"). Xx. Xxxxxxxxx agrees that this covenant is
reasonable with respect to its duration, geographical area, and scope.
5.7.2 NO SOLICITATION. For a period of three years after the
Effective Time, Xx. Xxxxxxxxx shall not, directly or indirectly,
either for himself or any other person or entity, (a) induce or
attempt to induce any employee of MergerSub to leave their employment,
(b) employ, or otherwise engage as an employee, independent
contractor, or otherwise, any employee of MergerSub (or its
successors) that was an employee of Road Rescue, or (c) induce or
attempt to induce any former customer, supplier, licensee, or business
24
relation of Road Rescue to cease doing business with MergerSub (or its
successor), or in any way interfere with the relationship of MergerSub
(or its successor) with any former customer, supplier, licensee, or
business relation of Road Rescue.
In the event of a breach of any covenant set forth in this Section, the
term of such covenant will be extended by the period of the duration of
such breach.
5.8 RESALE RESTRICTIONS. For a period of one year following the
Closing, each Shareholder agrees that he shall in no event pledge,
hypothecate, sell, transfer, assign, or otherwise dispose of any restricted
Buyer's Common Stock, nor receive any consideration for such shares from
any person, unless and until: (a) such shares shall be effectively
registered or qualified under the Securities Act and applicable Blue Sky
Laws or (b) the Shareholder shall have furnished Buyer with an opinion of
counsel in form and substance satisfactory to Buyer to the effect that such
disposition will not require such registration or qualification and counsel
for Buyer shall have concurred in such opinion and advised the Shareholder
of such concurrence.
5.9 BUYER'S POST-CLOSING FILINGS. Buyer shall file the reports
required to be filed by it under the Exchange Act, and the rules and
regulations adopted by the SEC thereunder, all to the extent required from
time to time to enable Road Rescue and/or a Shareholder to sell the Buyer's
Common Stock issued in connection with this Agreement pursuant to and in
compliance with SEC Rule 144, for a period of two years after delivery of
the Buyer's Common Stock under this Agreement.
5.10 RELEASE OF CLAIMS. Effective as of the Effective Time, each
Shareholder releases and forever discharges Road Rescue and its affiliates
(including each Shareholder) (collectively, the "RELEASED PERSONS") from
any and all claims, demands, proceedings, causes of action, orders,
obligations, contracts, agreements, debts, and liabilities whatsoever, that
each of the Shareholders now has, has ever had, or may hereafter have
against the Released Persons arising at or prior to the Effective Time or
on account of or arising out of any matter, cause, or event occurring at or
prior to the Effective Time, including, but not limited to, any rights to
indemnification or reimbursement from Road Rescue, and whether or not
relating to claims pending on, or asserted after, the Effective Time;
provided, however, that nothing contained in this Section shall operate to
release (i) any obligations of Buyer or MergerSub arising under this
Agreement, (ii) any claims or right to indemnification as provided under
Minnesota Statutes, Chapter 302A, (iii) any claims to the extent covered by
insurance, and (iv) any claims against a Shareholder based solely upon the
individual's capacity as a shareholder of Road Rescue. Further, each
Shareholder, as of the Effective Time, irrevocably covenants to refrain
25
from, directly or indirectly, asserting any claim or demand, or commencing,
instituting, or causing to be commenced, any proceeding of any kind against
any Released Person, based upon any matter purported to be released hereby.
5.11 LEASE. Prior to Closing, with respect to the Lease, the
Shareholder shall obtain a reasonably acceptable consent to the deemed
assignment of the Lease from the landlord.
5.12 STOCK TO CASH RATIO; TAX CONSEQUENCES. If at the time of the
Closing, for any reason, the fair market value of the portion of the Merger
Consideration to be paid in Buyer Common Stock is less than 40% (the
"TARGET PERCENTAGE") (valuing the Buyer Common Stock as of the trading day
immediately prior to the proposed Closing Date), then either Buyer or the
Shareholders shall have the right to adjust the amount of consideration to
be paid in Buyer Common Stock so that the Target Percentage is met. Any
such adjustment shall be made pro rata among the Shareholders. The
Shareholders acknowledge and agree that neither Buyer, MergerSub, nor any
of their advisors has made any representation or warranties regarding (and
Buyer and MergerSub takes no responsibility or risk for) the intended tax
consequences of the Merger.
5.13 PAST RETURNS. Buyer shall not amend any Road Rescue income tax
returns without the consent of the Shareholders.
5.14 BEST EFFORTS. During the Term of this Agreement, Buyer, Road
Rescue, and the Shareholders shall use their best efforts to cause the
conditions in Articles 6 and 7 to be satisfied.
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE
Buyer's obligation to consummate the Merger and to take the
other actions required of it at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of
which may be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Road Rescue's and the
Shareholders' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the
date of this Agreement, and must be accurate in all material respects as of
the Closing as if then made, without giving effect to any supplement to the
Disclosure Schedule.
6.2 ROAD RESCUE'S AND THE SHAREHOLDERS' PERFORMANCE. All of the
covenants and obligations that Road Rescue and the Shareholders are
required to perform or to comply with at or prior to the Closing
(considered collectively), and each of these covenants and obligations
26
(considered individually), must have been duly performed and complied with
in all material respects.
6.3 CONSENTS. Each of the consents identified in Section 3.5 and
Schedule 3.5 of the Disclosure Schedule must have been obtained and must be
in full force and effect.
6.4 LEGAL OPINION. Road Rescue and the Shareholders must have
delivered an opinion of their counsel in substantially the form as set
forth in EXHIBIT 6.4.
6.5 ADDITIONAL DOCUMENTS. Each of the following documents must
have been delivered to Buyer: such documents as Buyer may reasonably
request for the purpose of (a) enabling its counsel to provide the opinion
referred to in Section 7.3, (b) evidencing the accuracy of any of Road
Rescue's or the Shareholders' representations and warranties, or the
performance by Road Rescue or the Shareholders of, or the compliance by
Road Rescue or the Shareholders with, any covenant or obligation required
hereunder, (c) evidencing the satisfaction of any condition referred to in
this Article 6, or (d) otherwise facilitating the consummation or
performance of any of the transactions contemplated by this Agreement.
6.6 NO PROCEEDINGS. Since the date of this Agreement, there must
not have been commenced or threatened against Buyer or any of its
affiliates, any proceeding (a) involving any challenge to or relating in
any way to this Agreement, or (b) that may prevent, delay, make illegal, or
otherwise interfere with any of the transactions contemplated by this
Agreement.
6.7 NO CLAIM REGARDING SALE PROCEEDS. There must not have been made
or threatened by any person or entity any claim asserting that such person
or entity is entitled to all or any portion of the consideration paid to
the Shareholders in connection with the Merger.
6.8 NO PROHIBITION. The consummation of any of the transactions
contemplated by this Agreement will not materially contravene, conflict
with, or result in a material violation of, or cause Buyer or any of its
affiliates to suffer any material adverse consequence under, any applicable
Legal Requirement.
6.9 LEASE. The Shareholders must have delivered the landlord's
consent to the deemed assignment of the Lease.
6.10 SENIOR MANAGEMENT CERTIFICATES. The Shareholders must have
delivered the certificates of Senior Management, as described in the last
paragraph of Article 3.
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ARTICLE 7 CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE
Road Rescue's and the Shareholders' obligation to consummate
the Merger and to take the other actions required to be taken by Road
Rescue and the Shareholders at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of
which may be waived by Shareholders, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations
and warranties in this Agreement (considered collectively), and each of
these representations and warranties (considered individually), must have
been accurate in all material respects as of the date of this Agreement and
must be accurate in all material respects as of the Closing as if then
made.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
7.3 LEGAL OPINION. Buyer must have delivered an opinion of its
counsel in substantially the form as set forth in EXHIBIT 7.3.
7.4 ADDITIONAL DOCUMENTS. Buyer must have caused to be delivered
to Road Rescue such documents as Road Rescue may reasonably request for the
purpose of (a) enabling its counsel to provide the opinion referred to in
Section 6.4 evidencing the accuracy of any representation or warranty of
Buyer, (b) evidencing the performance by Buyer of, or the compliance by
Buyer with, any covenant or obligation required to be performed or complied
with by Buyer, (c) evidencing the satisfaction of any condition referred to
in this Article 7, or (d) otherwise facilitating the consummation of any of
the transactions contemplated hereby.
7.5 NO INJUNCTION. There must not be in effect any legal
requirement or any injunction or other order that prohibits the Merger and
has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
7.6 RELEASE OF GUARANTIES. Buyer must have delivered an agreement
in substantially the form as set forth in EXHIBIT 7.6 (the "INDEMNITY
AGREEMENT").
7.7 XXXXXXX DOCUMENTS. Road Rescue has entered into the following
documents with Xxxxxxx X. Xxxxxxx (collectively, the "XXXXXXX DOCUMENTS"):
7.7.1 that certain $490,000 Subordinated Note, dated January
1, 1994, executed by Road Rescue in favor of Xxxxxxx X. Xxxxxxx;
28
7.7.2 that certain $50,000 Revolving Subordinated Demand
Note, dated January 1, 1994, executed by Road Rescue in favor Xxxxxxx
X. Xxxxxxx; and
7.7.3 that certain Non-Competition and Confidentiality
Agreement, dated March 16, 1990, as amended by that certain Amendment
to Non-Competition and Confidentiality Agreement, dated January 1,
1994, each entered into by and between Road Rescue and Xxxxxxx X.
Xxxxxxx.
Consummation of the transactions contemplated by this Agreement shall
constitute a default and give rise to the right to accelerate payments
under each of the Xxxxxxx Documents. At or before the Closing, Buyer shall
either (i) pay in full all amounts outstanding under the Xxxxxxx Documents,
or (ii) execute and enter into appropriate amendments with respect to each
of the Xxxxxxx Documents for their continuation and, in connection
therewith, obtain a complete release of any personal guaranty obligations
of Xxxxxxx X. Xxxxxxxxx relating to the Xxxxxxx Documents.
7.8 XXXXXXXXX LOANS. Under the Loan Agreement dated July 1, 1997,
Note date July 1, 1997, Note dated October 1, 1997, Security Agreement
dated July 1, 1997, and Participation and Subordination Agreement dated
July 1, 1997 between Firstar Bank, Road Rescue, and Xxxxxxx X. Xxxxxxxxx
(collectively, the "XXXXXXXXX LOANS"), as of the date hereof, the total
amount owed by Road Rescue to Firstar (and Xxxxxxxxx) is $482,015.73. At
or before the Closing, Buyer shall arrange for the entire amount of the
Xxxxxxxxx Loans, together with all accrued interest thereon, to be paid in
full.
ARTICLE 8 TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior
to or at the Closing, be terminated:
8.1.1 BREACH. By either Buyer or the Shareholders if a
material breach of this Agreement has been committed by the other and
such breach has not been waived;
8.1.2 CONDITIONS. (a) By Buyer if any of the conditions in
Article 6 has not been satisfied as of the Closing or if satisfaction
of such a condition is or becomes impossible (other than through
Buyer's fault) and Buyer has not waived such condition on or before
the Closing; or (b) by the Shareholders, if any of the conditions in
Article 7 has not been satisfied as of the Closing or if satisfaction
of such a condition is or becomes impossible (other than through Road
Rescue' or a Shareholder's fault) and the Shareholders have not waived
such condition on or before the Closing;
29
8.1.3 CONSENT. By mutual consent of Buyer and the
Shareholders; or
8.1.4 UPSET DATE. By either Buyer or the Shareholders if the
Closing has not occurred (other than through the fault of the party
seeking to terminate this Agreement) on or before February 15, 1998,
or such later date as the parties may agree upon.
8.2 EFFECT OF TERMINATION. The exercise of a party's right of
termination under Section 8.1 will not be an election of remedies. If this
Agreement is terminated pursuant to Section 8.1, all further obligations of
the parties under this Agreement will terminate, except that the
obligations in Sections 10.3 and 10.5 will survive; provided, however, that
if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied
as a result of the other party's failure to comply with its obligations
under this Agreement, the terminating party's right to pursue all legal
remedies will survive unimpaired.
ARTICLE 9 INDEMNIFICATION
9.1 INDEMNIFICATION AND REIMBURSEMENT BY SHAREHOLDERS. The
Shareholders severally but not jointly, will indemnify and hold harmless
Buyer, MergerSub, Road Rescue, and their respective representatives,
shareholders, controlling persons, and affiliates (collectively, the
"INDEMNIFIED PERSONS"), and will reimburse the Indemnified Persons, for any
loss, liability, claim, damage, expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether
or not involving a third-party claim (collectively, "DAMAGES"), arising
from or in connection with: (a) any breach of any representation or
warranty made by Road Rescue or a Shareholder in this Agreement or any
other certificate or document delivered by Road Rescue or the Shareholders
pursuant to this Agreement; or (b) any breach by either Road Rescue or a
Shareholder of any covenant or obligation of such Road Rescue or
Shareholder in this Agreement. The Shareholders' liability under this
Section is a pro rata liability; any loss which the Shareholders incur
under this Section will be borne by them in the same proportion to which
they owned Road Rescue's Common Stock as of the date of this Agreement.
9.2 INDEMNIFICATION AND REIMBURSEMENT BY BUYER. Buyer will
indemnify and hold harmless the Shareholders and will reimburse the
Shareholders for Damages arising from or in connection with: (a) any
breach of any representation or warranty made by Buyer or MergerSub in this
Agreement or any other certificate or document delivered by Buyer or
MergerSub pursuant to this Agreement; or (b) any breach by either Buyer or
MergerSub of any covenant or obligation of such entity in this Agreement.
30
9.3 LIMITATIONS ON INDEMNIFICATION. Notwithstanding any other
provisions in this Article, an indemnified person's right to
indemnification under this Article shall be limited as follows:
9.3.1 BASKET. The indemnifying party (either (i)
collectively the Shareholders, or (ii) Buyer, as the case may be)
shall not be obligated to indemnify the indemnified person unless and
until, and only to the extent that, the aggregate amount of Damages
exceeds $40,500 (the "BASKET"), in which case the indemnifying party
shall be liable for all claims to the extent they exceed the Basket
amount, up to a maximum aggregate amount of $405,000 (the CEILING");
provided, however, that the Basket and Ceiling shall not apply to, and
the indemnifying party shall fully indemnify the indemnified party
for: (a) any claim arising out of a breach of a representation or
warranty relating to authorization to enter into and enforceability of
this Agreement, taxes, or the capitalization of Road Rescue; and (b)
any fraudulent or intentional breach of this Agreement (collectively,
"NON-CEILING CLAIMS"). Notwithstanding anything to the contrary in
this Agreement, in no event shall the amount of the indemnification
obligations of a given Shareholder under this Article 9 exceed the
amount of the Merger Consideration received by that Shareholder. For
the purpose of determining the amount of the Merger Consideration
received by a Shareholder, the Buyer Common Stock shall be valued at
$7.50 per share. If the Escrow Fund has been distributed in full and
a Shareholder is obligated to indemnify Buyer with respect to one or
more Non-Ceiling Claims:
(a) CLOSING STOCK. At any time on or prior to the one-
year anniversary of the Closing or during an "Unlisted Period"
(as defined below), that Shareholder shall offer, and Buyer shall
accept, a sufficient amount of the Shareholder's Buyer Common
Stock received as of the Closing in the Merger ("CLOSING
STOCK"), valued at $7.50 per share, as to pay the Shareholder's
portion of the Non-Ceiling Claims. Except during an Unlisted
Period, the Shareholder may not offer, and Buyer need not
accept, Closing Stock after the one-year anniversary of the
Closing.
(b) ADJUSTMENT STOCK. At any time (I) after the one-
year anniversary of the Closing but prior to or on the one-year
anniversary of the issuance of Buyer Common Stock (if any)
pursuant to Section 2.3, or (II) during an Unlisted Period,
that Shareholder shall offer, and Buyer shall accept, a
sufficient amount of the Shareholder's Buyer Common Stock
received pursuant to Section 2.3 ("ADJUSTMENT STOCK"), valued
at $7.50 per share, as to pay the Shareholder's portion of the
Non-Ceiling Claims. Except during an Unlisted Period, the
Shareholder may not offer, and Buyer need not accept,
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Adjustment Stock after the one-year anniversary of the issuance
of the Adjustment Stock.
(c) UNSATISFIED NON-CEILING CLAIMS. To the extent that
a Shareholder is unable to satisfy the Shareholder's portion of
Non-Ceiling Claims through delivery of Closing Stock or
Adjustment Stock under subsections (a) or (b) of this Section
9.3.1, the balance of the Shareholder's portion of the Non-
Ceiling Claims shall be paid by the Shareholder in immediately
available funds.
(d) UNLISTED PERIOD. An "UNLISTED PERIOD" shall mean
that period of time during which the Buyer Common Stock does not
continue as actively traded and listed on the Nasdaq National
Stock Market or equivalent stock exchange.
9.3.2 INDEMNIFICATION PERIOD. An indemnified party's right
to seek indemnification under this Article shall survive for a period
of 16 months from the Closing, except that: (a) the indemnity period
shall not expire, but shall survive forever, for claims with respect
to representations, warranties, covenants regarding taxes, and the
enforceability of this Agreement; and (b) with respect to the covenant
contained in Section 5.7 (No Competition), the right to seek indemnity
shall survive until the covenant expires by its terms. The making of
a claim for indemnification under this Agreement shall toll the
running of the limitation period with respect to that claim. For
purposes of the preceding sentence, a claim shall be deemed made upon
the commencement of an independent judicial proceeding with respect to
the matter underlying the claim or receipt by the indemnifying party
of a written notice of claim setting forth the amount of the claim (if
known by the indemnified party) and a general description of the facts
underlying the claim. Notwithstanding anything contained in this
Agreement to the contrary, recovery for any claims brought for breach
of Shareholder representations and warranties shall be limited to the
Escrow Fund until the Escrow Fund has been distributed in full; any
recovery from the Shareholders thereafter shall be several, and not
joint, in accordance with each Shareholders' ownership interest
percentage in Road Rescue immediately prior to the Effective Time.
This Section shall not be construed to limit in any way the other
restrictions and limitations on indemnification obligations contained
in this Agreement.
9.3.3 WARRANTY CLAIMS. Based on Buyer's and its representa-
tives' review of information regarding Road Rescue's history
of warranty claims, the Shareholders shall not be obligated to
indemnify Buyer for Damages arising from warranty claims made by its
customers.
32
9.3.4 OTHER LIMITATIONS. Except for (a) issues relating to
EBIT, (b) the calculation of the purchase price (which are addressed
in Article 2), and (c) covenants that, by their terms, extend beyond
the Closing, the provisions of this Article 9 contain the exclusive
provisions relating to indemnification and recovery for a breach of
any representation or warranty or covenant of the parties under this
Agreement. The amount of any such claim for indemnification hereunder
shall be (i) net of any tax benefits realized (or to be realized and
capable of being estimated on a reasonable basis) by the indemnified
party by reason of the facts and circumstances giving rise to the
liability, and (ii) net of any insurance proceeds received by the
indemnified party in connection with the facts giving rise to the
right of indemnification; provided that (A) if applicable, the tax
costs resulting from a reduction in basis, and the resulting reduction
in depreciation and amortization or increase in gain recognized on a
sale, must be included in the calculation under clause (i) above, and
(B) any costs Buyer and/or Road Rescue incurs due to insurance
recoveries, such as retrospective premium adjustments and experience-
based premium adjustments, must be included in the calculation under
clause (ii) above.
9.4 THIRD-PARTY CLAIMS.
9.4.1 NOTICE OF THIRD-PARTY CLAIMS. If any action, suit, or
proceeding (including claims by federal, state, local, or foreign tax
authorities) shall be threatened or commenced against an indemnified
party in respect of which the indemnified party may demand
indemnification under this Agreement, the indemnified party shall
notify the indemnifying party to that effect with reasonable
promptness after receiving written notice of the action, suit, or
proceeding, and the indemnifying party shall have the opportunity
(provided the indemnifying party shall have acknowledged in writing
that the indemnifying party is obligated under the terms of this
Agreement to indemnify the indemnified party) to defend against the
action, suit, or proceeding, at the indemnifying party's sole expense,
subject to the limitations set forth below.
9.4.2 DEFENSE OF CLAIMS. If the indemnifying party elects to
defend against an action, suit, or proceeding and the indemnified
party does not decide to retain control of the matter as provided in
this Section, the indemnifying party shall notify the indemnified
party to that effect with reasonable promptness. The indemnified
party shall have the right to employ its own counsel and participate
in the defense of the case, but the fees and expenses of the
indemnified party's counsel shall be at the expense of indemnified
party, unless (a) the employment of the indemnified party's counsel at
the expense of indemnifying party shall have been authorized in
writing by the indemnifying party in connection with the defense of
33
the action, suit, or proceeding; (b) the indemnifying party shall
have decided not to defend against the action, suit, or proceeding; or
(c) the indemnified party shall have reasonably concluded that the
action, suit, or proceeding involves to a significant extent matters
beyond the scope of the indemnity agreement contained in this Article.
In any case described in clause (c) of the preceding sentence, the
indemnifying party shall not have the right to direct the defense of
the action, suit, or proceeding on behalf of indemnified party,
provided that only that portion of the fees and expenses reasonably
related to matters covered by the indemnity agreement contained in
this Article shall be borne by the indemnifying party.
9.4.3 CONDUCT OF DEFENSE. Any party granted the right to
direct the defense of a claim pursuant to this Article shall:
(a) keep the other parties to this Agreement fully informed of the
action, suit, or proceeding at all stages of the matter, whether or
not represented; (b) promptly submit to the other parties copies of
all pleadings, responsive pleadings, motions, and other similar legal
documents and papers received in connection with the action, suit, or
proceeding; (c) permit the other parties to this Agreement and their
counsel, to the extent practicable, to confer on the conduct of the
defense of the action, suit, or proceeding; and (d) to the extent
practicable, permit the other parties to this Agreement and their
counsel an opportunity to review all legal papers to be submitted
before the submission. Subject to an appropriate confidentiality
agreement, the parties shall make available to each other and each
other's counsel and accountants all of the books and records relating
to the action, suit, or proceeding, and each party shall render to the
other any assistance as may be reasonably required in order to insure
the proper and adequate defense of the action, suit, or proceeding.
9.5 ASSERTION OF CLAIMS. A party shall notify the others in writing
with reasonable promptness after the discovery of any claim upon which he,
it, or they will demand indemnification from the other under this
Agreement. To the extent possible, the notice shall describe in reasonable
detail the basis for the claim, include an itemized accounting of the
claim, and provide a good faith estimate of the amount of the Damages.
Within 21 days after receipt of the notice, the indemnifying party shall
either reimburse indemnified party for the amount of the claim (or
acknowledge a right of offset) or notify the indemnified party of the
indemnifying party's intent to dispute the claim.
9.6 REMEDIES CUMULATIVE. Subject to Section 9.3.4, the remedies
expressly provided in this Article are cumulative and shall not prevent the
assertion by Buyer of any other rights or the seeking of any other remedies
against any Shareholder.
34
ARTICLE 10 GENERAL
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
INDEMNITIES. Subject to and except as limited by Section 9.3.2, all
representations, warranties, covenants, and indemnities made by any party
to this Agreement and all other documents related hereto shall survive the
Closing and any investigation made by or on behalf of any party.
10.2 ASSIGNMENT AND BENEFITS. No party to this Agreement may assign
or transfer this Agreement, either directly or indirectly, without the
prior written consent of all parties to this Agreement, except that Buyer
may assign all or part of Buyer's interest in this Agreement to one or more
of its affiliates. Any assignment of this Agreement shall not release the
assignor from the duty to perform the assignor's obligations under this
Agreement. This Agreement shall be binding upon, inure to the benefit of,
and may be enforced by and against the respective successors and permitted
assigns of each of the parties to this Agreement.
10.3 CONFIDENTIALITY. Unless otherwise required by law, the parties
to this Agreement shall not make any disclosure of the existence or terms
of this Agreement without the prior written consent of the other party or
parties, except that each party may disclose the transactions contemplated
by this Agreement to persons that have a professional need to know thereof.
10.4 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given
when delivered, sent by telecopy, or sent by express delivery service with
charges prepaid and receipt requested, or, if those services are not
reasonably available, mailed (postage prepaid) by certified mail with
return receipt requested:
TO BUYER: WITH A COPY TO:
Spartan Motors, Inc. Xxxxxx Xxxxxxxx & Xxxx LLP
0000 Xxxxxxxx Xx. 000 Xxx Xxxx Xxxxxxxx
X.X. Xxx 000 111 Lyon Street, N.W.
Xxxxxxxxx, Xxxxxxxx 00000 Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Attn.: President Attn.: Xxxxxxx X. Xxxxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
TO ROAD RESCUE OR SHAREHOLDERS: WITH A COPY TO:
c/o Xxxxxxx X. Xxxxxxxxx Winthrop & Weinstine
000 Xxxxxxxx Xxx. 0000 Xxxxxxxxx Xxxxx Xxxxx Xxxxxx
Xxxxx Xxxx Xxxx, XX 00000 00 X. Xxxxxxx Xxxxxx
Fax: (000) 000-0000 Xx. Xxxx, Xxxxxxxxx 00000
Attn.: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
35
Any party may change that party's address by prior written notice to the
other parties.
10.5 EXPENSES. Each party to this Agreement shall pay that party's
respective expenses, costs, and fees (including professional fees) incurred
in connection with the negotiation, preparation, execution, and delivery of
this Agreement and the consummation of the transactions contemplated by
this Agreement.
10.6 APPOINTMENT OF REPRESENTATIVE. Notwithstanding anything to the
contrary in this Agreement, each Shareholder irrevocably appoints Xxxxxxx
X. Xxxxxxxxx as the "SHAREHOLDER REPRESENTATIVE," with full power of
substitution to act on his, her, or its behalf as attorney-in-fact in
connection with the Merger to receive notices, give consents, and handle
other administrative details involving the consummation of the Merger
(specifically including the payment and receipt of adjustment amounts to
the Merger Consideration and handling dispute resolution procedures under
Sections 2.2 and 2.3) on behalf the Shareholders collectively. Buyer shall
be permitted to rely upon and request any such actions by the Shareholder
Representative. The Shareholder Representative is specifically authorized
to utilize a pro rata portion of the funds held in the Escrow Fund to
satisfy any amounts to which the Shareholders are responsible hereunder
following the Closing. In the event of the death, incapacity or
resignation of the Shareholder Representative, the Shareholders (by
majority vote of the parties holding stock of Road Rescue immediately prior
to the Closing hereunder) shall appoint a substitute Shareholder
Representative, and in such event, the Shareholder Representative shall so
notify the Buyer. The Shareholder Representative may resign at any time
upon written notice to Buyer and Shareholders.
10.7 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, and the exhibits
and schedules (including the Disclosure Schedule) to this Agreement (which
are incorporated in this Agreement by reference), the Confidentiality
Agreement, and the agreements referred to in this Agreement, contains the
entire agreement and understanding of the parties and supersede all prior
agreements, negotiations, arrangements, and understandings relating to the
subject matter of this Agreement. This Agreement may be signed in
counterparts, each of which shall be deemed to be an original, and the
counterparts shall together constitute one document.
10.8 AMENDMENTS AND WAIVERS. This Agreement may be amended,
superseded, or canceled, and any of the terms or conditions of this
Agreement may be waived, only by a written instrument signed by each party
to this Agreement or, in the case of a waiver, by or on behalf of the party
waiving compliance. The failure of any party at any time to require
performance of any provision in this Agreement shall not affect the right
of that party at a later time to enforce that or any other provision. No
waiver by any party of any condition, or of any breach of any term,
36
covenant, representation, or warranty contained in this Agreement, in any
one or more instances, shall be deemed to be a further or continuing waiver
of any condition or of any breach of any other term, covenant,
representation, or warranty.
10.9 NO THIRD-PARTY BENEFICIARIES. The provisions of this Agreement
are solely between and for the benefit of the respective parties to this
Agreement, and do not inure to the benefit of, or confer rights upon, any
third party, including any employee of Buyer or Road Rescue.
10.10 SEVERABILITY. This Agreement shall be interpreted in all
respects as if any invalid or unenforceable provision were omitted from
this Agreement. All provisions of this Agreement shall be enforced to the
full extent permitted by law.
10.11 GOVERNING LAW. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of
Minnesota, without regard to conflicts of law principles.
[remainder of this page intentionally blank]
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This Agreement and Plan of Merger is signed as of January 7,
1997.
SPARTAN MOTORS, INC.
By _____________________________________
Xxxxxxx X. Xxxxxxxx
Its Chief Financial Officer,
Secretary, and Treasurer
SPARTAN ROAD RESCUE, INC.
By _____________________________________
Xxxxxxx X. Xxxxxxxx
Its Secretary and Treasurer
ROAD RESCUE, INC.
By _____________________________________
Xxxxxxx X. Xxxxxxxxx
Its President
________________________________________
XXXXXXX X. XXXXXXXXX
________________________________________
XXXX X. XXXXXXXX
________________________________________
XXXXXX X. XXXXX, XX
________________________________________
XXXX X. XXXXXXXX
________________________________________
XXXXX X. XXXXXXXXXX
________________________________________
XX. XXXX X. XXXXXXX
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