Exhibit 2
STOCK PURCHASE AGREEMENT
AMONG
CRABAR/GBF, INC.,
a Delaware corporation,
the STOCKHOLDERS of
CRABAR, GBF, INC.
AND
XXXXX, INC.,
a Texas corporation
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Dated as of June 25, 2004
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated as
of June 25, 2004 and made by and among Crabar/GBF, Inc., a
Delaware corporation (the "Company"), the stockholders of the
Company (the "Sellers"), and Xxxxx, Inc., a Texas corporation
("Purchaser"). All capitalized terms used herein but not defined
where used shall have the meanings set forth in Article XII.
WITNESSETH:
WHEREAS, the Sellers own all of the outstanding capital
stock (the "Stock") of the Company; and
WHEREAS, Purchaser desires to acquire the Stock of the
Company from the Sellers, and the Sellers desire to sell the
Stock of the Company to Purchaser, on the terms and conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and the
covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
acknowledged, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Stock Purchase. Subject to the terms and conditions set
forth below, Purchaser shall purchase from Sellers, and Sellers
shall sell to Purchaser, at closing (the "Closing") all of the
Stock.
1.02 Purchase Price. The purchase price ("Purchase Price")
of the Stock is $18,000,000 less Company Debt and less the
Noncompetition Consideration; provided, however, the Purchase
Price shall be increased by $2,000,000 in the event Purchaser
terminates the Merger Agreement in accordance with a Fault
Termination, and such amount shall be paid by the Purchaser to
the Escrow Agent, for deposit into the Escrow Fund on behalf of
Sellers, not later than five (5) business days following such
Fault Termination by wire transfer of immediately available funds
to such account(s) as directed by the Sellers; and provided
further the Purchase Price shall be adjusted in accordance with
Section 2.02(b); and provided further the Purchase Price shall be
adjusted in accordance with Section 5.07(g)(v). "Company Debt"
means, with respect to the Company, the indebtedness for interest-
bearing borrowed money and funded debt as set forth on Schedule
1.02, together with accrued interest through the Closing Date
thereon, if any, based on the Company's good faith estimate made
immediately prior to Closing.
ARTICLE II
CLOSING
2.01 Place and Time. The Closing shall take place at the
offices of Xxxxxxx Xxxxxx & Xxxxxxx LLP, 000 X. Xxxxxx Xxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx, at 10:00 am. local time on June
30, 2004, or such other date as mutually agreed by the parties in
writing which shall be no later than the third (3rd) business day
after the date that all of the closing conditions, except for
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conditions that, by their terms, are to be satisfied by
deliveries made at Closing have been satisfied or waived (if
waivable). The time and date on which the Closing is actually
held is referred to herein as the ("Closing Date"), and the
effective time of the Closing shall be 12:01 a.m. Central Time on
the Closing Date (the "Effective Time").
2.02 Payment; Debt Adjustment.
(a) At Closing, Purchaser shall deliver the Purchase
Price, less $250,000 (the "Holdback Amount"), in
immediately available funds, in accordance with the names,
accounts and amounts set forth on Annex II, and Sellers
shall deliver to Purchaser certificates representing all of
the Stock, duly endorsed or accompanied by stock transfer
powers duly executed in like manner, or a duly executed and
notarized affidavit of lost certificate, in form and
substance acceptable to Purchaser. Sellers shall deliver
to Purchaser certificates representing all of the
outstanding capital stock or membership interests, as
applicable, in the Company's Subsidiaries registered in the
name of the Company.
(b) Within ten (10) business days following the
Closing Date, Purchaser shall determine the final Company
Debt, and shall deliver to the Sellers a written statement
setting forth, in reasonable detail, the actual calculation
of the Company Debt as of the Closing Date (the "Final
Company Debt"), together with any documents substantiating
same as may be reasonably requested by the Sellers. In the
event the Final Company Debt exceeds the Company Debt,
Purchaser shall reduce the Purchase Price by the amount of
such excess; provided, however, that in no event may such
adjustment exceed the Holdback Amount (the "Debt
Adjustment"). Any Holdback Amount remaining after such
determination and adjustment shall be promptly delivered to
the Sellers by wire transfer of immediately available funds
to such account(s) as designated by Sellers, on a pro rata
basis in proportion to their respective shares of Stock.
The Purchase Price shall be reduced by the Debt Adjustment,
if any.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND COMPANY
The Indemnifying Sellers represent and warrant, jointly and
severally, and the Company represents and warrants, to Purchaser
as follows:
3.01 Organization. The Company and the Company Subsidiary
are a corporation and limited liability company, respectively,
duly organized, validly existing and in good standing under the
laws of the State of Delaware, and have all requisite power and
authority to carry on and conduct their business as it is now
being conducted and to own or lease their properties and assets,
and are duly qualified and in good standing in every state (if
any) in which the conduct of their businesses or the ownership of
their properties and assets requires them to be so qualified,
except where the failure to qualify would not have a material
adverse effect. Sellers (including trustees under all trusts)
have the right, power and capacity to execute, deliver and
perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Sellers and constitutes the legal,
valid and binding obligation of Sellers, enforceable in
accordance with its terms.
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3.02 No Conflict. Except as set forth on Schedule 3.02,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated will (a) result in
the material breach, violation or contravention of, or constitute
a material default under, or materially conflict with, or give
rise to a right of termination of, or accelerate any obligation
under any of the provisions of (i) any agreement, lease, note,
bond, debenture or other evidence of indebtedness or any
mortgage, deed of trust, indenture or other instrument to which
Sellers, the Company or the Company Subsidiary are a party or by
which any of them is bound or to which any of their assets is
subject, (ii) any judgment, decree, order or award of any court,
regulatory agency or other governmental body or arbitrator to
which Sellers, the Company or the Company Subsidiary or any of
their assets is subject or by which Sellers, the Company or the
Company Subsidiary are bound or (iii) any statute, rule or
regulation or other law applicable to Sellers, the Company or the
Company Subsidiary, or (iv) result in the violation of the
Organizational Documents of the Company or the Company
Subsidiary, (b) result in the creation of any pledge, lien,
encumbrance or security interest upon any of its assets, or (c)
require the authorization, approval, consent or order of, or
filing with, or other action by any court, regulatory agency or
other governmental body.
3.03 Stock; Capitalization.
(a) The authorized capital stock of the Company
consists of one thousand (1,000) shares of Class A common
stock, and two thousand (2,000) shares of Class B common
stock, $1.00 par value per share, of which four (4) shares
of Class A common stock, and three-hundred ninety-six (396)
of Class B common stock, are issued and outstanding. The
Stock constitutes all of the issued and outstanding shares
of capital stock of the Company. All of the Stock is owned
of record and beneficially by Sellers except with respect
to Stock held by trusts which are held beneficially for the
beneficiaries thereof. Sellers hold the exclusive right
and power to vote the Stock. The Stock is owned by the
Sellers, free and clear of any and all adverse claims. No
legend or other reference to any adverse claims appears
upon any certificate representing the Stock, except
pursuant to applicable securities law. Upon delivery of
the Stock under this Agreement, Purchaser will acquire good
and valid title to the Stock, free and clear of any adverse
claims. The Stock is validly issued, fully paid and
nonassessable. The Stock was issued in compliance with all
applicable federal and state securities laws and is not
subject to preemptive rights. There are no outstanding
options, warrants or convertible securities issued by the
Company. The stock transfer records of the Company are
correct and complete, and all certificates representing
Stock that are not outstanding and owned by Sellers have
been cancelled and placed in the stock transfer records.
(b) The Company Subsidiary is the only Subsidiary of
the Company. The Company Subsidiary has no Subsidiary.
The Company owns one hundred percent (100%) of the limited
liability company membership interests in the Company
Subsidiary, free and clear of any and all adverse claims.
There are no outstanding options, warrants or convertible
securities issued by the Company Subsidiary or by the
Company with respect to the Company Subsidiary.
3.04 Financial Statements. The Company has delivered to
Purchaser (a) audited consolidated balance sheets of the Company
and for each Company Subsidiary as at December 31, 2003 (the
"Balance Sheet") and 2002 and the related audited consolidated
statements of income, shareholders' (deficit) equity and cash
flows for the year ended December 31, 2003 and
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for the period from inception (May 28, 2002) to December 31,
2002, together with the report thereof of Battelle & Battelle
LLP, independent certified public accountants, including the
notes thereto, and (b) an unaudited consolidated balance sheet of
the Company and each Company Subsidiary as at March 31, 2004 (the
"Interim Balance Sheet") and the related unaudited consolidated
statements of income, stockholders' (deficit) equity, and cash
flow for the three (3) months then ended, including in each case
the notes thereto (collectively, the "Financial Statements") all
of which are attached hereto as Schedule 3.04. The Interim
Balance Sheet includes all liabilities that are listed on the
Liabilities Journal included as part of Schedule 3.04. To the
Company's best knowledge, such Financial Statements fairly
present the financial condition and the results of consolidated
operations, stockholders' equity, and cash flow as at the
respective dates of and for the periods referred to in such
financial statements, all generally in accordance with GAAP,
subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially
from those included in the Balance Sheet). To the Company's best
knowledge, the Financial Statements reflect the consistent
application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial
statements. To the Company's best knowledge, no financial
statements of any person other than the Company Subsidiary are
required by GAAP to be included in the consolidated financial
statements of the Company.
3.05 Off-Balance Sheet Arrangements. The Company does not
have any "off-balance sheet arrangements." For purposes of the
preceding sentence, "off-balance sheet arrangement" means with
respect to the Company or the Company Subsidiary or affiliated
entity ("Person"), any securitization transaction to which it is
party and any other transaction, agreement or other contractual
arrangement to which an entity unconsolidated with that Person is
a party, under which it, whether or not a party to the
arrangement, has, or in the future may have: (a) any obligation
under a direct or indirect guarantee or similar arrangement; (b)
a retained or contingent interest in assets transferred to an
unconsolidated entity or similar arrangement; (c) derivatives to
the extent that the fair value thereof is not fully reflected as
a liability or asset in the financial statements; or (d) any
obligation or liability, including a contingent obligation or
liability, to the extent that it is not fully reflected in the
financial statements (excluding the footnotes thereto) (for this
purpose, obligations or liabilities that are not fully reflected
in the financial statements (excluding the footnotes thereto)
include, without limitation: (i) obligations that are not
classified as a liability according to GAAP; (ii) contingent
liabilities as to which, as of the date of the financial
statements, it is not probable that a loss has been incurred or,
if probable, is not reasonably estimable; or (iii) liabilities as
to which the amount recognized in the financial statements is
less than the reasonably possible maximum exposure to loss under
the obligation as of the date of the financial statements, but
exclude contingent liabilities arising out of litigation,
arbitration or regulatory actions (not otherwise related to off-
balance sheet arrangements)). Schedule 3.05 identifies all
outstanding guarantees, letters of credit, performance bonds,
assurance bonds, surety agreements, indemnity agreements and any
other legally binding forms of assurance or guaranty in
connection with the business of the Company, whether or not
issued by the Company.
3.06 Undisclosed Liabilities. Except as set forth in
Schedule 3.06, to the Company's knowledge, neither the Company
nor the Company Subsidiary has any liabilities or obligations of
any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) which have arisen or accrued
since December 31, 2003 and which are the types of
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liabilities under GAAP that should be reflected on the Balance
Sheet, except for liabilities or obligations reflected or
reserved against in the Balance Sheet or the Interim Balance
Sheet recorded in accordance with GAAP consistently applied for
the period thereof, and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
Since the date of the Interim Balance Sheet, neither the Company
nor the Company Subsidiary has extended or maintained credit,
arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any director or
executive officer (or equivalent thereof) of the Company or the
Company Subsidiary.
3.07 Taxes. Except as set forth on Schedule 3.07:
(a) The Company and the Company Subsidiary has (i)
properly completed and timely filed all Tax Returns
required to be filed by it since inception (May 28, 2002)
and all such Tax Returns are true and complete in all
respects and (ii) duly paid in full all Taxes that were due
and payable for all periods ending on or before the date
hereof. The Company and the Company Subsidiary maintain and
has maintained adequate accruals, as reflected in their
respective Balance Sheets and Interim Balance Sheet, for
all Taxes accrued but not yet due. Company has delivered
to Purchaser copies of all such Tax Returns filed since
inception (May 28, 2002).
(b) There is no (i) material claim for Taxes that is
a Lien against the property or assets of the Company or the
Company Subsidiary or that is being asserted against the
Company or the Company Subsidiary other than liens for
Taxes not yet due and payable; (ii) audit, administrative
proceeding or court proceeding with respect to any Taxes or
Tax Returns of the Company or the Company Subsidiary that
is being conducted or is pending and no Governmental
Authority responsible for the imposition of any Tax has
asserted against the Company or the Company Subsidiary any
material deficiency or claim for Taxes; (iii) extension of
the statute of limitations on the assessment of any Taxes
granted by the Company or the Company Subsidiary and
currently in effect; or (iv) agreement, contract or
arrangement to which the Company or the Company Subsidiary
are a party that would result in the payment of any amount
that would not be deductible by reason of Code (sections)
162(m) or 280G as a result of the transactions contemplated
by this Agreement.
(c) No claim or notice has been submitted by a
Governmental Authority in a jurisdiction where the Company
or the Company Subsidiary have not filed Tax Returns that
it is or may be subject to taxation by that jurisdiction.
(d) Neither the Company nor the Company Subsidiary is
a party to any Tax sharing, Tax indemnity or Tax allocation
agreement nor does the Company or the Company Subsidiary
have any liability or potential liability to another person
under any such agreement, and has not incurred any
liability for the Taxes of any person under Treasury
Regulation (section) 1.1502-6 (or any similar Laws) as a
transferee or successor, by contract or otherwise.
(e) The Company and the Company Subsidiary have
withheld and paid all material Taxes required to have been
withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor,
stockholder or other Person.
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(f) No power of attorney has been granted by the
Company or the Company Subsidiary with respect to any
matters relating to Taxes that is currently in effect.
(g) Neither the Company nor the Company Subsidiary
has filed any disclosures under Code (sections) 6662 or
6011 or comparable provisions of state, local or foreign
Law to prevent the imposition of penalties with respect to
any Tax reporting position taken on any Tax Return.
(h) The Company has been an S corporation, within the
meaning of Code (section) 1361(a)(1) and all times since
June 30, 2003, and the Company will be an S corporation up
to and including the day before the Closing Date and up and
including the Closing Date if an election is made under
(section) 338(h)(10). There are no subsidiaries that are
corporations.
(i) Neither the Company nor the Company Subsidiary
will be liable for any tax under Code (sections) 1374 or
1375 or any corresponding provisions of state, local or
foreign law in connection with the deemed sale of assets as
a result of an election under Code (section) 338(h)(10).
(j) Neither the Company nor the Company Subsidiary
has filed or made any material Tax election or has changed
its overall method of accounting, or its method of
accounting with respect to specific items of income and
deduction including the determination of its cost of goods
sold, for Tax purposes.
3.08. Absence of Changes. Except as disclosed on
Schedule 3.08, since December 31, 2003, none of the following has
occurred:
(a) To the Company's knowledge, any change in the
financial condition, assets, liabilities, business or
operations, other than changes in the ordinary course of
business or changes affecting the economy or industry as a
whole, which in the aggregate would have a material adverse
effect on the Company or the Company Subsidiary;
(b) Any material damage, destruction, or loss,
whether or not covered by insurance, of the Company or the
Company Subsidiary;
(c) Any event or condition that could materially and
adversely affect the Company or its business, operations,
properties or prospects; or
(d) Any receipt of written notice, that any supplier
or customer has taken or contemplates taking any steps that
could disrupt the Company's business relationship with the
supplier or customer.
3.09 Condition and Title to the Assets. To the Company's
knowledge: (i) the tangible assets of the Company and the Company
Subsidiary are in good condition and repair, ordinary wear and
tear excepted, (ii) the present use and location of the tangible
assets of the Company and the Company Subsidiary conforms, in all
material respects, with all applicable laws, ordinances, and
regulations of all federal, state, and local governmental
agencies, and (iii) neither the Company nor the Company
Subsidiary has received written notice of any breach or violation
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of any such laws, ordinances, or regulations. Except as set
forth on Schedule 3.09 and except for the Permitted Encumbrances,
at Closing, the Company and the Company Subsidiary will have good
and marketable title to the tangible assets of the Company and
the Company Subsidiary, free and clear of all Encumbrances.
Notwithstanding anything contained in this Section 3.09 to the
contrary, in no event shall Company or the Sellers be liable for
a breach of the representations and warranties set forth in this
Section 3.09 unless and until the damages or losses related
thereto exceed $125,000.
3.10 Insurance. Schedule 3.10 lists all insurance policies
held by the Company and the Company Subsidiary and now in force
relating to the Company and the Company Subsidiary.
3.11 Compliance with Laws.
(a) To its knowledge: (i) the Company and the Company
Subsidiary have complied and are in compliance with all
laws, regulations, and orders applicable to the Company and
the Company Subsidiary, and has obtained all permits,
licenses, orders, and approvals of federal, state, and
local governmental and regulatory bodies that are required
for it to own, maintain, and operate its business; (ii) no
threat of cancellation, modification, or non-renewal of any
such permits, licenses, orders, or approvals is pending,
nor does any basis exist for cancellation, modification, or
non-renewal; (iii) except as otherwise set forth on
Schedule 3.11(a), the Company and the Company Subsidiary
are not currently in violation or default of any such
permit, license, order, or approval and the present uses of
the Company does not violate any law, regulation, or order;
and (iv) except as disclosed in Schedule 3.11(a), neither
the Company nor the Company Subsidiary has or needs
governmental permits or licenses to transact their business
as currently conducted and, except as listed on Schedule
3.11(a), none of the permits or licenses that the Company
or the Company Subsidiary hold will be adversely affected
in any way by reason of this Agreement or the consummation
of the transactions contemplated here, including the
transfer of stock in the Company to Purchaser. No
Governmental Authority has issued or, to the Company's
knowledge, threatened any notice or warning with respect to
any failure or alleged failure of the Company or the
Company Subsidiary to comply with any law, regulation or
order.
(b) Except as set forth in Schedule 3.11(b), to the
Company's knowledge, no consent or approval of, prior
filing with, notice to, or other action by, any
governmental body or agency is required for the Company to
execute and deliver this Agreement or any assignment,
agreement, or other instrument to be executed and delivered
pursuant to this Agreement by or to consummate the
transactions provided for here.
3.12 Litigation and Claims. No judgments, orders, writs,
decrees, injunctions, or quasi judicial or administrative
decisions are outstanding to which the Company, the Company
Subsidiary or their properties are subject. Except as disclosed
on Schedule 3.12, no litigation, claim, action, suit,
investigation, or proceeding is pending or has been filed at any
time since May 28, 2002, or, to the Company's knowledge,
threatened against or relating to the Company, the Company
Subsidiary or their material assets. Except as disclosed on
Schedule 3.12, to the Company's knowledge, neither the Company
nor the Company Subsidiary has any "loss contingencies" (as
defined in Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 5 ("FASB 5")), that FASB 5
would require to be disclosed or accrued
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in the Company's Financial Statements if they were prepared when
this representation and warranty is made or deemed made.
3.13 Contracts and Consents. Schedule 3.13 lists each
written contract to which the Company and the Company Subsidiary
is a party which, in the aggregate, has a value of $100,000 or
more (the "Material Contracts"), copies of which have been made
available to Purchaser. To the Company's knowledge, no party is
in breach or default of any Material Contract, nor, to the
Company's knowledge, does any basis for any claim of breach or
default, whether upon the passage of time, giving notice, or
otherwise with regard to the foregoing exist with respect to any
party to any such Material Contract. Except as set forth on
Schedule 3.13, no Material Contract has been modified or amended,
and neither the Company nor the Company Subsidiary have received
any written notice of any proposed modification or amendment.
Sellers shall have obtained all consents or approvals required
pursuant to any Material Contracts.
3.14 Intangible Assets. Schedule 3.14 lists all licenses,
trademarks, service marks, trade names, service names,
copyrights, patents, and related registrations and applications
owned by, registered in the name of, or used in connection with
the Company's or the Company Subsidiary's business, or for which
application has been made, subject to the exceptions set forth on
Schedule 3.14, and except with respect to commercial, off-the-
shelf software and except with respect to the Company's or
Company Subsidiary's use, for archival purposes, of software
originally licensed to the Company's or Company Subsidiary's
predecessors which the Company or the Company Subsidiary uses to
access sales records from prior periods. There are no pending or
threatened infringement claims against the Company or the Company
Subsidiary by any person with respect to any of the items listed
on Schedule 3.14, nor has any such item been declared invalid or
been limited by any court or agreement. The conduct of the
Company and the Company Subsidiary as presently conducted does
not, to the Company's knowledge, infringe on the intellectual
property rights of any other person.
3.15 Environmental Matters. Except as disclosed in Schedule
3.15:
(a) The Company and the Company Subsidiary have, to
the Company's knowledge, obtained or filed all Governmental
Authorizations that they are required to obtain, make or
file under any applicable Environmental Laws to own or
operate any of the properties or facilities owned or
operated by the Company or the Company Subsidiary or to
operate or conduct its business. All Governmental
Authorizations required under Environmental Laws to own or
operate any properties or facilities currently owned or
operated by the Company and the Company Subsidiary and to
operate and conduct the Company's and the Company
Subsidiary's business are listed on Schedule 3.15(a); and,
to Company's knowledge, all such Governmental
Authorizations are in full force and effect. The Company
and the Company Subsidiary have been and are in compliance
with all terms, conditions and requirements of all such
Governmental Authorizations. None of the Governmental
Authorizations required under Environmental Laws would be
violated by the transfer of the Shares contemplated by this
Agreement, and no Governmental Authorizations or consents
are required under any Environmental Law for the transfer
of the Shares contemplated by this Agreement.
(b) Neither the Company nor the Company Subsidiary
are subject to any Environmental Liability, and, to the
knowledge of the Company, none of the Company,
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Company Subsidiary or Purchaser will, after Closing, suffer
or incur any Environmental Liability, based on any facts,
circumstances, or conditions existing on or prior to the
Closing Date.
(c) To the knowledge of the Company, no past or
present events, conditions, circumstances, activities,
practices, incidents, actions, or plans could, with the
passage of time or the provision of notice, (i) give rise
to the imposition on the Company or the Company Subsidiary
of any Environmental Liability, (ii) interfere with or
prevent continued compliance by the Company or the Company
Subsidiary with Environmental Laws, or (iii) form the basis
of any claim, action, suit, proceeding, hearing, or
investigation, based on related to the Company's or the
Company Subsidiary's manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling,
or the emission, discharge, runoff, release, or threatened
release into the environment, of any Regulated Material.
(d) None of the Company, the Company Subsidiary or
any other person for whom the Company or the Company
Subsidiary is responsible has treated, stored, recycled or
disposed of any Regulated Material on any real property or
facilities in violation of any Environmental Law or, to the
knowledge of the Company, in a manner that could result in
an Environmental Liability. There is no and, to the
knowledge of Company has not been any, release or threat of
release of any Regulated Material to the environment at, on
or under any real property or facility in violation of any
Environmental Laws or that could give rise to imposition of
an Environmental Liability on the Company or the Company
Subsidiary.
(e) Company has provided to Purchaser a list of all
sites at which the Company and the Company Subsidiary have
arranged for the transportation, recycling, treatment,
disposal, or other handling of any Regulated Material for
the last three (3) years. To the knowledge of the Company,
none of the Company, the Company Subsidiary or any
predecessor has arranged for the treatment or disposal of
any Regulated Material generated at the properties or
assets related to the Company or the Company Subsidiary, or
arranged for the transportation of any such Regulated
Material for treatment or disposal, at any site or facility
listed or proposed for listing on the National Priority
List established pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") or on any list established by another
governmental body of sites potentially requiring
environmental remedial action.
(f) None of the Company, the Company Subsidiary or
Sellers has received any written request for information,
notice of claim, demand or other notification that the
Company or the Company Subsidiary is or may be potentially
responsible with respect to any Environmental Liability,
environmental remedial action or any threatened or actual
release of any Regulated Material. There has been no past,
and there is no pending, or to the knowledge of the Company
contemplated, claim by or against the Company, the Company
Subsidiary or Sellers under any Environmental Law. None of
the Company, the Company Subsidiary or Sellers has entered
into any agreement with any person regarding any
environmental remedial action or other Environmental
Liability.
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(g) All storage tanks located on real property owned
or operated by the Company and the Company Subsidiary,
whether underground or aboveground, are disclosed on
Schedule 3.15(g). All tanks and associated piping have
been maintained, inspected and tested in compliance with
applicable Environmental Laws, are in sound condition and,
to the Company's knowledge, are not leaking and have not
leaked. All storage tanks on such property which were
previously removed from service have been properly closed
in compliance with all applicable Environmental Law, and
with respect to each such tank, testing and observations
confirm that there were no releases requiring environmental
response actions, or that any required environmental
response actions have been completed.
(g) Neither the Company nor the Company Subsidiary
owns or operates any PCB equipment as defined in 40 C.F.R
Part 761 ("PCB Equipment") at any of the real property
owned or operated by the Company or the Company Subsidiary.
To the knowledge of the Company, PCB Equipment which
previously existed at any such property has been flushed of
polychlorinated byphenyls, or has been removed and properly
disposed of, in compliance with applicable Environmental
Laws. Any remaining PCB Equipment owned or operated by the
Company or the Company Subsidiary is and has been labeled,
inspected, and managed in compliance with applicable
Environmental Laws. There is no asbestos containing
material as defined by 40 C.F.R. (section) 61.141
("Regulated Asbestos Containing Material") at any of the
real property owned or operated by the Company or the
Company Subsidiary, and any Regulated Asbestos Containing
Material has been identified, labeled and is being managed
in compliance with all applicable Environmental Laws.
(h) The Company, the Company Subsidiary and Sellers
have made available to Purchaser true and complete copies
and results of any assessments, audits, reports, studies,
analyses, tests, or monitoring possessed or initiated by
the Company, the Company Subsidiary or Sellers pertaining
to the matters in this Section 3.15. To the knowledge of
the Company, no other documents reflecting such
assessments, audits, reports, studies, analyses, tests, or
monitoring pertaining to the real property owner or
operated by the Company, the Company Subsidiary or business
exist.
3.16 Major Suppliers and Customers. Schedule 3.16 lists the
top ten (10) suppliers of goods or services and the top ten (10)
customers, both determined on the basis of aggregate annual
expenditures, during the year ended December 31, 2003 and the
total amount paid or billed during the year ended December 31,
2003 (each, a "Material Supplier/Customer"). Except as set forth
on Schedule 3.16, neither the Company nor the Company Subsidiary
has a dispute with any Material Supplier/Customer and has
received a written notice that any such Material
Supplier/Customer has taken or contemplates taking any steps to
terminate its relationship with the Company or the Company
Subsidiary.
3.17 Internal Accounting Control. The Company and the
Company Subsidiary maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP consistently applied and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization,
(iv)
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the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences, and (v) accounts, notes
and other receivables and inventory are recorded accurately, and
proper and adequate procedures are implemented to effect the
collection thereof on a current and timely basis.
3.18 Labor Relations. Except to the extent set forth in
Schedule 3.18, neither the Company not the Company Subsidiary is
subject to any collective bargaining agreements respecting
employment and employment practices, terms and conditions of
employment, wages and hours, and occupational safety and health,
and is not engaged in any unfair labor practice within the
meaning of National Labor Relations Act (section) 8.
3.19 Employees. Schedule 3.19 contains a complete and
accurate list of the following information for each employee,
officer or director of Company or any Company Subsidiary (each,
an "Employee") with aggregate compensation in excess of $70,000
per year, including each employee on leave of absence or layoff
status: employer; name; years of service; job title; current
compensation paid or payable and any change in compensation since
December 31, 2003. To the Company's knowledge, no Employee is
subject to any non-competition or non-solicitation agreement that
would be breached as a result of Purchaser consummating the
transactions contemplated herein.
3.20 Inventory. Except as set forth on Schedule 3.20, the
quantities of each item of inventory (whether raw materials, work-
in-process, or finished goods) reflected on the Interim Balance
Sheet are not excessive in kind or amount, but are reasonable in
the present circumstances of the Business. To the Company's
knowledge, all of the raw materials and work-in-process inventory
of the Company and the Company Subsidiary can be expected to be
utilized in the ordinary course of business within a reasonable
period of time. To the Company's knowledge, and except as set
forth on Schedule 3.20, none of the Company's or the Company
Subsidiary's inventory is obsolete, slow-moving, has been
consigned to others or is on consignment from others.
Notwithstanding anything contained in this Section to the
contrary, in no event shall Company or the Company Subsidiary be
liable for a breach of the representations and warranties set
forth in this Section unless and until the damages or losses
related thereto exceed the Inventory Basket. All of the
Company's and Company Subsidiary's inventory is located at their
respective premises.
3.21 Receivables. Schedule 3.21 identifies each trade or
other account receivable of the Company ("Receivable")
outstanding as of March 31, 2004 on an aged basis by account
debtor. All Receivables arose from bona fide sale transactions.
To the Company's knowledge, no portion of any Receivable is
subject to any counterclaim, defense or set-off, or is otherwise
in dispute, other than returns in the Ordinary Course of
Business. To the Company's knowledge, except as adequately
reserved on the Financial Statements or set forth on Schedule
3.21, all of the Receivables are collectible in the ordinary
course of business and, unless collected prior to Closing, will
be fully collected without setoff in accordance with the Ordinary
Course of Business after using commercially reasonable efforts
(excluding litigation and assignment to a collection agency).
Notwithstanding anything contained in this Section to the
contrary, in no event shall Company be liable for a breach of the
representations and warranties set forth in this Section unless
and until the damages or losses related thereto exceed the A/R
Basket.
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3.22 Real Property. Schedule 3.22 discloses and summarizes
all real properties currently owned, used or leased by the
Company and the Company Subsidiary (collectively, the "Real
Property") and identifies the record title holder of all Real
Property. Schedule 3.22 separately identifies all real property
previously owned, used or leased by the Company within the past
five (5) years. The Company and the Company Subsidiary have good
and marketable fee simple title to all Real Property shown as
owned by it on Schedule 3.22, free and clear of all Encumbrances
subject only to Permitted Encumbrances. The Company and the
Company Subsidiary have the right to quiet enjoyment of all Real
Property in which they hold a leasehold interest for the full
term, including all renewal rights, of the leasehold interest.
All such leasehold interests are valid and subsisting and, to the
Company's knowledge, not subject to any default, notice of
default or any event with which passage of time or notice, would
result in a default. To the Company's knowledge, copies of all
title insurance policies written in favor of the Company, and all
deeds, opinions and abstracts relating to the Real Property have
been delivered to Purchaser. To the Company's knowledge, all
structures and other improvements on all Real Property owned by
the Company and the Company Subsidiary are within the lot lines
and do not encroach on the properties of any other person. To
the Company's knowledge, the use and operation of all Real
Property conform to all applicable building, zoning, safety and
subdivision laws, and other legal requirements and all
restrictive covenants and restrictions and conditions affecting
title. To the Company's knowledge, no portion of any Real
Property is located in a flood plain, flood hazard area or
designated wetlands area. Neither the Company nor the Company
Subsidiary have received any written notice of assessments for
public improvements against any Real Property or any written
notice or order by any governmental body, insurance company or
board of fire underwriters or other body exercising similar
functions that (i) relates to violations of building, safety or
fire ordinances or regulations, (ii) claims any defect or
deficiency with respect to any Real Property or (iii) requests
the performance of any repairs, alterations or other work to or
in any Real Property or in any streets bounding the Real
Property. Each parcel of Real Property owned by the Company and
the Company Subsidiary is considered a separate parcel of land
for taxing and conveyancing purposes. To the Company's
knowledge, there is no pending condemnation, expropriation,
eminent domain or similar proceeding affecting all or any portion
of the Real Property. All public utilities (including water,
gas, electric, storm and sanitary sewage, and telephone
utilities) required to operate the Real Property are available to
such Real Property and enter the boundaries of such Real Property
through adjoining public streets, easements or rights-of-way of
record in favor of the Company or the Company Subsidiary.
Neither the Company nor the Company Subsidiary have received any
written notice of any proposed, planned or actual curtailment of
service of any utility supplied to any facility of the Company or
the Company Subsidiary. All Real Property used by the Company
and the Company Subsidiary has access to a publicly-opened
street. There exists no outstanding option, right of first
refusal or other contractual right to purchase, sell, assign or
dispose of any owned Real Property. To the Company's knowledge,
the Company and the Company Subsidiary have all certificates of
occupancy and governmental approvals necessary for current and
continued use and operation of the Real Property.
3.23 Subsidiaries and Investments. Except as set forth on
Schedule 3.23, neither the Company nor the Company Subsidiary
owns, nor have they ever owned, any equity interest in any
corporation, partnership, limited liability company, joint
venture or other entity. Except as set forth on Schedule 3.23,
none of the officers or directors of the Company or the Company
Subsidiary and, to the knowledge of the Company, none of the
employees of the Company or the Company
12
Subsidiary are presently a party to any transaction with the
Company or the Company Subsidiary (other than for services as
employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from
any officer, director or such employee or, to the knowledge of
the Company, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer,
director, trustee or partner.
3.24 Records. The books and records of the Company and the
Company Subsidiary are, and have been, maintained in the
Company's and the Company Subsidiary's usual, regular and
ordinary manner consistent with past practice, and, to the extent
applicable, in accordance with applicable law. All minute books,
stock transfer records, income tax filings and returns,
correspondence, files and records pertaining to the business and
operations of the Company and the Company Subsidiary have been
made available to Purchaser and, at Closing, will be in the
possession of the Company or delivered to Purchaser, as Purchaser
may specify.
3.25 Transactions With Related Parties. None of the
Sellers, officers or directors of the Company or the Company
Subsidiary (a "Related Party") is or has been for the past three
years a party to any transaction, agreement or understanding with
the Company or the Company Subsidiary, except for arrangements
disclosed on Schedule 3.25. Schedule 3.25 separately identifies
all services that any Related Party provides to the Company and
the Company Subsidiary, all assets that any Related Party owns or
leases that are used by the Company and the Company Subsidiary,
and all outstanding liabilities of any Related Party that are
related to the business of the Company and the Company
Subsidiary. Schedule 3.25 separately discloses all cash
dividends from the Company and the Company Subsidiary since
December 31, 2003. No Related Party uses any assets of the
Company or the Company Subsidiary except directly in connection
with the business of the Company or the Company Subsidiary. To
the Company's knowledge, no Related Party has any claim of any
nature, including any inchoate claim, against the Company or the
Company Subsidiary, and, to the Company's knowledge, neither the
Company nor the Company Subsidiary has a claim of any nature,
including any inchoate claim, against any Related Party. To the
Company's knowledge, no Related Party directly or indirectly owns
or is engaged in any business that competes directly or
indirectly with the Company or the Company Subsidiary. Except as
disclosed on Schedule 3.25 or as otherwise expressly provided by
this Agreement, (i) no Related Party will at any time after
Closing for any reason, directly or indirectly, be or become
entitled to receive any payment or transfer of money or other
property of any kind from the Company or the Company Subsidiary
with respect to facts, circumstances or events existing or
occurring on or before Closing, and (ii) to the Company's
knowledge, neither the Company nor the Company Subsidiary will at
any time after Closing for any reason, directly or indirectly, be
or become subject to any obligation to any Related Party with
respect to facts, circumstances or events existing or occurring
on or before Closing. Since January 1, 2003, neither the Company
nor the Company Subsidiary has (i) extended or maintained credit,
arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any director or
executive officer (or equivalent thereof) of the Company or the
Company Subsidiary, or (ii) materially modified any term of any
such extension or maintenance of credit. Schedule 3.25
identifies any loan or extension of credit maintained by the
Company or the Company Subsidiary to which the second sentence of
(section) 13(k)(1) of the Securities Exchange Act of 1934, as
amended, applies.
13
3.26 Warranties. Schedule 3.26 discloses and describes the
terms of all express product warranties under which the Company
or the Company Subsidiary may have liability after Closing. The
Company's product warranty reserve as of March 31, 2004 is
identified on Schedule 3.26. Schedule 3.26 discloses the product
warranty claims experience of the Company for the past five (5)
years.
3.27 Employee Benefits.
(a) Company Plans. Schedule 3.27(a) discloses all
written and unwritten benefit plans, whether or not funded
and whether or not terminated, (i) maintained or sponsored
by the Company, (ii) with respect to which the Company (or
Sellers with respect to the Company) has or may have
liability or is obligated to contribute, (iii) that
otherwise covers any of the current or former employees of
the Company or their beneficiaries, or (iv) as to which any
current or former employees of the Company or their
beneficiaries participated or were entitled to participate
or accrue or have accrued any rights (each, a "Company
Plan").
(b) Company Group Matters; Funding. Neither the
Company, nor any corporation that may be aggregated with
the Company under (section) 414(b), (c), (m) or (o) of the
Code (the "Company Group"), has any obligation to
contribute to, or any direct or indirect liability with
respect to, any benefit plan subject to (section) 412 of
the Code. The Company does not have any liability and,
after Closing, the Company will not have any liability,
with respect to any benefit plan of any other member of the
Company Group, whether as a result of delinquent
contributions, distress termination, fraudulent transfer,
failure to pay premiums to the PBGC, withdrawal liability
or otherwise. No accumulated funding deficiency (as
defined in (section) 302 of ERISA and (section) 412 of the
Code) exists nor has any funding waiver from the IRS been
received or requested with respect to any Company Plan or
benefit plan of any member of the Company Group. No excise
or other Tax is due or owing because of any failure to
comply with the minimum funding standards of the Code or
ERISA with respect to any Company Plan or benefit plan of
any member of the Company Group.
(c) Compliance. Each of the Company Plans and all
related trusts, insurance contracts and funds have been
created, maintained, funded and administered in material
compliance with all applicable Laws and the underlying or
applicable plan document, trust agreement, insurance policy
or other writing. No Company Plan is or, to Sellers'
knowledge, is proposed to be, under audit or investigation.
No completed audit of any Company Plan has resulted in the
imposition of any Tax, fine or penalty. There are no
actions or proceedings (other than routine claims for
benefits) pending, threatened or, to Sellers' knowledge,
anticipated with respect to the Company Plans. No Company
Plan covers any employees of any member of the Company
Group in any foreign country or territory.
(d) Qualified Plans. Schedule 3.27(d) separately
discloses each Company Plan that purports to be a qualified
plan under (section) 401(a) of the Code and exempt from
United States federal income tax under (section) 501(a) of
the Code (a "Qualified Plan"). A determination letter (or
opinion or notification letter, if applicable) has been
received from the IRS for each Qualified Plan stating that
it is qualified under (section) 401(a) of the Code
14
and exempt from federal income tax under (section) 501(a)
of the Code. No member of the Company Group or fiduciary
of any Qualified Plan has done anything that would
adversely affect the qualified status of a Qualified Plan
or the qualified status of any related trust.
(e) No Defined Benefit Plans. Except as set forth on
Schedule 3.27(e), no Company Plan is a defined benefit plan
within the meaning of (section) 3(35) of ERISA (a "Defined
Benefit Plan"). No Defined Benefit Plan sponsored or
maintained by any member of the Company Group has been
terminated or partially terminated during the past ten
years, except as set forth on Schedule 3.27(e). Each
Defined Benefit Plan identified as terminated on Schedule
3.27(e) has satisfied the requirement for standard
termination of single-employer plans contained in (section)
4041(b) of ERISA. During the five-year period ending on
Closing, no member of the Company Group has transferred a
Defined Benefit Plan to a corporation that was not, at the
time of transfer, related to the transferor in any manner
described in (section) 414(b), (c), (m) or (o) of the Code.
(f) Multiemployer Plans. No Company Plan is a
multiemployer plan within the meaning of (section) 3(37) or
(section) 4001(a)(4) of ERISA (a "Multiemployer Plan"). No
member of the Company Group has withdrawn from any
Multiemployer Plan or incurred any withdrawal liability to
or under any Multiemployer Plan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
4.01 Organization and Authorization. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and has all requisite power
and authority to carry on and conduct its business as it is now
being conducted and to own or lease its properties and assets,
and is duly qualified and in good standing in every state in
which the conduct of its businesses or the ownership of its
properties and assets requires it to be so qualified, except
where the failure to so qualify would not have a material adverse
effect. Purchaser has the right, power and capacity to execute,
deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Purchaser and the consummation
of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Purchaser. This
Agreement has been duly and validly executed and delivered by
Purchaser and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms.
4.02 Investment Intent. Purchaser is acquiring the Stock for
its own account for investment purposes only and not with a view
to distributing such Stock. Purchaser is acquiring the Stock
hereunder in the ordinary course of its business.
4.03 No Conflict. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
will (a) result in the breach, violation or contravention of, or
constitute a default under, or conflict with, or give rise to a
right of termination of, or accelerate any obligation under any
of the provisions of (i) any agreement, lease, note, bond,
debenture or other evidence of indebtedness or any mortgage, deed
of trust,
15
indenture or other instrument to which Purchaser is a party or by
which any of them is bound or to which any of their assets is
subject, (ii) any judgment, decree, order or award of any court,
regulatory agency or other governmental body or arbitrator to
which Purchaser or any of its assets is subject or by which
Purchaser is bound or (iii) any statute, rule or regulation or
other law applicable to Purchaser, or (iv) result in the
violation of the Organizational Documents of the Purchaser, (b)
result in the creation of any pledge, lien, encumbrance or
security interest upon any of its assets, or (c) require the
authorization, approval, consent or order of, or filing with, or
other action by any court, regulatory agency or other
governmental body.
4.04 Affiliated Group. Purchaser is the common parent of an
affiliated group of corporations (within the meaning of (section)
1504(a) of the Code) which files a consolidated federal income
tax return and will include the Company in the consolidated
federal income tax return which includes the day after the
Closing Date.
ARTICLE V
COVENANTS
5.01 Conduct of Business. Until the earlier of Closing or
the termination of this Agreement, Sellers shall not cause the
Company, without the prior written consent of Purchaser, to enter
into any material contractual agreements, or amend any existing
Material Contracts, or make any commitments regarding the
business, other than in the Ordinary Course of Business. Sellers
shall cause the Company to carry on its business diligently and
substantially in the manner as heretofore conducted. By way of
illustration and not in limitation of the foregoing:
(a) The Company's tangible assets shall be maintained
in their present state or repair, ordinary wear and tear
excepted, and Sellers shall use their commercially
reasonable efforts to cause the Company to preserve and
keep intact its business organization, to keep available
the services of its employees and preserve for Purchaser
the goodwill of its business and its relationships with its
customers, suppliers and others with whom it has business
relations. Sellers shall cause the Company to conduct its
business only in the Ordinary Course of Business.
(b) Without the prior written consent of Purchaser,
prior to Closing, Sellers shall not cause the Company to
take any actions not permitted under the covenants made by
Company pursuant to that certain Amended and Restated Loan
and Security Agreement dated as of June 30, 2003 between
LaSalle Business Credit, LLC and Company.
5.02 Confidential Information. Sellers and Purchaser will
hold in strict confidence and not disclose to third parties any
data and information obtained from the other parties, except (i)
to its sources of financing, lawyers and accountants, (ii) as may
be required by law and (iii) except for certain creditors of
Sellers who have executed confidentiality agreements satisfactory
to Purchaser, (iv) such information that was known by such party
prior to such disclosure or was thereafter developed or obtained
by such party independent of such disclosure or (v) such
information that becomes generally available to the public other
than by breach of this Section 5.02. Prior to any disclosure of
information pursuant to the exception in clause (ii) of the
preceding sentence, the party intending to disclose the same
shall so notify the party which
16
provided the name in order that such party may seek a protective
order or other appropriate remedy should it choose to do so.
5.03 Brokerage Fees. Sellers shall indemnify Purchaser, its
officers, directors and shareholders against any fee or
commission payable to any broker, agent or finder retained by
Sellers in connection with the sale of the Stock to Purchaser.
Purchaser shall indemnify Sellers against any fee or commission
payable to any broker, agent or finder retained by Purchaser in
connection with the purchase of the Stock by Purchaser.
5.04 Exclusivity. Sellers agree that until July 31, 2004
(unless this Agreement is earlier terminated pursuant to Article
VIII), neither they nor the Company nor its officers, directors,
shareholders, agents or representatives shall enter into any
agreement, understanding, negotiation or discussion with any
third party relating to the sale or other disposition of the
Stock, or of the assets of the Company, except in the Ordinary
Course of Business.
5.05 Access and Information.
(a) Subsequent to the execution of this Agreement,
Sellers shall cooperate fully with Purchaser, shall supply
such information and data as Purchaser may request,
including the books and records, and the tax returns and
filings of the Company and shall, upon reasonable prior
notice to Company, permit Purchaser's auditors, legal
counsel and other authorized representatives access at the
Company's offices during regular business hours to inspect
and investigate the Company's tangible assets and the
Company's records, business, operations and properties.
Without limiting the foregoing, between the date of this
Agreement and the Closing Date, the Company shall permit
Purchaser's senior officers to meet with the officers of
the Company responsible for the Financial Statements and
the internal controls of the Company to discuss such
matters as Purchaser may deem reasonably necessary or
appropriate for Purchaser to satisfy its obligations under
(sections) 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002
and any rules and regulations relating thereto.
(b) In addition, the Purchaser shall have the right
to have the real property and tangible personal property
owned or operated by the Company inspected by the Purchaser
and Purchaser's representatives and environmental
consultants, at Purchaser's sole cost and expenses, for
purposes of determining the environmental condition of such
property and the compliance of the property and business
with Environmental Laws. In the event that subsurface or
other invasive testing is recommended by any
representatives of Purchaser, Purchaser shall be permitted
to perform such testing subject to the following terms and
conditions:
(1) Purchaser shall advise Sellers of the basis
for any request to conduct subsurface or other invasive
testing.
(2) Purchaser shall notify Sellers at least two
(2) business days in advance of any required access to
the property.
(3) Purchaser shall consult with designated
representatives of Sellers prior to undertaking any
testing or sampling which involves boring, drilling, or
similar intrusive penetration of the soil or structures
on the property.
17
(4) Purchaser agrees to split any samples that
are taken of environmental media at the property, and
the Purchaser agrees to identify the parameters and test
methods which will be utilized in analyzing such
sampling.
(5) Purchaser shall assume full responsibility
for proper characterization, manifesting,
transportation, storage and disposal of any materials or
wastes generated as a result of sampling by Purchaser.
(6) Purchaser agrees, and will require its agents,
consultants, employees and contractors to agree to
comply with all applicable laws, regulations, rules and
permits pertaining to the property, including, but not
limited to, the Occupational Health and Safety Act and
all applicable environmental laws, health and safety
laws and regulations. Sellers shall be a third party
beneficiary of such agreements by the Purchaser's
agents, consultants, employees and contractors.
(7) Upon completion of its investigations,
Purchaser shall promptly restore the property to
substantially the condition it was in prior to engaging
in the investigations, including the repair or
replacement of any and all damage to the property.
(8) Purchaser agrees to indemnify and hold
harmless Company and Sellers from and against any and
all claims, suits, actions, damages, costs,
liabilities, obligations, fines or penalties
(collectively "Claims") resulting from or arising out
of injury or death of any person, damage or loss to any
property, any non-compliance with paragraph (6) above,
or any damage to the environment, resulting from or
arising out of the performance of the investigations by
the Purchaser or the Purchaser's consultants,
contractors or agents, except to the extent that such
Claims result from the negligence or willful misconduct
of the Company or Sellers or their respective
employees, agents or contractors. Sellers, the Company
and Purchaser recognize and agree that the Purchaser
has neither created nor contributed to the existence of
any regulated substances or other environmental
conditions on the property existing as of the date of
this Agreement, and that (i) by virtue of the
investigations conducted under this section, the
Purchaser is not an owner or operator of the Property,
or the generator, transporter, xxxxxx, treater, or
disposer of any Regulated Material found or identified
at the Property, and (ii) the Purchaser is not
undertaking or arranging for the handling, removal,
treatment, storage, transportation or disposal of
Regulated Material found or identified at the Property,
except in either case with respect to the specific
materials generated as the result of the Purchaser's
sampling and investigation work. The provisions of
this paragraph shall survive termination of this
Agreement.
(9) All data, reports and information derived from
any sampling and investigation work is subject to
Section 5.02 of this Agreement.
5.06 Expenses. Purchaser and Sellers agree that they will
each bear and pay all costs and expenses incurred by them
respecting the transactions contemplated herein and all
investigations and proceedings in connection therewith,
including, without limitation, fees and expenses of their
respective counsel, accountants and advisors.
18
5.07 Tax Matters. The following provisions shall govern the
allocation of responsibility as among the Purchaser, the Company
and the Sellers for certain Tax matters following the Closing
Date:
(a) Pre-Closing Tax Periods. The Purchaser and
Company shall prepare or cause to be prepared and shall
timely file or cause to be filed all Tax Returns for the
Company and each Company Subsidiary for all Pre-closing Tax
Periods and Straddle Periods which are due (including with
extensions) after the Closing Date with the income for the
Pre-Closing Tax Period and the portion of any straddle
period before the Effective Time determined by an actual
closing of the Company's books. The Purchaser shall
provide copies of such Tax Returns to the Seller
Representative at least thirty (30) days prior to their due
date for their review and approval, such approval not to be
unreasonably withheld. If the Seller Representative does
not notify Purchaser of any objections at least ten (10)
days prior to the due date of such Tax Returns, Purchaser
may file such returns. The parties shall act in good faith
to resolve any objections raised by the Company
Stockholders and if not resolved within five (5) days of
the due date such objections raised by the Seller
Representative shall be resolved by an independent
accountant mutually agreeable to Purchaser and Seller
Representative. If such objections are not resolved by the
due date of the Tax Return, Purchaser may file such Tax
Return. When such objections are resolved, the Purchaser
shall file or cause to be filed an amended Tax Return as
may be requested by Seller Representative reflecting the
resolution of such objections. Except as otherwise
required by applicable Law, such Tax Returns for each of
Company and each Company Subsidiary shall be prepared in a
manner consistent with Tax Returns prepared and filed by
the Company prior to the Closing Date. The Purchaser and
Company shall be solely responsible for, and shall promptly
pay, all Taxes of the Company with respect to such periods
except to the extent such Taxes are due to a breach of the
representation and warranty in Section 3.07(h) or (i).
(b) Tax Refunds. The Purchaser and Company
acknowledge and agree that any and all refunds of any Taxes
paid by the Sellers or the Company and any Company
Subsidiary, respectively, in connection with all periods
ending on or before the Closing Date shall be the property
of the Sellers except to the extent such Taxes were paid by
the Purchaser after the Closing Date and such refunds,
including interest thereon paid by any taxing authority,
net of any additional Taxes imposed on the Purchaser or
Company for any period occurring after the Closing Date and
which are attributable to the receipt of such refunds,
shall be paid by the Purchaser and Company to the Sellers
promptly after such refund is either received or credited
against such liability of the Purchaser, Company or the
Company Subsidiary for Taxes.
(d) Amended Returns and Audit. Purchaser and Company
acknowledge that no amended Tax Returns may be field with
respect to any Pre-Closing Period of the Company or any
Company Subsidiary if such amended Tax Return will increase
taxes payable by the Company or any Company Subsidiary for
any Pre-Closing Period or by the Sellers without the
written consent of the Seller Representative. No
examination or other proceeding concerning the tax returns
filed by the Company or any Company Subsidiary for any Pre-
Closing Period may be settled without the consent of the
Seller
19
Representative if such settlement will increase the taxes
payable by the Sellers or their indemnification obligation
under this Agreement.
(e) Cooperation on Tax Matters. The Purchaser, the
Company and the Sellers shall cooperate fully, as and to
the extent reasonably requested by the other party, in
connection with the preparation and filing of Tax Returns
pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request)
the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The
Purchaser, Company and the Sellers agree, upon request, to
use their commercially reasonable efforts to obtain any
certificate or other document from any government authority
as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed (including, but not limited to,
with respect to the transactions contemplated hereunder).
(f) Payment of Shareholder Tax Distribution. On or
before December 31, 2004, Purchaser and the Shareholder
Representative shall compute the Deemed Tax Due with
respect to the Sellers in accordance with the ownership of
the Company for the period from January 1, 2004 through the
Effective Date (the "Prior Ownership Period"). In the
event that Purchaser and the Shareholder Representative are
unable to agree on the amount of the Deemed Tax Due for the
Prior Ownership Period, then the parties shall refer the
determination of Deemed Tax Due to a mutually agreeable
independent public accounting firm for resolution. On or
before January 1, 2005, Purchaser shall cause Company to
distribute to the Sellers that amount which shall be the
lesser of: (i) the Deemed Tax Due for the Sellers for the
Prior Ownership Period; and (ii) the amount which had been
accrued on the Company's books and records as of the
Effective Date as a reserve for taxes to be paid by the
Sellers.
(g) 338(h)(10) Election. Purchaser and Company
hereby agree, and the Sellers hereby consent, that at the
option of the Purchaser they shall elect to treat any or
all of the transactions contemplated by this Agreement in
accordance with the provisions of (section) 338 of the Code
and including without limitation, (section) 338(h)(10) of
the Code. In the event, Purchaser exercises its option to
have an election under (section) 338(h)(10) of the Code,
Purchaser, Company and the Sellers further agree as
follows:
(i) Purchaser, Company and Sellers shall jointly make
a timely election pursuant to the provisions of
(section) 338(h)(10) of the Code (the "Election")
with respect to the purchase and sale of the
Company hereunder. Purchaser and Sellers shall
complete and execute Form 8023 at Closing.
Purchaser, Sellers and Company agree to treat the
Election consistently.
(ii) Purchaser, Company and Sellers agree to
cooperate, and to cause their respective
Affiliates to cooperate, with the other in
preparing, executing and filing any Tax forms and
other documents required under (section)
338(h)(10) of the Code and other applicable laws
and regulations so that the Election will be made
in a proper and timely manner. Such cooperation
shall
20
include providing all information and records
necessary in connection with such Tax forms.
(iii) Purchaser shall provide an allocation of the
Purchase Price among the assets of the Company to
the Sellers and Sellers and Purchaser shall be
bound by such allocation for purposes of
determining and reporting Taxes.
(iv) To the extent permitted by state and local laws,
Purchaser may make an election under sections of
State and local Tax Laws corresponding to
(section) 338(h)(10) of the Code and the
principles and procedures of Paragraphs (i), (ii)
and (iii) above and (v) below shall also apply
with respect to elections filed for such purposes
and to forms and related documents to be filed
pursuant thereto.
(v) Seller shall increase the Purchase Price by such
amounts as is necessary so that the Sellers shall
receive the same amount net of Taxes as they
would receive net of Taxes if no Election had
been made (the "Election Adjustment"). Sellers
shall provide the Election Adjustment
calculation, based on the allocation of Purchase
Price provided by Purchaser and the actual Tax
rates applicable to Sellers, for review and
comment by Purchaser and, to the extent Purchaser
disputes such Election Adjustment calculation,
any such dispute shall be resolved by an
independent accounting firm mutually agreeable to
Sellers and Company. Promptly, but no later than
five (5) business days, following final
determination of the Election Adjustment,
Purchaser shall pay the final Election Adjustment
by wire transfer of immediately available funds
to such account(s) as directed by the Sellers.
In the event the allocation of Purchase Price
among the assets is changed by any Taxing
Authority or otherwise such that it increases the
Taxes of Sellers from the amounts originally
calculated, Seller Representative shall recompute
the Election amount and Purchaser will pay any
additional amount to Sellers within 15 days of
receipt of such calculation from Sellers.
5.08 Update of Schedules. Company shall promptly disclose to
Purchaser any information contained in its representations and
warranties or the Disclosure Schedules that is incomplete or is
no longer correct as of all times after the date of this
Agreement until the Closing Date; provided, however, that none of
such disclosures, to the extent Purchaser reasonably determines
that such disclosure has or may have a material adverse effect on
the Company, shall be deemed to modify, amend or supplement the
representations and warranties of Company or the Disclosure
Schedules for the purposes of Article III, unless Purchaser shall
have consented thereto in writing; provided, further, that the
sole remedy to Purchaser if it fails or refuses to consent to
such an update shall be the right to terminate this Agreement by
notice to Company within three (3) business days after receipt of
the revised Disclosure Schedules.
5.09 Repayment of Certain Company Debt. In accordance with
Section 2.02(b), Purchaser shall repay the entire outstanding
principal and accrued interest of the Company Debt.
21
5.10 Regulation S-X Compliance. Between the date hereof and
the Closing, the Purchaser may, at its own cost and expense,
review the Financial Statements of Company and make all
arrangements necessary to cause the Company's Financial
Statements and books and records to be in compliance at or after
the Effective Time with Securities and Exchange Commission
Regulation S-X, and Company shall cooperate with Purchaser in
making any such adjustments or modifications as Purchaser may
reasonably request in that regard.
5.11 Information For Proxy Statement. The Company will
furnish the Purchaser with such information concerning the
Company and the Company's Subsidiaries as Purchaser may
reasonably request in connection with the preparation of the
proxy statement with respect to the merger contemplated by the
Merger Agreement. None of the information relating to the Company
and the Company Subsidiary supplied by the Company for inclusion
in such proxy statement will be false or misleading with respect
to any material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading. The Company agrees promptly to
advise Purchaser if, at any time prior to the meeting of the
stockholders of the Purchaser for the matters contained in such
proxy statement, any information provided by it in such proxy
statement is or becomes incorrect or incomplete in any material
respect and to provide Purchaser with the information needed to
correct such inaccuracy or omission.
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
6.01 Obligations of Purchaser. The obligations of Purchaser
are subject to the satisfaction or waiver at Closing of each of
the following conditions:
(a) Representations and Warranties True at Closing.
Sellers' representations and warranties contained in this
Agreement shall be true in all material respects on and as
of Closing with the same force and effect as though made on
and as of such date, except those representations and
warranties that speak of an earlier date, which shall be
true and correct in all material respects as of such
earlier date (it being understood that, for purposes of
determining the accuracy of such representations and
warranties, any update of or modification to the Disclosure
Schedule made or purported to have been made after the date
of this Agreement shall be disregarded). Sellers shall
have complied in all material respects with their
respective covenants and agreements in this Agreement on or
before Closing. Sellers shall have delivered to Purchaser
a certificate dated as of Closing to all such effects.
(b) Litigation. No suit, investigation, action or
other proceeding shall be threatened or pending against
Sellers before any court or governmental agency which (i)
could result in the restraint or prohibition of Sellers, or
the obtaining of damages or other relief from any such
party, in connection with this Agreement or the
consummation of the transactions contemplated herein or
(ii) an order materially restricting the Company from
conducting its business as now being conducted.
(c) No Material Adverse Changes. The Company shall
not have suffered any material adverse change in its
businesses, financial condition, working capital, assets,
liabilities (absolute, accrued, contingent, or otherwise)
or operations.
22
(d) Documents Satisfactory. All instruments of
transfer and other certificates and documents delivered by
Sellers to Purchaser at Closing will be in form and
substance reasonably satisfactory to Purchaser and its
counsel.
(e) Required Governmental Approvals. All
governmental authorizations, consents, and approvals
necessary to consummate the transactions contemplated
herein, including environmental permits and licenses, shall
have been obtained and shall be in full force and effect.
(f) Other Necessary Consents. Sellers shall have
obtained all other consents and approvals set forth on
Schedule 6.01(f), including consents of lessors, which
shall be in form and substance satisfactory to Purchaser,
necessary to consummate the transactions contemplated
herein.
(g) Release of Liens. At Closing, the tangible
assets of the Company shall not be subject to any
Encumbrance except for Permitted Encumbrances.
(h) Environmental Reports. Purchaser shall have
received an environmental site assessment report with
respect to the real properties and facilities owned or
operated by the Company (including a phase II environmental
site assessment report, to the extent deemed necessary by
the Purchaser in its sole discretion), which report shall
be acceptable in form and substance to Purchaser in its
sole discretion, with a copy delivered to Sellers.
(i) Opinion of Sellers' Counsel. Purchaser shall
have received the opinion of Sellers' counsel, which shall
be in form and substance satisfactory to Purchaser and its
counsel.
(k) Resignations. Sellers shall have delivered to
Purchaser the written resignations of all incumbent
directors and officers of Company.
(l) Noncompetition Agreement. Each of the
Indemnifying Sellers shall have executed and delivered to
Purchaser the Noncompetition Agreement substantially in the
form of Exhibit 6.01(m) attached hereto (the
"Noncompetition Agreement").
(m) Mutual Release and Waiver. Sellers shall have
executed and delivered to Purchaser a Mutual Release and
Waiver in a form to be mutually agreed to between Sellers
and Purchaser (the "Release").
(n) Escrow Agreement. Sellers shall have executed
and delivered to Purchaser an Escrow Agreement in the form
of Exhibit 6.01(n) attached hereto (the "Escrow
Agreement").
ARTICLE VII
CONDITIONS TO SELLERS' OBLIGATIONS
23
7.01 Obligations of Sellers. The obligations of Sellers are
subject to the satisfaction or waiver at Closing of each of the
following conditions:
(a) Representations and Warranties True at Closing.
Purchaser's representations and warranties contained in
this Agreement shall be true in all material respects on
and as of Closing with the same force and effect as though
made on and as of such date. Purchaser will have complied
in all material respects with its covenants and agreements
in this Agreement on or before Closing. Purchaser shall
have delivered to Sellers a certificate dated as of Closing
signed by an authorized officer to all such effects.
(b) Litigation. No suit, investigation, action or
other proceeding shall be overtly threatened or pending
against Purchaser before any court or governmental agency
which (i) could result in the restraint or prohibition of
Purchaser, or the obtaining of damages or other relief from
any such party, in connection with this Agreement or the
consummation of the transactions contemplated herein or
(ii) an order restricting Purchaser from conducting the
business of the Company as now being conducted.
(c) Opinion of Purchaser's Counsel. Sellers shall
have received the opinion of Purchaser's counsel, which
shall be in form and substance satisfactory to Sellers and
their counsel.
(d) Mutual Release and Waiver. Purchaser shall have
executed and delivered to Sellers the Release.
(e) Escrow Agreement. Purchaser shall have executed
and delivered to Sellers the Escrow Agreement.
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
8.01 Termination of Agreement. This Agreement may be
terminated at any time prior to Closing:
(a) By the mutual written consent of the parties;
(b) By Sellers in writing, without liability, if
Purchaser (i) fails to perform in any material respect any
act required at Closing, or (ii) materially breaches any of
its representations, warranties or covenants in this
Agreement which breach of a covenant is not cured within
ten (10) days after Sellers shall have delivered written
notice to Purchaser of its breach of such covenant(s);
(c) By Purchaser in writing, without liability, if
Sellers (i) fails to perform in any material respect any
act required on or prior to Closing, or (ii) materially
breaches any of their representations, warranties or
covenants in this Agreement which breach of a covenant is
not cured within ten (10) days after Purchaser shall have
delivered written notice to Sellers of their breach of such
covenant(s); or
24
(d) By any party in writing, without liability, if
any court or governmental or regulatory agency order, writ,
injunction, or decree prohibits or restrains any party from
consummating the transactions contemplated here.
(e) By any party if the Closing has not occurred on
or prior to July 31, 2004; provided, however, that the
right to terminate this Agreement pursuant to this Section
8.01(e) shall not be available to any party whose breach of
a representation, warranty or covenant of this Agreement or
failure to perform any of its obligations under this
Agreement results in the failure of the Closing to be
consummated by such time.
8.02 Termination of Obligations. Termination of this
Agreement pursuant to this article will terminate all of the
parties' obligations, except for the obligations under Sections
5.02, 5.04, 5.05 and 5.06 hereof. However, termination pursuant
to Sections 8.01(b) or (c) hereof will not relieve a defaulting
or breaching party from any liability to any other party. After
this Agreement is terminated, each party will, upon written
request from any other party, return all documents and copies
previously delivered to it or made in connection with this
Agreement.
ARTICLE IX
INDEMNIFICATION; SURVIVAL; LIMITATIONS
9.01 Indemnity Agreement. Certain of the Sellers have
entered into an Indemnity Agreement ("Indemnity Agreement") dated
June 25, 2004 with Purchaser and Redwing Acquisition Co., a
Delaware limited liability company ("Merger Sub"). Purchaser's
sole remedy for a breach of a representation or warranty made by
the Company or the Sellers in this Agreement shall be recourse to
the indemnity made in the Indemnity Agreement by the Holders (as
that term is defined in the Indemnity Agreement). With the
exception of the obligations of the Sellers under Article II of
this Agreement, Purchaser's sole remedy for a breach of a
covenant made by the Company or the Sellers in this Agreement
shall be recourse to the indemnity made in the Indemnity
Agreement by the Holders.
ARTICLE X
ENFORCEMENT; ARBITRATION
10.01 Informal Mediation. In the event of any dispute
arising out of or relating to this Agreement or any agreements
contemplated hereby, including any question regarding any such
agreement's existence, validity or termination (collectively
referred to herein as a "Dispute"), then prior to filing any
arbitration proceeding as provided in Section 10.02 of this
Agreement, party intending to file such a proceeding shall be
required to notify the other party or parties in writing of the
existence and nature of the Dispute. The party intending to file
such a proceeding and the other party or parties each agree that
within twenty (20) business days of the other party or parties'
receipt of such notice, the parties shall meet at the principal
office of the Company, or other agreed place, for a minimum of
two (2) consecutive eight (8) hour days in order to attempt to
amicably resolve the dispute. If such informal dispute
resolution efforts prove to be unsuccessful, the notifying party
may initiate arbitration proceedings pursuant to Section 10.02 of
this Agreement.
25
10.02 Arbitration. In the event of a Dispute that
cannot be resolved pursuant to the procedure in Section 10.02
above, then except as expressly provided in Section 10.02, any
dispute or controversy arising between the parties to or in
connection with this Agreement involving the interpretation,
application and/or enforcement of any provision of this
agreement, or arising out of this Agreement, shall be submitted
to for arbitration at Dallas, Texas, to a panel of three
arbitrators chosen from the list of arbitrators on Schedule 10.03
attached hereto, each of whom are members of national accounting
firms, and each of whom is qualified and experienced in mergers
and acquisitions and/or in the distributed forms printing
industry and who shall be independent of the parties and
reasonably experienced in conducting arbitration proceedings
relating to similar matters ("Arbitrators"). Such arbitrators
shall be selected by the agreement of the Company and Purchaser;
in the event that the Company and Purchaser cannot agree on a
panel of three Arbitrators, then the Company shall select one
Arbitrator, Purchaser shall select one Arbitrator and the two
Arbitrators selected by the parties shall select the third
Arbitrator, with the selection of the Arbitrators by the parties
to be made no later than twenty (20) days after the delivery of a
demand by the other party for arbitration (the "Arbitration
Notice"). Any designated arbitrator shall not be an agent,
employee, shareholder or affiliate of any parties to the
arbitration, but as reasonably possible should be a person with
knowledge and experience in the type of dispute existing between
the parties.
(a) The arbitrator or arbitrators shall be directed
to identify the prevailing party in the arbitration, and
the non-prevailing party shall be responsible for the costs
and expenses incurred in conducting the arbitration
proceeding provided for in this Section 10.02, including
reasonable attorneys' fees and expenses. In the event that
the allegations of damages for fraud is determined to be
unfounded, the arbitration panel shall assess costs and
expenses related to that unfounded allegation against the
party making the same allegation even if that party is the
prevailing party on other aspects of the arbitration.
(b) The decision of the arbitrator or arbitrators
shall be final and binding on the parties.
ARTICLE XI
MISCELLANEOUS
11.01 Entire Agreement. This Agreement constitutes the
sole understanding of the parties with respect to the subject
matter hereof. This Agreement supersedes all prior agreements
and the understandings between the parties with respect to such
subject matter. There are no restrictions, promises,
representations, warranties, covenants, or undertakings, other
than those expressly set forth or referred to herein. No
amendment, modification or alteration of the terms or provisions
of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto. Any of the
terms or conditions of this Agreement may be waived in writing at
any time by the party that is entitled to the benefits thereof.
No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar).
11.02 Parties Bound by Agreement; Successors and
Assigns. The terms, conditions and obligations of this Agreement
shall inure to the benefit of and be binding upon the parties
hereto
26
and the respective successors and assigns thereof. Without the
prior written consent of the other party, neither party may
assign its rights, duties, or obligations hereunder or any part
hereof to any other person or entity.
11.03 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will for all purposes be
deemed to be an original and all of which will constitute the
same instrument.
11.04 Headings; Interpretation. The headings of the
Articles, Sections and Disclosure Schedules of this Agreement are
inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction
hereof. As used in this Agreement, (i) the term "person" shall
mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an
association, an unincorporated organization, a Governmental
Authority and any other entity, (ii) unless otherwise specified
herein, the term "affiliate," with respect to any person, shall
mean and include any person controlling, controlled by or under
common control with such person, and (iii) the term "including"
shall mean "including, without limitation". This Agreement is
being entered into by and among competent and sophisticated
parties who are experienced in business matters and represented
by counsel and other advisors, and have been reviewed by the
parties and their counsel and other advisors. Therefore, any
ambiguous language in this Agreement will not necessarily be
construed against any particular party as the drafter of the
language
11.05 Knowledge. As used in this Agreement, "knowledge"
and "to the knowledge of" means actual knowledge of a Party or
its affiliates or employees.
11.06 Stock Transfer Taxes. Any stock transfer tax or
sales or other tax due or to become due as a result of the
consummation of the transactions contemplated hereby shall be
borne solely by, and paid to the appropriate taxing authorities
by Purchaser.
11.07 Sales Tax. Any sales or other tax due or to become
due as a result of the consummation of the transactions
contemplated hereby shall be borne solely by, and paid to the
appropriate taxing authorities, by Purchaser.
11.08 Notices. Any notice, request, instruction, or
other document to be given must be in writing and delivered
personally or sent by certified mail or by United States Express
Mail, postage or fees prepaid, or by Federal Express as follows:
If to Sellers to: Crabar/GBF, Inc.
0000 Xxxxxxxxxx-Xxxxxxxxxxx Xxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxxx Xxxxxxx
with a copy to: Xxxxxxx Xxxxxx & Xxxxxxx LLP
000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
27
If to Purchaser to: Xxxxx, Inc.
0000 Xxxxxxxxxxxx Xxxxxxx (287 East)
Midlothian, Texas
Attention: President
with a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
0000 X. Xxxxxxx Xx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Any notice delivered personally in the manner provided here will
be deemed given to the party to whom it is directed upon the
party's (or its agent's) actual receipt. Any notice addressed
and mailed in the manner provided here will be deemed given to
the party to whom it is addressed at the close of business, local
time of the recipient, on the fourth (4th) business day after the
day it is placed in the mail or, if earlier, the time of actual
receipt.
11.09 Public Disclosure. Sellers shall not issue any
press release or make other public statement or disclosure
concerning the transaction contemplated hereby, without the
consent of Purchaser as to the content and the manner of
presentation and publication thereof.
11.10 Governing Law. This Agreement shall be deemed to
be made in, and shall be interpreted, construed and governed by
and in accordance with the internal laws of, the Laws of the
State of Delaware, without regard to principles of conflicts of
law thereof. Each of the Company, Purchaser and Purchaser hereby
irrevocably and unconditionally consents to submit to the
jurisdiction of the federal and state courts located in Dallas,
Texas for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such
courts), waives any objection to the laying of venue of any such
litigation in such courts and agrees not to plead or claim in any
such court that such litigation brought therein has been brought
in an inconvenient forum.
11.11 Waiver of Compliance; Consents. Any failure of
Company, Purchaser or Sellers to comply with any obligation,
covenant, agreement or condition herein may be waived by the
other party, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any
party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as
set forth in this Section 11.11.
11.12 Severability. In case any provision in this
Agreement shall be held invalid, illegal or unenforceable in a
jurisdiction, such provision shall be modified or deleted, as to
the jurisdiction involved, only to the extent necessary to render
the same valid, legal and enforceable, and the validity, legality
and enforceability of the remaining provisions hereof shall not
in any way be affected or impaired thereby nor shall the
validity, legality or enforceability of such provision be
affected thereby in any other jurisdiction.
11.13 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
28
with their specific terms or were otherwise breached.
Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent
breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any
state having jurisdiction, this being in addition to any other
right or remedy to which such party may be entitled under this
Agreement, at law or in equity.
11.14 Third Parties. Nothing contained in this Agreement
or in any instrument or document executed by any party in
connection with the transactions contemplated hereby shall create
any rights in, or be deemed to have been executed for the benefit
of, any person or entity that is not a party hereto or thereto or
a successor or permitted assign of such a party.
11.15 Disclosure Schedules. The Company, Purchaser and
Sellers acknowledge that the Disclosure Schedules (i) relate to
certain matters concerning the disclosures required and
transactions contemplated by this Agreement, (ii) are qualified
in their entirety by reference to specific provisions of this
Agreement and (iii) are not intended to constitute and shall not
be construed as indicating that such matter is required to be
disclosed, nor shall such disclosure be construed as an admission
that such information is material with respect to the Company or
Purchaser.
ARTICLE XII
DEFINED TERMS
12.01 For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
12.01:
"A/R Basket" - an amount equal to five percent (5%) of the
aggregate amount of the Receivables.
"Code" - the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"Company Subsidiary" - Centrum/GBF LLC, a Delaware limited
liability company, which is wholly-owned by Company.
"Damages" - shall mean any loss, liability, claim, damage
(including incidental and consequential damages), or diminution
of value, whether or not involving a third-party claim and the
Enforcement Costs associated therewith.
"Deemed Tax Due" - means the product of: (i) the taxable income
of the Company in the Prior Ownership Period; and (ii) the 42
percent (42%). In no event shall the Deemed Tax Due be an amount
less than zero.
"Disclosure Schedule" - means the schedules delivered by Company
to Purchaser as of the date of this Agreement that set forth the
exceptions to the representations and warranties contained in
Article III and certain other information called for by this
Agreement.
"Encumbrance" - any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind,
including
29
any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"Enforcement Costs" - shall mean all reasonable costs of
investigation and defense and reasonable attorneys' fees and
expenses.
"Environmental Laws" - mean any law relating to protection of the
environmental, natural resources, or public or employee health
and safety, or relating to the production, generation, use,
storage, treatment processing, transportation disposal or release
of Regulated Materials, including common law trespass, nuisance,
property damages and similar common law theories.
"Environmental Liability" - means any claims, loss or other
liability imposed upon or arising under any Environmental Laws,
including those consisting of or relating to any: (i) duty
imposed by, breach of or noncompliance with any Environmental
Laws, (ii) environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety
and health and regulation of Regulated Materials); (iii)
environmental remedial actions; (iv) bodily injury (including
illness, disability and death), property damage (including
trespass, nuisance, wrongful eviction, and deprivation of the use
of real or personal property); (v) any injury to, destruction of,
or loss of natural resources, or costs of any natural resource
damage assessments; (vi) Hazardous Activity conducted by any
person; and (vii) the presence or release of any Regulated
Material at or on any property.
"ERISA" - means the Employee Retirement Income Security Act of
1974, as amended.
"Fault Termination" - means a termination of the Merger Agreement
pursuant to any of the following:
(i) pursuant to Section 7.1(b)(ii);
(ii) pursuant to Section 7.1(b)(iii); or
(iii) by Company pursuant to Section 7.1(d) as a result of
a material breach by the Purchaser of a
representation, warranty or covenant in the
Agreement, which breach of a covenant is not cured
within ten (10) days after Sellers shall have
delivered written notice to Purchaser of its breach
of such covenant(s).
For purposes of the definition of Fault Termination, all
defined terms used in this definition shall have the meanings set
forth in the Merger Agreement, and all section references shall
refer to such sections of the Merger Agreement.
"GAAP" - generally accepted United States accounting principles,
consistently applied.
"Governmental Authority" - any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government; governmental or
30
quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or
entity and any court or other tribunal); or
(c) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Governmental Authorization" - any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any
Governmental Authority or pursuant to any Law.
"Hazardous Activity" - means the distribution, generation,
handling, importing, management, manufacturing, processing,
production, refinement, release, storage, transfer,
transportation, treatment or use of Regulated Materials in, on,
under, about, or from any property or facility or any part of any
property or facility into the environment, and any other act,
business, operation, or thing that increases the danger, or risk
of danger, or poses a risk of harm to persons or property on or
off any property or facility, or that may adversely affect the
value of any property, facility or the Company.
"Inventory Basket" - an amount equal to five percent (5%) of the
inventory of the Company set forth on the Interim Balance Sheet.
"IRS" - the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"Law" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law,
regulation, statute, or treaty.
"Merger Agreement" - that certain Agreement and Plan of Merger
dated as of June 25, 2004 by and among Centrum Acquisition, Inc.,
Purchaser and [Merger Sub].
"Noncompetition Consideration" - means the sum of $100,000, to be
paid in accordance with, and as consideration for, the agreement
of certain of the Sellers to enter into the Noncompetition
Agreement.
"Ordinary Course of Business" - an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business"
only if such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-
day operations of such Person.
"Organizational Documents" - (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a
general partnership; (c) the certificate of formation and the
operating agreement of a limited liability company; (d) the
limited partnership agreement and the certificate of limited
partnership of a limited partnership; (e) any charter or similar
document adopted or filed in connection with the creation,
formation, or organization of a Person; and (f) any amendment to
any of the foregoing.
"PBGC" - means the Pension Benefit Guaranty Corporation, or any
successor thereto.
31
"Permitted Encumbrance" - means (i) liens for current real or
personal property taxes and installments for special assessments
and other governmental charges which are not yet due and payable
or which may thereafter be paid without penalty, (ii) liens and
rights of third parties disclosed in Schedule 12.01(b) including
pursuant to existing leases, licenses and possession or occupancy
agreements, (iii) worker's compensation, carrier's and
materialmen's liens, (iv) liens that are immaterial in character,
amount and extent, and which do not detract from the value or
interfere with the present or proposed use of the properties they
affect, (v) easements, rights of way, encroachments, restrictions
or similar conditions affecting or burdening the owned Real
Property which individually or in the aggregate do not detract
materially from the use or value of the owned Real Property, (vi)
any conditions that would be showed by a current, accurate survey
or physical inspection of the owned Real Property, (vii) zoning,
building, fire, health, environmental and pollution control laws,
ordinances, rules and safety regulations and other similar
restrictions, (viii) acts done, or suffered to be done by, and
judgments against, Purchaser and those claiming by, through or
under Purchaser, (ix) any and all orders, decrees, awards or
judgments related to any eminent domain or condemnation
proceedings, and (x) consigned tooling, equipment inventory and
production fixtures.
"Pre-Closing Tax Period" - means any Tax period ending before the
Closing Date or on or before the Closing Date if an election is
made under (section) 338(h)(10) of the Code; and, with respect to
a Tax period that begins on or before the Closing Date and ends
thereafter, the portion of such Tax period ending at 12:00 a.m.
on the Closing Date.
"Proceeding" - shall mean any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil,
criminal, administrative, investigative, or informal) commenced,
brought, conducted, or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator.
"Regulated Material" - means any (i) hazardous substance as
defined by any Environmental Laws, (ii) any petroleum or
petroleum product, oil or waste oil; (iii) any asbestos or
polychlorinated byphenyls; (iv) any hazardous material, toxic
substance, toxic pollutant, solid waste, municipal waste,
industrial waste, hazardous waste, flammable material,
radioactive material, pollutant or contaminant or words of
similar meaning and regulatory effect under any applicable
Environmental Laws; and (v) any other chemical, material, or
substance exposure to which or whose discharge, emission,
disposal or release is prohibited, limited, or regulated under
any applicable Environmental Law. "Regulated Material" includes
any mixture or solution of the foregoing, and all derivatives or
synthetic substitutes of the foregoing.
"Representative" - shall mean with respect to a particular
Person, any director, officer, employee, agent, consultant,
advisor, or other representative of such Person, including legal
counsel, accountants, and financial advisors.
"Seller Representative" - means Xxxx XxXxxxxx, or any successor
Seller Representative as elected by a majority vote of the
Sellers.
"Subsidiary" - with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other
interests having the power to elect a majority of that
corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to
32
direct the business and policies of that corporation or other
Person (other than securities or other interests having such
power only upon the happening of a contingency that has not
occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person,
"Subsidiary" means a Subsidiary of the Company.
"Tax" - means any tax, custom, duty, governmental fee or other
like assessment or charge of any kind whatsoever, imposed by any
governmental authority (including, but not limited to, any
federal, state, local, foreign or provincial income, gross
receipts, property, sales, use, license, excise, franchise,
employment, payroll, alternative or added minimum, ad valorem,
transfer or excise tax) together with any interest, addition or
penalty imposed thereon.
"Tax Return" - any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed
with or submitted to, any governmental authority in connection
with the determination, assessment, collection, or payment of any
Tax or in connection with the administration, implementation, or
enforcement of or compliance with any law relating to any Tax.
12.02 For purposes of this Agreement, the following
terms have the meanings specified or referred to in the Section
of the Agreement as referenced below:
Defined Term Location
------------ --------
Agreement Preamble
Balance Sheet (section) 3.04
Basket Cap (section) 9.04(c)
Cash Amount (section) 1.02
CERCLA (section) 3.15(e)
Claims (section) 5.05(b)(8)
Closing (section) 1.01
Closing Date (section) 2.01
Company Preamble
Company Debt (section) 1.02
Company Group (section) 3.27(b)
Company Plan (section) 3.27(a)
Damage Claim (section) 9.02(b)
Damage Claim Notice (section) 9.02(b)
Damages Floor (section) 9.04(b)
Debt Adjustment (section) 2.01(b)
Defined Benefit Plan (section) 3.27(e)
Disagreement Notice (section) 9.05(a)
Effective Time (section) 2.01
Election (section) 5.07(h)(i)
Election Adjustment (section) 5.07(h)(v)
Employees (section) 3.19
Escrow Agreement (section) 6.01(n)
FASB 5 (section) 3.12
33
Final Company Debt (section) 2.01(b)
Final Damage Claim Date (section) 9.03
Financial Statements (section) 3.04
First Anniversary Pending Claims (section) 9.04(c)
Holdback Amount (section) 2.02(a)
Indemnified Persons (section) 9.02(a)
Interim Balance Sheet (section) 3.04
Material Contracts (section) 3.13
Material Supplier/Customer (section) 3.16
Multiemployer Plan (section) 3.27(f)
Noncompetition Agreement (section) 6.01(l)
Off balance sheet arrangements (section) 3.05
PCB Equipment (section) 3.15(g)
Pending Matter (section) 9.04(e)
Prior Ownership Period (section) 5.07(f)
Purchase Price (section) 1.02
Qualified Plan (section) 3.27(d)
Real Property (section) 3.22
Receivable (section) 3.21
Regulated Asbestos Containing
Material (section) 3.15(g)
Related Party (section) 3.25
Release (section) 6.01(m)
Second Year Cap (section) 9.04(c)
Seller Damage Claim (section) 9.03(b)
Seller Indemnified Person (section) 9.03(a)
Sellers Preamble
Set-Off Demand (section) 9.05(a)
Stock Recitals
[signature page follows]
34
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed and delivered as of the date hereof.
PURCHASER: COMPANY:
XXXXX, INC., CRABAR/GBF, INC.,
a Texas corporation an Illinois corporation
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx Xxxxx
------------------------ ------------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxx Xxxxx
Its: Chairman, President Title: President
and CEO
/s/ Xxxxxxxx Xxxxxx
--------------------------------
Xxxxxxxx Xxxxxx
/s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx
/s/ Xxxx XxXxxxxx
--------------------------------
Xxxx XxXxxxxx
/s/ Xxxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxxxx Xxxxxx
--------------------------------
Xxxxxxxx Xxxxxx, as Trustee of
the Xxxxx Xxxxx Trust dated
June 8, 2003
/s/ Xxxxxxxx Xxxxxx
--------------------------------
Xxxxxxxx Xxxxxx, as Trustee of
the Xxxx Xxxxxx Trust dated
June 8, 2003
/s/ Xxxxxxxx Xxxxxx
--------------------------------
Xxxxxxxx Xxxxxx, as Trustee of
the Xxxx Xxxxxx Trust dated
June 9, 2003
35
