Exhibit No. 2.2
[EXECUTION COPY]
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PURCHASE AGREEMENT
by and among
C&B ASSOCIATES, LTD.,
C&B ASSOCIATES II, LTD.,
THE SELLERS NAMED HEREIN,
XXXX.XXX ACQUISITION CORP.,
XXXX.XXX ACQUISITION CORP. II,
and
XXXX.XXX, INC.
Dated as of December ____, 1999
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TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS ......................................................................................1
1.1 Definitions ...................................................................................1
ARTICLE II
PURCHASE AND SALE OF THE PARTNERSHIP INTERESTS ............................................................8
2.1 Basic Transaction ............................................................................8
2.2 Closing Transactions ..........................................................................8
2.3 Purchase Price ................................................................................9
2.4 Determination and Payment of Earnout Payment .................................................11
ARTICLE III
CONDITIONS TO CLOSING ....................................................................................13
3.1 Conditions to Buyers' Obligations ............................................................13
3.2 Conditions to Sellers' Obligations ...........................................................16
ARTICLE IV
[Intentionally Omitted] ..................................................................................18
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANIES AND SELLERS ................................................................................18
5.1 Capacity, Organization, Corporate Power and Licenses .........................................18
5.2 Capital and Related Matters; Title to Partnership Interests ..................................18
5.3 Authorization; Noncontravention ..............................................................19
5.4 Subsidiaries .................................................................................19
5.5 Financial Statements .........................................................................20
5.6 Accounts Receivable ..........................................................................20
5.7 Inventory ....................................................................................20
5.8 Absence of Undisclosed Liabilities ...........................................................20
5.9 No Material Adverse Effect ...................................................................21
5.10 Absence of Certain Developments ..............................................................21
5.11 Assets .......................................................................................23
5.12 Contracts and Commitments ....................................................................24
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TABLE OF CONTENTS (CONTINUED)
Page
5.13 Intellectual Property Rights. ................................................................26
5.14 Litigation ...................................................................................27
5.15 Compliance with Laws .........................................................................28
5.16 Environmental and Safety Matters .............................................................28
5.17 Employees ....................................................................................29
5.18 Employee Benefit Plans .......................................................................30
5.19 Insurance ....................................................................................31
5.20 Tax Matters. .................................................................................31
5.21 Brokerage and Transaction Bonuses ............................................................33
5.22 Bank Accounts ................................................................................33
5.23 Names and Locations ..........................................................................33
5.24 Affiliate Transactions .......................................................................33
5.25 Service Warranties ...........................................................................34
5.26 Customers and Suppliers ......................................................................34
5.27 Disclosure ...................................................................................34
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYERS .................................................................35
6.1 Organization and Power .......................................................................35
6.2 Capitalization ...............................................................................35
6.3 Authorization ...............................................................................35
6.4 No Violation ................................................................................35
6.5 Governmental Authorities and Consents ........................................................35
6.6 Litigation ...................................................................................35
6.7 Brokerage ....................................................................................36
ARTICLE VII
[Intentionally Omitted] ..................................................................................36
ARTICLE VIII
ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING ...........................................................36
8.1 Survival of Representations and Warranties ...................................................36
8.2 Indemnification ..............................................................................37
8.3 Mutual Assistance ............................................................................40
8.4 Non-Competition; Non-Solicitation ............................................................40
8.5 Press Release and Announcements ..............................................................42
8.6 Expenses .....................................................................................42
8.7 Specific Performance .........................................................................42
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TABLE OF CONTENTS (CONTINUED)
Page
8.8 Arbitration Procedure ........................................................................43
8.9 Further Assurances ...........................................................................44
8.10 Confidentiality ..............................................................................44
8.11 Tax Matters ..................................................................................44
ARTICLE IX
MISCELLANEOUS.............................................................................................47
9.1 Amendment and Waiver .........................................................................47
9.2 Notices ......................................................................................47
9.3 Successors and Assigns .......................................................................49
9.4 Severability .................................................................................49
9.5 Interpretation ...............................................................................49
9.6 Captions .....................................................................................50
9.7 No Third-Party Beneficiaries .................................................................50
9.8 Complete Agreement ...........................................................................50
9.10 Delivery by Facsimile ........................................................................50
9.11 Governing Law ................................................................................50
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EXHIBITS AND SCHEDULES
EXHIBITS:
Exhibit A - Escrow Agreement
Exhibit B - Employment Agreement
Exhibit C - Executive Purchase Agreement
Exhibit D - Amended and Restated Stockholders Agreement
Exhibit E - Amended and Restated Registration Agreement
Exhibit F - Real Estate Lease
Exhibit G - Form of Opinion of Counsel for Sellers and the Company
Exhibit H - Form of Opinion of Counsel for Buyers
SCHEDULES
Operating Leases Schedule
Indebtedness Schedule
Capital Expenditure Schedule
Permitted Liens Schedule
Schedule of Sellers
Officers and Directors Schedule
Restrictions Schedule
Financial Statements Schedule
Accounts Receivable Schedule
Liabilities Schedule
Contracts Schedule
Developments Schedule
Assets Schedule
Leased Real Property Schedule
Excluded Assets Schedule
Intellectual Property Schedule
Litigation Schedule
Compliance Schedule
Permits Schedule
Environmental Schedule
Employees Schedule
Employee Benefits Schedule
Insurance Schedule
Taxes Schedule
Brokerage Schedule
Transaction Bonuses Schedule
Bank Account Schedule
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Names and Locations Schedule
Affiliated Transactions Schedule
Warranty Schedule
Customers and Suppliers Schedule
Buyers Brokerage Schedule
Indemnification Schedule
Excluded Employees Schedule
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INDEX OF DEFINED TERMS
Accounting Firm ......................................................................... 10
ADSP .................................................................................... 46
Affiliate ............................................................................... 1
Affiliated Group ........................................................................ 2
Agreement ............................................................................... 1
Applicable Rate ......................................................................... 2
Bank .................................................................................... 2
Buyer ................................................................................... 1
Buyer Parties ........................................................................... 37
Cash Equivalents ........................................................................ 2
CERCLA .................................................................................. 2,29
Closing ................................................................................. 8
Closing Balance Sheet ................................................................... 10
Closing Cash Amount ..................................................................... 9
Closing Date ............................................................................ 8
Closing Indebtedness .................................................................... 9
Closing Net Working Capital ............................................................. 9
Closing Net Worth ....................................................................... 9
Closing Tax Liability ................................................................... 9
Code .................................................................................... 2
Companies ............................................................................... 1
Confidential Information ................................................................ 2
control ................................................................................. 1
controlled by ........................................................................... 1
controlling ............................................................................. 1
Disputes ................................................................................ 43
Disputing Person ........................................................................ 43
Earnout Payment ......................................................................... 11
Earnout Period .......................................................................... 11
EBITDA .................................................................................. 3
EBITDA Statement ........................................................................ 12
EBITDA Threshold ........................................................................ 12
Employment Agreements ................................................................... 15
Encumbrance ............................................................................. 3
Encumbrances ............................................................................ 8
Environmental and Safety Requirements ................................................... 3,29
ERISA ................................................................................... 4
Escrow Agent ............................................................................ 3
Escrow Agreement ........................................................................ 4,8
Escrow Amount ........................................................................... 4
Estimated Purchase Price ................................................................ 10
Executive Purchase Agreement ............................................................ 15
Executive Purchase Agreements ........................................................... 15
Executive Securities .................................................................... 4
Executives .............................................................................. 4
Final Determination ..................................................................... 43
Final Purchase Price .................................................................... 11
First Earnout Payment ................................................................... 11
GAAP .................................................................................... 4
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Governmental Approvals .................................................................. 14
Guaranty ................................................................................ 4
Indebtedness ............................................................................ 4
Indemnitee .............................................................................. 38
Indemnitor .............................................................................. 38
Institute ............................................................................... 43
Intellectual Property Rights ............................................................ 4
Investment .............................................................................. 5
Knowledge ............................................................................... 5
Latest Balance Sheet .................................................................... 20
Leased Real Property .................................................................... 24
Leased Realty ........................................................................... 24
Lien .................................................................................... 5
Xxxx.xxx ................................................................................ 5
Losses .................................................................................. 37
MADSP ................................................................................... 46
Material Adverse Effect ................................................................. 5
Net Working Capital ..................................................................... 5
Net Worth ............................................................................... 5
Notice of Arbitration ................................................................... 43
Notice of Disagreement .................................................................. 10
Partnership Interest .................................................................... 1
Permitted Liens ......................................................................... 6
Person .................................................................................. 6
Plan .................................................................................... 30
Pre-Closing Taxes ....................................................................... 45
Purchase Price .......................................................................... 9
Real Estate Lease ....................................................................... 15
Realty Leases ........................................................................... 24
Registration Agreement .................................................................. 15
Related Party Profit .................................................................... 6
Restricted Territories .................................................................. 41
Restrictive Covenants ................................................................... 41
Rules ................................................................................... 43
Section 338(h)(10) Adjustment ........................................................... 6
Section 338(h)(10) Elections ............................................................ 46
Securities Act .......................................................................... 7
Seller .................................................................................. 1
Seller Representative ................................................................... 7
Sellers ................................................................................. 1
Shares .................................................................................. 1
Stockholders Agreement .................................................................. 15
Straddle Tax Returns .................................................................... 45
Subsidiary .............................................................................. 7
Tax ..................................................................................... 7
Tax Returns ............................................................................. 7
Third-Party Approvals ................................................................... 13
Transfer ................................................................................ 12
Treasury Regulations .................................................................... 7
under common control with ............................................................... 1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of December ___, 1999, by and among C&B Associates, Ltd., a
Texas limited partnership ("C&BI"), C&B Associates II, Ltd., a Texas limited
partnership ("C&BII"), (C&BI and C&BII are collectively referred to as the
"COMPANIES"), Xxx X. Xxxxx ("MEC"), Xxxxxx X. Xxxxx ("BYC"), Xxxxxxx Xxxxx
("DC") and Xxxx Xxxxxxxx, Xx. ("EB"), all individual residents of the State
of Texas, (each of MEC and DC a "SELLER" and collectively, " SELLERS"), and
Xxxx.xxx Acquisition Corp., a Delaware corporation ("XXXX.XXX ACQUISITION
I"), Xxxx.xxx Acquisition Corp. II, a Delaware corporation ("XXXX.XXX
ACQUISITION II") (each a "BUYER" and collectively, "BUYERS") and Xxxx.xxx,
Inc., a Delaware corporation.
WHEREAS, MEC and BYC own all of the outstanding partnership
interests of C&BI (the "C&BI PARTNERSHIP INTERESTS"), and DC owns fifty
percent (50%) of the outstanding partnership interests of C&BII (the "C&BII
PARTNERSHIP INTERESTs");
WHEREAS, on the terms and subject to the conditions set
forth in this Agreement, Buyers desire to purchase from MEC and BYC all of
the C&BI Partnership Interests and to purchase from DC all of the C&BII
Partnership Interests, and MEC and BYC desire to sell to Buyers all of the
C&BI Partnership Interests and DC desires to sell to Buyers the C&BII
Partnership Interests; and
WHEREAS, BYC is entering into this Agreement for the
purpose of consenting to the sale of the C&BI Partnership Interests by MEC
and to sell her 1% limited partnership interest of C&BI and EB is entering
into this Agreement for the purpose of consenting to the sale of the C&BII
Partnership Interests by DC.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and understandings contained herein and intending to be legally
bound, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "CONTROL" (including the terms "CONTROLLING,"
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, direct
or indirect, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract or otherwise, and such "control" will be presumed if any Person
owns 10% or more of the voting capital stock or other ownership interests,
directly or indirectly, of any other Person.
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"AFFILIATED GROUP" means an affiliated group as defined in
Section 1504 of the Code (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income Tax law) of which the
Company is or has been a member.
"APPLICABLE RATE" means the prime rate of interest
reported from time to time by the Wall Street Journal.
"BANK" means PNC Bank National Association or such other
financial institution as shall be selected by Buyers.
"BUY/SELL AGREEMENT" means that certain Transfer
Restriction Agreement and Contract and Option for the Purchase and Sale of
the Partnership Interests in C&B Associates II, Ltd., dated as of January 1,
1997, by and among C&BI, MEC, BYC and DC.
"CASH EQUIVALENTS" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within 90 days from the date of
acquisition thereof; (b) commercial paper maturing no more than 90 days from
the date issued and, at the time of acquisition, having a rating of at least
A-1 from Standard & Poor's Corporation or at least P-I from Xxxxx'x Investors
Service, Inc; (c) certificates of deposit maturing within 90 days from the
date of issuance thereof issued by any commercial bank organized under the
laws of the United States of America or any state thereof having combined
capital and surplus of not less than $100,000,000; (d) time deposits maturing
no more than 30 days from the date of creation thereof and demand deposits
with commercial banks having membership in the Federal Deposit Insurance
Corporation and having combined capital and surplus of not less than
$100,000,000; and (e) deposits or investments in mutual or similar funds
offered or sponsored by brokerage or other companies having membership in the
Securities Investor Protector Corporation investing only in obligations
described in clauses (a) through (d) above, less any redemption, penalty or
similar fees and Taxes in connection with redeeming interests in such mutual
or similar funds; PROVIDED THAT Cash Equivalents will be deemed to include
any cash (other than cash borrowed) used by the Companies to purchase or pay
deposits on the capital equipment set forth on the attached CAPITAL
EXPENDITURE SCHEDULE since December 3, 1999 and the two items marked with an
asterisk on the attached CAPITAL EXPENDITURE SCHEDULE.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CODE" means the Internal Revenue Code of 1986, as
amended, and any reference to any particular Code section shall be
interpreted to include any revision of or successor to that section
regardless of how numbered or classified.
"CONFIDENTIAL INFORMATION" means all information of a
confidential or proprietary nature (whether or not specifically labeled or
identified as "confidential"), in any form or medium,
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that relates to the business, products, services or research or development
of the Companies or their respective suppliers, distributors, customers,
independent contractors or other business relations. Confidential Information
includes, but is not limited to, the following: (i) internal business
information (including information relating to strategic and staffing plans
and practices, business, training, marketing, promotional and sales plans and
practices, cost, rate and pricing structures and accounting and business
methods); (ii) identities of, individual requirements of, specific
contractual arrangements with, and information about, the Companies'
suppliers, distributors, customers, independent contractors or other business
relations and their confidential information; (iii) trade secrets, know-how,
compilations of data and analyses, techniques, systems, formulae, recipes,
research, records, reports, manuals, documentation, models, data and data
bases relating thereto; (iv) inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports and all similar
or related information (whether or not patentable); and (v) other
Intellectual Property Rights.
"EBITDA" means, for any period, the Companies' combined
net income for such period, PLUS, to the extent (but only to the extent)
deducted in determining such combined net income (A) federal and state income
and franchise tax expense, (B) interest expense for indebtedness for borrowed
money , (C) depreciation expense and (D) amortization expense, MINUS to the
extent (but only to the extent) added in determining such consolidated net
income (Y) interest income and (Z) extraordinary or nonrecurring items of
income or gain. EBITDA shall be determined first, in accordance with GAAP and
second, in a manner consistent with the accounting methods and practices used
by the companies in preparing the financial statements identified on the
FINANCIAL STATEMENTS SCHEDULE; PROVIDED THAT EBITDA shall also include 50% of
any Related Party Profit on any work projects originated by the Companies
during the period in which EBITDA is being calculated.
"ENCUMBRANCE" means any lien, charge, security interest,
claim, pledge, Tax, option, warrant, right, contract, call, commitment,
equity, demand, proxy, voting agreement, restriction on transfer (other than
restrictions on transfer under the Securities Act and applicable state
securities laws) or other encumbrance.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal,
state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law, in
each case concerning public health and safety, worker health and safety and
pollution or protection of the environment (including all those relating to
the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control or cleanup of any hazardous or otherwise
regulated materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise, radiation or radon),
each as amended and as now or hereafter in effect.
"ESCROW AGENT" means Norwest Bank Minnesota, N.A.
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"ESCROW AGREEMENT" means the escrow agreement in the form
of EXHIBIT A attached hereto.
"ESCROW AMOUNT" means $1,500,000.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"EXECUTIVES" means MEC and DC.
"EXECUTIVE SECURITIES" means the shares of Xxxx.xxx's
Series A Redeemable Preferred Stock and Common Stock issued to Sellers
pursuant to the respective Executive Purchase Agreements between Sellers and
Xxxx.xxx.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"GUARANTY" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon the debt, obligation or other liability of any other
Person (other than by endorsements of instruments in the ordinary course of
collection), or guaranties of the payment of dividends or other distributions
upon the shares of any other Person.
"INDEBTEDNESS" means, with respect to any Person at any
date, without duplication: (i) all obligations of such Person for borrowed
money or in respect of loans or advances, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments or debt
securities, (iii) all obligations in respect of letters of credit and
bankers' acceptances issued for the account of such Person, (iv) all
obligations arising from cash/book overdrafts, (v) all obligations arising
from deferred compensation arrangements, (vi) all obligations of such Person
secured by a Lien, (vii) all Guaranties of such Person in connection with any
of the foregoing, (viii) all capital lease obligations, (ix) all accrued
interest, prepayment premiums or penalties related to any of the foregoing;
(x) all deferred rent, (xi) all indebtedness for the deferred purchase price
of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade
payables, subcontractor payables and accrued expenses incurred in the
ordinary course of business which are not past due and xxxxxxxx in excess of
cost on uncompleted contracts), (xii) the sum of the face value of all
payments to be made following the Closing by the Companies (as lessee) under
the Operating Leases (without giving effect to payment of the residual value
or purchase option in connection therewith), and (xii) all other liabilities
classified as non-current liabilities in accordance with GAAP as of the
Closing Date; PROVIDED THAT Indebtedness will be deemed not to include any
debt incurred by the Companies to purchase or pay deposits on the capital
equipment set forth on the attached CAPITAL EXPENDITURE SCHEDULE since
December 3, 1999.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents,
patent applications, patent disclosures and inventions, (ii) Internet domain
names, trademarks, service marks, trade dress, trade
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names, logos and corporate names and registrations and applications for
registration thereof together with all of the goodwill associated therewith,
(iii) copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer
software, data, data bases and documentation thereof, (vi) trade secrets and
other confidential information (including ideas, formulas, recipes,
compositions, inventions (whether patentable or unpatentable and whether or
not reduced to practice), know-how, manufacturing and production processes
and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable
works, financial and marketing plans and customer and supplier lists and
information), (vii) other intellectual property rights and (viii) copies and
tangible embodiments thereof (in whatever form or medium).
"INVESTMENT" as applied to any Person means (i) any direct
or indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest (including
limited liability company interests, partnership interests and joint venture
interests) of any other Person and (ii) any capital contribution by such
Person to any other Person.
"KNOWLEDGE" of the Companies or the Sellers means the
actual knowledge of MEC and DC after reasonable investigation.
"LIEN" means any mortgage, pledge, hypothecation, lien
(statutory or otherwise), preference, priority, security interest, security
agreement, easement, covenant, restriction or other encumbrance of any kind
or nature whatsoever (including any conditional sale or other title retention
agreement and any lease having substantially the same effect as any of the
foregoing and any assignment or deposit arrangement in the nature of a
security device).
"XXXX.XXX" means Xxxx.xxx, Inc., a Delaware corporation.
"MATERIAL ADVERSE EFFECT" means a material and adverse
effect or development upon the business, operations, assets, liabilities,
financial condition, value, business prospects, operating results, cash flow,
net worth or employee, customer or supplier relations of the Companies.
"NET WORKING CAPITAL" means as of any date of
determination, the excess of the Companies' total current assets (other than
cash, Cash Equivalents and marketable securities) as of such date over the
Companies' total current liabilities (excluding Indebtedness) as of such date
determined in accordance with GAAP. In determining total current assets and
total current liabilities hereunder, (i) all accounting entries shall be
taken into account regardless of their amount and all errors and omissions
corrected, (ii) all proper adjustments shall be made, and (iii) appropriate
reserves for all liabilities and obligations for which reserves are
appropriate in accordance with GAAP shall be included.
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"NET WORTH" means, as of any date of determination, the
excess of the Companies' total assets (other than cash, Cash Equivalents and
marketable securities) as of such date over the Companies' total liabilities
(excluding Indebtedness) as of such date, determined in accordance with GAAP.
In determining total assets and total liabilities hereunder, (i) all
accounting entries shall be taken into account regardless of their amount and
all errors and omissions shall be corrected, (ii) all proper adjustments
shall be made, and (iii) appropriate reserves for all liabilities and
obligations for which reserves are appropriate in accordance with GAAP shall
be included.
"OPERATING LEASES" means those certain lease agreements,
dated as of various dates, between C&BII and 1st Source Bank, as detailed on
the OPERATING LEASE SCHEDULE.
"PERMITTED LIENS" means (i) Liens that are set forth on the
PERMITTED LIENS SCHEDULE attached hereto, (ii) Liens for Taxes not delinquent
or the validity of which are being contested in good faith by appropriate
proceedings and as to which adequate reserves have been established on the
Companies' financial statements in accordance with GAAP, (iii) statutory
landlord's, mechanic's, carrier's, workmen's, repairmen's or other similar
Liens arising or incurred in the ordinary course of business and (iv) Liens
arising from zoning ordinances.
"PERSON" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated association, corporation,
limited liability company, entity or governmental entity (whether federal,
state, county, city or otherwise and including any instrumentality, division,
agency or department thereof).
"RELATED PARTY PROFIT" means, for any period, the gross
profit of any direct or indirect Subsidiary of Xxxx.xxx (other than the
Companies) related to any work project originated by the Companies and
performed by such Subsidiary LESS an amount equal to a portion of such
Subsidiary's general and administrative expenses (determined by dividing the
revenue recognized by such Subsidiary on such work projects originated by the
Companies for the last twelve-month period by the total revenue of such
Subsidiary for the last twelve-month period and multiplying such quotient by
such Subsidiary's total general and administrative expense for the last
twelve-month period); PROVIDED THAT the gross profit and general and
administrative expense of any such Subsidiary of Xxxx.xxx shall not include
any interest income or expense, depreciation or amortization. Related Party
Profit shall be determined first, in accordance with GAAP and second, in a
manner consistent with the accounting methods and practices used by the
direct or indirect Subsidiary of Xxxx.xxx in preparing its audited financial
statements.
"RIGHT OF FIRST REFUSAL AGREEMENT" means that certain Right
of First Refusal, dated as of June 22, 1997, granted by C&BI to DC and Xxxxx
Ventures, LLC.
"SECTION 338(h)(10) ADJUSTMENT" means an amount equal to
the sum of (a) the difference between all Taxes payable by MEC and BYC, as a
result of the sale of the C&BI Partnership Interests and the amount of such
Taxes that would have been payable by MEC and BYC if no election under
Section 338(h)(10) of the Code had been made, and (b) a gross up amount equal
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to all Taxes payable by MEC and BYC as a result of the receipt of the amounts
calculated in paragraphs (a) and (b). In calculating the Section 338(h)(10)
Adjustment, it shall be assumed that any item of ordinary income reportable
by MEC and BYC as a result of the sale of the C&BI Partnership Interests will
be taxable at the highest marginal federal income tax rate.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, or any similar federal law then in force.
"SELLER REPRESENTATIVE" means DC.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (irrespective of whether, at the time,
stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a
partnership, limited liability company, association or other business entity,
either (A) a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof,
or (B) such Person is a general partner, managing member or managing director
of such partnership, limited liability company, association or other entity.
"TAX" means any (i) federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital
stock, social security, unemployment, disability, payroll, license, employee
or other withholding, or other tax, of any kind whatsoever, including any
interest, penalties or additions to tax or additional amounts in respect of
the foregoing; (ii) liability of the Companies for the payment of any amounts
of the type described in clause (i) above arising as a result of being (or
ceasing to be) a member of any Affiliated Group (or being included (or
required to be included) in any Tax Return relating thereto); and (iii)
liability of the Companies for the payment of any amounts of the type
described in clause (i) above as a result of any express or implied
obligation to indemnify or otherwise assume or succeed to the liability of
any other Person.
"TAX RETURNS" means returns, declarations, reports, claims
for refund, information returns or other documents (including any related or
supporting schedules, statements or information) filed or required to be
filed in connection with the determination, assessment or collection of any
Taxes of any party or the administration of any laws, regulations or
administrative requirements relating to any Taxes.
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"TREASURY REGULATIONS" means the United States Treasury
Regulations promulgated under the Code, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered
or classified.
ARTICLE II
PURCHASE AND SALE OF THE PARTNERSHIP INTERESTS
2.1 BASIC TRANSACTION. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, Xxxx.xxx Acquisition I shall
purchase from MEC and BYC the limited partnership interests of C&BI, and MEC
and BYC shall sell, convey, assign, transfer and deliver to Xxxx.xxx
Acquisition I all of the limited partnership interests of C&BI, free and
clear of all Encumbrances, and Xxxx.xxx Acquisition I shall purchase from
DC, and DC shall sell, convey, assign, transfer and deliver to Xxxx.xxx
Acquisition I all of the limited partnership interests of C&BII owned by her,
free and clear of all Encumbrances, and Xxxx.xxx Acquisition II shall
purchase from MEC, and MEC shall sell, convey, assign, transfer and deliver
to Xxxx.xxx Acquisition II, all of the general partnership interests of C&BI,
free and clear of all Encumbrances and Xxxx.xxx Acquisition II shall purchase
from DC and DC shall sell, convey, assign, transfer and deliver to Xxxx.xxx
Acquisition II all of the general partnership interests of C&BII owned by
her, free and clear of all Encumbrances.
2.2 CLOSING TRANSACTIONS.
(a) CLOSING. The closing of the transactions contemplated by this
Agreement (the " CLOSING") shall take place at the offices of Xxxxxxxx &
Xxxxx in Chicago, Illinois, at 9:00 a.m. local time on December ___, 1999, or
at such other time or place as is mutually agreeable to the parties, or, if
any of the conditions to Closing set forth in Article III have not been
satisfied at or waived by the party entitled to the benefit thereof on or
prior to such date, on the second business day following satisfaction or
waiver of such conditions (the " CLOSING DATE").
(b) DELIVERIES. At the Closing:
(i) Buyers, in the aggregate, shall pay to each of Sellers an
amount equal to (A) the percentage set forth opposite such Seller's name on
the SCHEDULE OF SELLERS attached hereto, MULTIPLIED BY (B) an amount equal to
the Estimated Purchase Price LESS the Escrow Amount, by wire transfer of
immediately available funds to the respective accounts designated by Sellers;
(ii) Buyers shall deliver the Escrow Amount to the Escrow Agent
for deposit into an escrow account established pursuant to the terms of the
Escrow Agreement. The Escrow Amount shall be available on a non-exclusive
basis to satisfy amounts owing to the Buyers Parties pursuant to Section 8.2
below;
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(iii) MEC and BYC shall deliver to Xxxx.xxx Acquisition I
assignments of the C&BI Partnership Interests which are limited partnership
interests, and will deliver to Xxxx.xxx Acquisition Corp. II assignments of
the C&BI Partnership Interests which are general partnership interests;
(iv) DC shall deliver to Xxxx.xxx Acquisition I assignments
of C&BII Partnership Interests which are limited partnership interests, and
will deliver to Xxxx.xxx Acquisition Corp. II assignments of the C&BII
Partnership Interests which are general partnership interests;
(v) the Companies, Sellers and Buyers, as applicable, shall
deliver the opinions, certificates and other documents and instruments
required to be delivered by or on behalf of such party under Article III
below;
(vi) Sellers shall deliver to Buyers all corporate books
and records and other property of the Companies in their possession; and
(vii) Buyers or their Affiliates shall cause all of the
Indebtedness set forth on the INDEBTEDNESS SCHEDULE to be paid in connection
with the Closing.
(c) EXCLUDED ASSETS. At any time prior to Closing, the Companies
may declare a dividend consisting of, sell or otherwise dispose of, or
distribute to the Sellers all of the assets set forth on the EXCLUDED ASSETS
SCHEDULE. Buyers agree to cooperate with Sellers after Closing as may be
reasonably necessary to assist Sellers in completing the distribution of any
Excluded Assets.
2.3 PURCHASE PRICE.
(a) The aggregate purchase price to be paid for the C&BI
Partnership Interest and C&BII Partnership Interests (the " PURCHASE PRICE")
shall be an amount equal to $34,000,000, MINUS (i) an amount equal to the
aggregate amount of all Indebtedness of the Companies existing as of the
Closing (the " CLOSING INDEBTEDNESS"), MINUS (ii) an amount equal to the
aggregate amount of all Taxes of or payable by the Companies with respect to
any taxable year or taxable period or portion thereof ended on or prior to
the Closing Date (the " CLOSING TAX LIABILITY"), MINUS (iii) an amount equal
to the amount (if any) by which the Net Worth of the Companies as of the
Closing Date as shown on the Closing Balance Sheet (as defined in Section
2.3(c) below and as prepared in accordance with the provisions thereof) (the
"CLOSING NET WORTH") is less than $8,300,000 (without duplication of any
reduction under clause (v) below), PLUS (iv) an amount equal to the aggregate
value of cash, Cash Equivalents and marketable securities of the Companies as
of the Closing Date as shown on the Closing Balance Sheet (as defined in
Section 2.3(c) below and as prepared in accordance with the provisions
thereof) (the "CLOSING CASH AMOUNT"), MINUS (v) an amount equal to the
amount (if any) by which the Net Working Capital of the Company as of the
Closing Date as shown on the Closing Balance Sheet (as defined in Section
2.3(c) below and as prepared in accordance with the provisions thereof) (the
"CLOSING NET WORKING CAPITAL") is less than
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$4,650,000, PLUS (vi) the Section 338(h)(10) Adjustment (if any). In
addition, Sellers will be entitled to the Earnout Payment (if any) set forth
in Section 2.4.
(b) At the Closing, Buyers, in the aggregate, shall pay to
Sellers in the manner described in clause (i) of Section 2.2(b) above an
amount equal to the Purchase Price, as estimated in good faith by Buyers and
Sellers (including an estimate of the components of the Purchase Price), not
less than two days prior to the Closing (the "ESTIMATED PURCHASE PRICE").
(c) Within 60 days following the Closing Date, Buyers shall
deliver to the Seller Representative a consolidated balance sheet of the
Companies (in its final and binding form, the " CLOSING BALANCE SHEET"),
setting forth the Closing Indebtedness, the Closing Tax Liability, the
Closing Net Worth, the Closing Cash Amount, the Closing Net Working Capital
and the Section 338(h)(10) Adjustment and the resulting Purchase Price
calculated with reference to such amounts. The Closing Balance Sheet shall
include all known adjustments required in a year-end closing of the books and
shall be prepared in accordance with GAAP. Sellers shall cooperate as
reasonably requested in connection with the preparation of the Closing
Balance Sheet. During the 20-day period immediately following the Seller
Representative's receipt of the Closing Balance Sheet, Sellers shall be
permitted to review the Companies' books and records and the Companies'
working papers related to the preparation of the Closing Balance Sheet and
determination of the Purchase Price. The Closing Balance Sheet shall become
final and binding upon the parties 20 days following the Seller
Representative's receipt thereof, unless Sellers shall give written notice of
their disagreement (a "NOTICE OF DISAGREEMENT") to Buyers prior to such
date. Any Notice of Disagreement shall specify in reasonable detail the
nature and dollar amount of any disagreement so asserted and shall be
delivered only if (and to the extent that) Sellers reasonably and in good
faith determine that the Closing Balance Sheet and the resulting Purchase
Price calculated with reference thereto delivered by Buyers has not been
determined in accordance with the guidelines and procedures set forth in this
Agreement. If a timely Notice of Disagreement is received by Buyers, then the
Closing Balance Sheet (as revised in accordance with clause (x) or (y) below)
shall become final and binding upon the parties on the earliest of (x) the
date the parties resolve in writing any differences they have with respect to
the matters specified in the Notice of Disagreement or (y) the date all
matters in dispute are finally resolved in writing by the Accounting Firm
(defined below). During the 20 days following delivery of a Notice of
Disagreement, the Parties shall seek in good faith to resolve in writing any
differences which they have with respect to the matters specified in the
Notice of Disagreement. Following delivery of a Notice of Disagreement,
Buyers and their agents and representatives shall be permitted to review
Sellers' and their representatives' working papers relating to the Notice of
Disagreement. At the end of the 20-day period referred to above, the parties
shall submit to a mutually satisfactory independent "big-five" accounting
firm other than Ernst & Young LLP and the Companies' accountants prior to the
Closing for review and resolution of all matters (but only such matters) that
remain in dispute and that were properly included in the Notice of
Disagreement. If the parties are unable to mutually agree upon an accounting
firm, Buyers and the Seller Representative shall select by lot a "big-five"
accounting firm other than Ernst & Young LLP and the Companies' accountants
prior to the Closing. The parties shall instruct the accounting firm
ultimately agreed upon or selected by lot under this Section 2.3(c)
(the "ACCOUNTING FIRM") to make a final determination of the Closing
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Indebtedness, the Closing Tax Liability, the Closing Net Worth, the Closing
Cash Amount, the Closing Net Working Capital and the Section 338(h)(10)
Adjustment and the resulting Purchase Price calculated with reference to such
amounts to the extent such amounts are in dispute, in accordance with the
guidelines and procedures set forth in this Agreement. The Parties will
cooperate with the Accounting Firm during the term of its engagement. The
Parties shall instruct the Accounting Firm to not assign a value to any item
in dispute greater than the greatest value for such item assigned by Buyers,
on the one hand, or Sellers, on the other hand, or less than the smallest
value for such item assigned by Buyers, on the one hand, or Sellers, on the
other hand. The Parties shall also instruct the Accounting Firm to make its
determination based solely on presentations by Buyers and Sellers which are
in accordance with the guidelines and procedures set forth in this Agreement
(i.e. not on the basis of an independent review). The Closing Balance Sheet
and the determination of the Closing Indebtedness, the Closing Tax Liability,
the Closing Net Worth, the Closing Cash Amount, the Closing Net Working
Capital and the Section 338(h)(10) Adjustment and the resulting Purchase
Price calculated with reference thereto shall become final and binding on the
Parties on the date the Accounting Firm delivers its final resolution in
writing to the parties (which final resolution shall be requested by the
Parties to be delivered not more than 45 days following submission of such
disputed matters). The fees and expenses of the Accounting Firm shall be
shared equally by Buyers, on the one hand, and Sellers, on the other hand.
(d) Promptly after the Closing Balance Sheet and the
determination of the Closing Indebtedness, the Closing Tax Liability, the
Closing Net Worth, the Closing Cash Amount, the Closing Net Working Capital
and the Section 338(h)(10) Adjustment and the resulting Purchase Price
calculated with reference to such amounts become final and binding on the
parties under Section 2.3(c) above, the Estimated Purchase Price shall be
recalculated by giving effect to the final and binding Closing Indebtedness,
Closing Tax Liability, Closing Net Worth, Closing Cash Amount, Closing Net
Working Capital and the Section 338(h)(10) Adjustment (as recalculated, the
"FINAL PURCHASE PRICE"). If the Estimated Purchase Price is greater than the
Final Purchase Price, Sellers shall, and if the Final Purchase Price is
greater than the Estimated Purchase Price, Buyers shall, within three
business days after the Closing Balance Sheet becomes final and binding on
the parties, make payment by wire transfer to Buyers or Sellers, as the case
may be, in immediately available funds of the amount of such difference,
together with interest thereon at a rate per annum equal to the Applicable
Rate, calculated on the basis of the actual number of days elapsed over 360,
from the Closing Date to the date of payment.
2.4 DETERMINATION AND PAYMENT OF EARNOUT PAYMENT.
(a) AMOUNT OF EARNOUT PAYMENT. Buyers, in the aggregate, shall
pay an additional amount to the Sellers based on the Companies' performance
during the twelve-month period ending December 31, 2000 (the "EARNOUT
PERIOD"). The amount (if any) paid with respect to the Earnout Period (the
"EARNOUT PAYMENT") shall be determined in accordance with this Section 2.4.
(b) PAYMENT OF EARNOUT PAYMENT. An Earnout Payment payable
hereunder shall be made by wire transfer of immediately payable funds to the
Sellers by Buyers. The Earnout Payment
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for shall be paid within five days following the determination of EBITDA for
the Earnout Period pursuant to Sections 2.4(c) and 2.4(d) below.
Notwithstanding the foregoing, any amounts payable by Buyers pursuant to this
Section 2.4 may be reduced by any amounts owing to any of the Buyer Parties
pursuant to Section 8.2 below.
(c) DETERMINATION OF EARNOUT PAYMENT. If the Companies' EBITDA
is greater than $8,800,000 (the "EBITDA THRESHOLD") during the Earnout
Period, then the Earnout Payment shall be equal to 35% of the amount of
EBITDA in excess of the EBITDA Threshold.
(d) DETERMINATION OF EBITDA. Within 60 days after the last day
of the Earnout Period, the Buyers will prepare and deliver to the Seller
Representative a statement (the "EBITDA STATEMENT") that sets forth EBITDA
for the Earnout Period. The Seller Representative shall cooperate as
reasonably requested by Buyers in connection with the preparation of the
foregoing. The Seller Representative may dispute the calculation of EBITDA
set forth on an EBITDA Statement by delivering a Notice of Disagreement to
Buyers within 30 days following delivery of the EBITDA Statement. Any Notice
of Disagreement delivered pursuant to this Section 2.4(d) shall specify in
reasonable detail the nature and dollar amount of any disagreement so
asserted and shall be delivered only if (and to the extent that) the Seller
Representative reasonably and in good faith determines that the EBITDA set
forth on the EBITDA Statement has not been determined in accordance with the
guidelines and procedures set forth in this Agreement. During the 30 days
following delivery of a Notice of Disagreement, the parties shall seek in
good faith to resolve in writing any differences which they may have with
respect to the matters specified in the Notice of Disagreement. At the end of
the 30 day period referred to above, the parties shall submit to the
Accounting Firm for review and resolution of all matters (but only such
matters) which were properly included in the Notice of Disagreement, and the
Accounting Firm shall make a final determination of EBITDA in accordance with
the guidelines and procedures set forth in this Agreement. If the parties are
unable to mutually agree on an Accounting Firm, the Seller Representative and
Buyers shall select a "big-five" Accounting Firm by lot (after excluding
Ernst & Young, LLP and the Companies' accountants prior to the Closing). The
parties will cooperate with the Accounting Firm during the term of its
engagement. In resolving any matters in dispute, the Accounting Firm may not
assign a value to any item in dispute greater than the greatest value for
such item assigned by Buyers, on the one hand, or the Seller Representative,
on the other hand, or less than the smallest value for such item assigned by
Buyers, on the one hand, or the Seller Representative, on the other hand. The
Accounting Firm's determination will be based solely on presentations by
Buyers and the Seller Representative or their respective representatives
which are in accordance with the guidelines and procedures set forth in this
Agreement (I.E., not on the basis of an independent review). The
determination of EBITDA shall become final and binding on the parties on the
date the Accounting Firm delivers its final resolution in writing to the
parties (which final resolution shall be delivered not more than 30 days
following submission of such disputed matters). The fees and expenses of the
Accounting Firm shall be shared equally by the Sellers, on the one hand, and
the Companies, on the other hand.
(e) EARNOUT PAYMENTS ARE NOT SECURITIES. The rights of a Seller
to receive a portion of any Earnout Payment (i) will not be represented by
any form of certificate or instrument; (ii) do not
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give the Sellers any dividend rights, voting rights, liquidation rights,
preemptive rights or other rights common to holders of the Companies' capital
stock or C&BII Partnership Interests, as the case may be; (iii) are not
redeemable; and (iv) may not be sold, assigned, pledged, gifted, conveyed,
transferred or otherwise disposed of (a "TRANSFER"), except by will or
pursuant to the laws of descent and distribution (and any Transfer in
violation of this Section 2.4(e) shall be null and void). The right to
receive a portion of the Earnout Payment is solely a contractual right, and
is not a security for purposes of any federal or state securities laws.
(f) RESTRICTIONS ON PAYMENT. Notwithstanding anything to the
contrary in this Agreement, the Buyers shall not be obligated to pay all or
any portion of the Earnout Payment (if any) on the date such payment is due
if and to the extent the payment of such amount (i) is not permitted at such
time under the provisions of any of Buyers' financing agreements or (ii)
would result in a default under any of Buyers' financing agreements or a
default exists thereunder at the time of such contemplated payment. Buyers
shall pay any amounts they are obligated to pay under this Section 2.4
(including interest at the Applicable Rate from the date such payment was due
under this Section 2.4) as soon as the restrictions set forth in clauses (i)
and (ii) above no longer exist. Any failure by Buyers to pay all or any
portion of the Earnout Payment by virtue of clauses (i) or (ii) above shall
not constitute a default under or a breach of this Agreement for any reason.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CONDITIONS TO BUYERS' OBLIGATIONS. The obligation of Buyers to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or prior to the Closing Date:
(a) The representations and warranties in Article V hereof that
are subject to materiality qualifications shall be true and correct in all
respects at and as of the Closing and the representations and warranties
contained in Article V hereof that are not subject to materiality
qualifications shall be true and correct in all material respects at and as
of the Closing, in each case as though then made and as though the Closing
Date was substituted for the date of this Agreement throughout such
representations and warranties (without taking into account any disclosures
made by Sellers or the Companies to Buyers pursuant to Section 4.7 below),
and each of Sellers and the Companies shall have performed in all material
respects all of the covenants and agreements required to be performed by
Sellers and the Companies hereunder prior to the Closing;
(b) Sellers and the Companies shall have received or obtained
all third-party consents and approvals that are necessary (i) for the
consummation of the transactions contemplated hereby or (ii) to prevent a
breach of or default under, or a termination, modification or acceleration
of, any instrument, contract, lease, license or other agreement identified
with an asterisk on the attached
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RESTRICTIONS SCHEDULE (collectively, the "THIRD-PARTY APPROVALS"), in each
case on terms reasonably satisfactory to Buyers;
(c) Buyers and the Companies shall have received or obtained all
governmental and regulatory consents, approvals, licenses and authorizations
that are necessary (i) for the consummation of the transactions contemplated
hereby or (ii) for Buyers to own the C&BI Partnership Interests and the C&BII
Partnership Interests and to operate the businesses of and control the
Companies following the Closing (including any required approvals from the
State of Texas), in each case on terms and conditions reasonably satisfactory
to Buyers (collectively, the "GOVERNMENTAL APPROVALS");
(d) No suit, action or other proceeding shall be pending or
threatened before any court or governmental or regulatory official, body or
authority or any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling or charge would (i) prevent the performance of this
Agreement or the consummation of any of the transactions contemplated hereby
or declare unlawful any of the transactions contemplated hereby, (ii) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of Buyers to own the
C&BI Partnership Interests and the C&BII Partnership Interests or operate the
businesses of or control the Companies or (iv) affect adversely the right of
the Companies to own their respective assets or control their respective
businesses, and no such injunction, judgment, order, decree or ruling shall
have been entered or be in effect;
(e) Since June 30, 1999, there shall have been no material
adverse change or development in the business, financial condition, value,
operating results, assets, operations, business prospects, cash flow, net
worth or customer, supplier or employee relations of the Companies taken as a
whole (as determined by Buyers in their sole discretion);
(f) Buyers shall have completed and shall be satisfied in their
sole discretion with the results of its and its attorneys', accountants' and
other representatives' business, legal, accounting and financial due
diligence investigation and evaluation of the Companies (which investigation
and evaluation shall include a review of the Companies' relationships with
key customers and suppliers, ongoing relationships with key employees
(including the Executives) and Intellectual Property Rights, as well as the
Companies' acquisition opportunities and any other matters as deemed
appropriate by Buyers);
(g) Buyers shall have obtained all of the financing they need in
order to consummate the transactions contemplated hereby and fund the working
capital requirements of the Companies following the Closing (in each case on
terms and conditions satisfactory to Buyers in their sole discretion);
(h) Sellers shall have delivered to the Companies (i) all
property owned by the Companies that is currently used by any persons who are
not full-time employees of the Companies, and (ii) all credit cards issued in
the name of the Companies and used by any persons who are not full-time
employees of the Companies;
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(i) The Companies shall have obtained and delivered to Buyers a
fully-executed estoppel certificate and landlord lien waiver agreement from
the lessor of the Leased Real Property demised by the Real Estate Lease in
form and substance reasonably satisfactory to Buyers and Buyers' lender, and
such estoppel certificate and landlord lien waiver agreement shall be in full
force and effect at Closing;
(j) The respective employment agreements between C&BII and each
of MEC and DC shall have been entered into, containing a two-year
noncompetition and nonsolicitation covenant, each in form substantially the
same as that attached hereto as EXHIBIT B (the "EMPLOYMENT AGREEMENTS"), and
all of such agreements shall be in full force and effect at the Closing;
(k) Each of MEC and DC shall have entered into an executive
stock purchase agreement with Xxxx.xxx providing for the purchase of at least
$3,400,000 of capital stock of Xxxx.xxx, each in form substantially the same
as that attached hereto as EXHIBIT C (the "EXECUTIVE PURCHASE AGREEMENTS"),
and all of such agreements shall be in full force and effect at the Closing;
(l) Each of MEC and DC shall have entered into an Amended and
Restated Stockholders Agreement among Xxxx.xxx and the stockholders of
Xxxx.xxx in form substantially the same as that attached hereto as EXHIBIT D
(the "STOCKHOLDERS AGREEMENT"), and such agreement shall be in full force
and effect at the Closing;
(m) Each of MEC and DC shall have entered into an Amended and
Restated Registration Agreement among Xxxx.xxx and the stockholders of
Xxxx.xxx in form substantially the same as that attached hereto as EXHIBIT E
(the "REGISTRATION AGREEMENT"), and such agreement shall be in full force
and effect at the Closing;
(n) MEC shall have entered into a lease agreement in form
substantially the same as that attached hereto as EXHIBIT F (the "REAL
ESTATE LEASE"), and the Real Estate Lease shall be in full force and effect
at the Closing;
(o) Each of Sellers and the Escrow Agent shall have executed and
delivered the Escrow Agreement, and the Escrow Agreement shall be in full
force and effect as of the Closing and shall not have been amended or
modified;
(p) Buyers shall have received from Decker, Jones, McMackin,
McClane, Hall & Xxxxx P.C., counsel for Sellers and the Company, an opinion
with respect to the matters set forth in EXHIBIT G attached hereto, which
shall be addressed to Buyers and Buyers' lenders, dated as of the Closing
Date, and in form and substance reasonably satisfactory to Buyers and Buyers'
lenders;
(q) Buyers shall have received evidence (in form and substance
satisfactory to Buyers) that the Companies' and Sellers' legal counsel,
investment bankers and other agents and representatives have been paid in
full and that the Companies do not have any liability to any of the
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Companies' or Sellers' legal counsel, investment bankers, agents or
representatives or that such liabilities will be paid prior to Closing out of
the Companies' available cash;
(r) The Companies shall have obtained releases of all Liens
(other than any Permitted Liens) relating to the assets and properties of the
Companies and the Companies shall have obtained and delivered to Buyers and
Buyers' lenders payoff letters with respect to all Indebtedness for borrowed
money outstanding as of the Closing (in each case on terms and conditions
satisfactory to Buyers);
(s) The Buy/Sell Agreement and the Right of First Refusal
Agreement shall have been terminated and be of no further force or effect;
(t) Sellers and the Companies shall have delivered to Buyers
copies of the Companies' most recently prepared interim monthly and
year-to-date financial statements; and
(u) At the Closing, Sellers shall have delivered to Buyers (i) a
certificate signed by the Companies, dated the date of the Closing, stating
that the conditions specified in subsections (a) through (t) above (other
than subsections (f), (g) and (p) above) have been satisfied as of the
Closing; (ii) a certificate from Sellers and the Companies indicating their
good faith and best estimates of (A) the Closing Indebtedness, (B) the
Closing Tax Liability, (C) the Closing Net Worth, (D) the Closing Cash
Amount, (E) the Closing Net Working Capital and (F) the Section 338(h)(10)
Adjustment; (iii) copies of all Third-Party Approvals and Governmental
Approvals; (iv) certified copies of the resolutions of C&BI's and C&BII's
general partners authorizing the execution, delivery and performance of this
Agreement and the other agreements contemplated hereby and the consummation
of the transactions contemplated hereby and thereby; (v) good standing
certificates for each of the Companies from their respective jurisdictions of
incorporation and each jurisdiction in which the Companies are qualified to
do business as a foreign corporation, in each case dated as of a recent date
prior to the Closing Date; and (vi) such other documents or instruments as
are required to be delivered by Sellers or the Companies at the Closing
pursuant to the terms hereof or that Buyers reasonably request prior to the
Closing Date to effect the transactions contemplated hereby.
All proceedings to be taken by Sellers and the Companies in
connection with the consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby reasonably requested by Buyers
shall be reasonably satisfactory in form and substance to Buyers and their
special counsel. Any condition specified in this Section 3.1 may be waived by
Buyers if such waiver is set forth in a writing duly executed by Buyers.
3.2 CONDITIONS TO SELLERS' OBLIGATIONS. The obligation of Sellers to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions at or prior to the Closing:
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(a) The representations and warranties made in Article VI
hereof shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date was
substituted for the date of this Agreement throughout such representations
and warranties (without taking into account any disclosures made by Buyers to
Sellers pursuant to Section 4.7 below), and Buyers shall have performed in
all material respects all the covenants and agreements required to be
performed by Buyers hereunder prior to the Closing;
(b) No suit, action or other proceeding shall be pending
before any court or governmental or regulatory official, body or authority
wherein an unfavorable injunction, judgment, order, decree or ruling would
(i) prevent consummation of the transactions contemplated by this Agreement
or (ii) cause the transactions contemplated by this Agreement to be rescinded
following consummation, and no such injunction, judgment, order, decree or
ruling shall be in effect;
(c) Each of Buyers and the Escrow Agent shall have executed
and delivered the Escrow Agreement, and the Escrow Agreement shall be in full
force and effect as of the Closing;
(d) Xxxx.xxx shall have executed and delivered the
Stockholders Agreement, and the Stockholders Agreement shall be in full force
and effect as of the Closing;
(e) Xxxx.xxx shall have executed and delivered the
Registration Agreement, and the Registration Agreement shall be in full force
and effect as of the Closing;
(f) Xxxx.xxx shall have executed and delivered each of the
Executive Purchase Agreements, and each of the Executive Purchase Agreements
shall be in full force and effect as of the Closing;
(g) At the Closing, Buyers shall have delivered to the
Seller Representative (i) a certificate signed by Buyers, dated the date of
the Closing, stating that the conditions specified in subsection (a) through
(f) above have been satisfied, (ii) certified copies of the resolutions of
Buyers' board of directors authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated hereby
and the consummation of the transactions contemplated hereby and thereby and
(iii) such other documents or instruments as are required to be delivered by
Buyers at the Closing pursuant to the terms hereof or that Sellers reasonably
request prior to the Closing Date to effect the transactions contemplated
hereby; and
(h) Sellers shall have received from Xxxxxxxx & Xxxxx,
counsel for Buyers, an opinion with respect to the matters set forth in
EXHIBIT H attached hereto, which shall be addressed to the Sellers, dated as
of the Closing Date and in a form reasonably satisfactory to Sellers.
All proceedings to be taken by Buyers in connection with
the consummation of the transactions contemplated hereby and all documents
required to be delivered by Buyers to effect the transactions contemplated
hereby reasonably requested by Sellers or the Seller Representative shall
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be reasonably satisfactory in form and substance to Sellers and their
counsel. Any condition specified in this Section 3.2 may be waived if such
waiver is set forth in a writing duly executed by Sellers.
ARTICLE IV
[Intentionally Omitted]
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANIES AND SELLERS
As a material inducement to Buyers to enter into this Agreement and
consummate the transactions contemplated hereby, each of Sellers and the
Companies hereby jointly and severally represent and warrant to Buyers that:
5.1 CAPACITY, ORGANIZATION, CORPORATE POWER AND LICENSES. Each
Seller has full power, authority and legal capacity to enter into this
Agreement and the other documents contemplated hereby to which such Seller is
a party and to perform his obligations hereunder and thereunder. C&BI is a
limited partnership duly organized, validly existing and in good standing
under the laws of the State of Texas and is qualified to do business as a
corporation (but not a limited partnership) in every jurisdiction in which
its ownership of property or conduct of business requires it to qualify.
C&BII is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Texas and is qualified in every
jurisdiction in which its ownership of property or conduct of business
requires it to qualify. Each of the Companies possesses all requisite power
and authority and all licenses, permits and authorizations necessary to own
and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of each of the Companies'
organizational and governance documents which have been furnished to Buyers'
special counsel reflect all amendments made thereto at any time prior to the
date of this Agreement and are correct and complete. The minute books
(containing the records of meetings of the partners) and the ownership record
books, if any, of the Companies are correct and complete in all material
respects. The Companies are not in default under or in violation of any
provision of their organizational and governance documents. The attached
OFFICERS AND DIRECTORS SCHEDULE sets forth a list all of the officers and
directors of each of the Companies, as applicable.
5.2 CAPITAL AND RELATED MATTERS; TITLE TO PARTNERSHIP INTERESTS. At
the Closing, MEC and BYC shall assign Buyers good and marketable title to the
C&BI Partnership Interests, free and clear of all Encumbrances and DC shall
assign to Buyers good and marketable title to the C&BII Partnership
Interests, free and clear of all Encumbrances. Neither C&BI nor C&BII has
outstanding any securities convertible or exchangeable for any of its
partnership interests or containing any profit participation
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features, nor any rights or options to subscribe for or to purchase its
partnership interests or any securities convertible into or exchangeable for
its partnership interests or any partnership interest appreciation plan or
any phantom partnership interest plan. Neither of the Companies is subject to
any option or obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any partnership interests or any warrants, options or other
rights to acquire its partnership interests. Neither of the Companies has
violated any federal or state securities laws in connection with the offer,
sale or issuance of its partnership interests. All of the Companies'
outstanding partnership interests, have been validly issued and are fully
paid and nonassessable. Except as set forth on the attached CAPITAL STOCK AND
RELATED MATTERS SCHEDULE, there are no agreements between the Companies'
partners with respect to the voting or transfer of the Companies' partnership
interests or with respect to any other aspect of the Companies' affairs. MEC
is the sole general partner of C&BI, and C&BI and DC are the sole general
partners of C&BII. Each of the Sellers has good and marketable title to the
C&BI Partnership Interests or C&BII Partnership Interests set forth next to
such Seller's name on the SCHEDULE OF SELLERS attached hereto.
5.3 AUTHORIZATION; NONCONTRAVENTION. The execution, delivery and
performance of this Agreement and all of the other agreements and instruments
contemplated hereby to which the Companies are a party have been duly
authorized by the Companies, and no other act or other proceeding on the part
of the Companies or their partners is necessary to authorize the execution,
delivery or performance of this Agreement or the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby or thereby. This Agreement has been duly executed and delivered by
each of the Companies and Sellers and constitutes a valid and binding
obligation of each of the Companies and Sellers, enforceable in accordance
with its terms, and each of the other agreements and instruments contemplated
hereby to which the Companies or any Seller is a party, when executed and
delivered by the Companies or such Seller(s), as applicable, in accordance
with the terms hereof and thereof, shall each constitute a valid and binding
obligation of such Person, enforceable in accordance with its respective
terms. Except as set forth on the attached RESTRICTIONS SCHEDULE, the
execution and delivery by the Companies and Sellers of this Agreement and all
of the other agreements and instruments contemplated hereby to which the
Companies or any Seller(s) is a party and the fulfillment of and compliance
with the respective terms hereof and thereof by the Companies and Sellers do
not and shall not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under (whether with or
without the passage of time, the giving of notice or both), (c) result in the
creation of any Lien upon the Companies' partnership interests or assets
pursuant to, (d) give any third party the right to modify, terminate or
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action of or by or
notice or declaration to, or filing with, any third party or any court or
administrative or governmental body or agency pursuant to, the Companies'
organizational documents, or any law, statute, rule or regulation to which
the Companies or any Seller is subject, or any agreement, instrument,
license, permit, order, judgment or decree to which the Companies or any
Seller is subject. Neither of the Companies nor any Seller is a party to or
bound by any written or oral agreement or understanding with respect to a
Company Transaction other than this Agreement, and each such Person has
terminated all discussions with third parties (other than with Buyers and its
Affiliates) regarding Company Transactions.
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5.4 SUBSIDIARIES. Neither of the Companies has or in the past five
years has had any Subsidiaries.
5.5 FINANCIAL STATEMENTS. Attached hereto as the FINANCIAL
STATEMENTS SCHEDULE are the following financial statements:
(a) the audited combined balance sheet of each of the
Companies as of December 31, 1998, December 31, 1997 and December 31, 1996,
and the related statements of income and cash flows (or the equivalent) for
the fiscal years then ended; and
(b) the unaudited combined balance sheet of the Companies
as of September 30, 1999 (the "LATEST BALANCE SHEET"), and the related
statements of income and cash flows (or the equivalent) for the nine-month
period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is accurate and complete, is consistent with the books and
records of the Companies (which, in turn, are accurate and complete), fairly
presents the financial condition and operating results of the Companies and
has been prepared in accordance with GAAP consistently applied throughout the
periods covered thereby (except for GAAP omissions as are noted on the
FINANCIAL STATEMENTS SCHEDULE), subject in the case of the unaudited
financial statements to the absence of footnote disclosures and normal year
end adjustments (none of which footnote disclosures or adjustments would,
alone or in the aggregate, be materially adverse to the business, operations,
assets, liabilities, financial condition, operating results, value, cash flow
or net worth of the Companies taken as a whole).
5.6 ACCOUNTS RECEIVABLE. Except as set forth on the attached
ACCOUNTS RECEIVABLE SCHEDULE, all accounts and notes receivable reflected on
the Latest Balance Sheet and all accounts and notes receivable to be
reflected on the Closing Balance Sheet (net of allowances for doubtful
accounts as reflected thereon and as determined in accordance with GAAP) are
or shall be valid receivables arising in the ordinary course of business and
are or shall be current and collectible at the aggregate recorded amount
therefor as shown on the Latest Balance Sheet and on the Closing Balance
Sheet, as the case may be (net of allowances for doubtful accounts as
reflected thereon and as determined in accordance with GAAP). Except as set
forth on the attached ACCOUNTS RECEIVABLE SCHEDULE, no Person has any Lien on
such receivables or any part thereof, and no agreement for deduction, free
goods, discount or other deferred price or quantity adjustment has been made
with respect to any such receivables.
5.7 INVENTORY . All of the Companies' inventory consists of a
quantity and quality usable and salable in the ordinary course of business
consistent with past practice, is not obsolete, defective, damaged or
slow-moving, is merchantable and fit for its intended use, and is being
actively marketed in normal commercial channels and in normal commercial
quantities, subject only to the reserves for inventory write-down set forth
on the face of the Latest Balance Sheet and the Closing Balance Sheet (rather
than the notes thereto) and as determined in accordance with GAAP.
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5.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the
attached LIABILITIES SCHEDULE, neither of the Companies has or will have any
obligation or liability (whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known to the Companies, whether due or to become
due and regardless of when or by whom asserted) arising out of any
transaction entered at or prior to the date hereof, or any action or inaction
at or prior to the date hereof, or any state of facts existing at or prior to
the date hereof, other than (a) liabilities reflected on the Latest Balance
Sheet, (b) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is
a liability for breach of contract, breach of warranty, tort, infringement,
violation of law, claim or lawsuit), (c) obligations under contracts and
commitments described on the attached CONTRACTS SCHEDULE or under contracts
and commitments entered into in the ordinary course of business consistent
with past practice which are not required to be disclosed on such Schedule
pursuant to Section 5.12 below (but not liabilities for any breach of any
such contract or commitment occurring on or prior to the Closing Date), and
(d) other liabilities and obligations expressly disclosed in the other
Schedules referred to in this Article V.
5.9 NO MATERIAL ADVERSE EFFECT. Since December 31, 1998, there has
occurred no fact, event or circumstance which has had or would reasonably be
expected to have a Material Adverse Effect. Since December 31, 1998, each of
the Companies has conducted its business only in the ordinary course of
business consistent with past practice.
5.10 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the
attached DEVELOPMENTS SCHEDULE, since December 31, 1998, neither of the
Companies has:
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities or rights
convertible, exchangeable or exercisable into any capital stock or other
equity securities;
(b) borrowed any amount or incurred or become subject to
any material liabilities, except commercial loan borrowing and current
liabilities incurred in the ordinary course of business and consistent with
past practice;
(c) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities or
commercial loan borrowings paid in the ordinary course of business;
(d) declared, set aside or made any payment or distribution
of cash (including so-called "tax distributions") or other property to any of
its shareholders or partners with respect to such shareholder's capital stock
or partner's partnership interests or otherwise, or purchased, redeemed or
otherwise acquired any shares of its capital stock or other equity securities
(including any warrants, options or other rights to acquire its capital stock
or other equity);
(e) mortgaged or pledged any of its properties or assets or
subjected them to any Lien, except for Permitted Liens;
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(f) sold, assigned, transferred, leased, licensed or
otherwise encumbered any of its tangible assets, except in the ordinary
course of business consistent with past practice, or canceled any material
debts or claims;
(g) sold, assigned, transferred, leased, licensed or
otherwise encumbered any Intellectual Property Rights, disclosed any
proprietary confidential information to any Person (other than to Buyers and
its Affiliates and other than in the ordinary course of business consistent
with past practice in circumstances in which it has imposed reasonable
confidentiality restrictions), or abandoned or permitted to lapse any
Intellectual Property Rights;
(h) made or granted any bonus or any wage or salary
increase to any employee or group of employees (other than any wage or salary
increase to any employee of the Companies whose annual compensation is less
than $50,000 in the ordinary course of business and consistent with past
practice and except as required by pre-existing contracts described on the
attached CONTRACTS SCHEDULE), or made or granted any increase in any employee
benefit plan or arrangement, or amended or terminated any existing employee
benefit plan or arrangement or adopted any new employee benefit plan or
arrangement;
(i) suffered any extraordinary losses or waived any rights
of material value (whether or not in the ordinary course of business or
consistent with past practice) in excess of $25,000 in the aggregate;
(j) made capital expenditures or commitments therefor that
amount in the aggregate to more than $25,000;
(k) delayed or postponed the payment of any accounts
payable or commissions or any other liability or obligation or agreed or
negotiated with any party to extend the payment date of any accounts payable
or commissions or any other liability or obligation or accelerated the
collection of (or discounted) any accounts or notes receivable;
(l) made any loans or advances to, guaranties for the
benefit of, or any Investments in, any Person (other than advances to the
Companies' employees in the ordinary course of business consistent with past
practice);
(m) made any charitable contributions or pledges exceeding
in the aggregate $5,000 or made any political contributions;
(n) suffered any damage, destruction or casualty loss
exceeding in the aggregate $25,000, whether or not covered by insurance;
(o) made any change in any method of accounting or
accounting policies or made any write-down in the value of its inventory that
is material or that is other than in the usual, regular
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and ordinary course of business consistent with past practice or reversed any
accruals (whether or not in the ordinary course of business or consistent
with past practice);
(p) made any Investment in or taken any steps to
incorporate any Subsidiary;
(q) amended its articles of incorporation, by-laws or other
organizational documents;
(r) entered into any agreement or arrangement prohibiting
or restricting it from freely engaging in any business or otherwise
restricting the conduct of its business anywhere in the world;
(s) taken any action or failed to take any action that has,
had or would reasonably be expected to have the effect of accelerating to
pre-Closing periods sales to the trade or other customers that would
otherwise be expected to occur after the Closing;
(t) entered into any contract other than in the ordinary
course of business consistent with past practice, entered into any other
material transaction, whether or not in the ordinary course of business or
consistent with past practice, or materially changed any business practice; or
(u) agreed, whether orally or in writing, to do any of the
foregoing.
5.11 ASSETS.
(a) Except as set forth on the attached ASSETS SCHEDULE,
each of the Companies has good and marketable title to, or a valid leasehold
interest in, all properties and assets used by it, located on its premises or
shown on the Latest Balance Sheet or acquired after the date thereof, free
and clear of all Liens (other than properties and assets disposed of for fair
consideration in the ordinary course of business since the date of the Latest
Balance Sheet and except for Liens disclosed on the Latest Balance Sheet
(including any notes thereto) and Liens for current property taxes not yet
due and payable and Permitted Liens). Each of the Companies owns, has a valid
leasehold interest in or has the valid and enforceable right to use all
assets, tangible or intangible, necessary for the conduct of its business as
presently conducted and as presently proposed to be conducted. Except as set
forth on the attached ASSETS SCHEDULE, all of the Companies' buildings
(including all components of such buildings, structures and other
improvements), equipment, machinery, fixtures, improvements and other
tangible assets (whether owned or leased) are in good condition and repair
(ordinary wear and tear excepted) and are fit for use in the ordinary course
of the Companies' business as presently conducted and as presently proposed
to be conducted. All such assets have been installed and maintained in all
material respects in accordance with all applicable laws, regulations and
ordinances. The attached ASSETS SCHEDULE sets forth and describes in
reasonable detail the actual out-of-pocket capital expenditures (as
determined in accordance with GAAP) made by the Companies during the
twelve-months ended December 31, 1998 and the nine-months ended September 30,
1999. The assets set forth on the attached EXCLUDED ASSETS SCHEDULE (except
for the Leased Real Property and office equipment and
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furniture located at the office of C&BI and miscellaneous sculpture and art)
are not used in the business or operations of the Companies, and have not
been used in the business or operations of the Companies in the past twelve
months.
(b) the LEASED REAL PROPERTY SCHEDULE attached hereto contains
a complete list of all real property leased or subleased by the Companies
(individually " LEASED REAL PROPERTY" and collectively, the "LEASED REALTY").
Other than the real property set forth on the attached EXCLUDED ASSETS SCHEDULE,
neither of the Companies owns any real property or possesses any right to
acquire any real property. The Companies have a valid leasehold interest in each
Leased Real Property, subject only to Permitted Liens. The Companies have
previously delivered to Buyers' special counsel complete and accurate copies of
each of the leases for the Leased Realty (the "REALTY LEASES"). With respect to
each Realty Lease: (i) the Realty Lease is legal, valid, binding, enforceable
and In full force and effect; (ii) neither of the Companies nor any other party
to the Realty Lease is in breach or default, and no event has occurred which,
with notice or lapse of time or both, would constitute such a breach or default
or permit termination, modification or acceleration under the Realty Lease;
(iii) no party to the Realty Lease has repudiated any provision thereof; (iv)
there are no disputes, oral agreements or forbearance programs in effect as to
the Realty Lease; (v) the Realty Lease has not been modified in any respect,
except to the extent that such modifications are disclosed by the documents
delivered to Buyers; and (vi) neither of the Companies has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the Realty Lease.
(c) The lessors of the Leased Real Property demised by the
Real Estate Lease own such property in fee simple absolute, free and clear of
all Liens, except Permitted Liens, and do not lease or sublease such property to
any Person other than the Companies and do not allow any Person other than the
Companies to use such property.
5.12 CONTRACTS AND COMMITMENTS.
(a) Except as expressly contemplated by this Agreement or
as set forth on the attached CONTRACTS SCHEDULE, neither of the Companies is
a party to or bound by any written or oral:
(i) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement providing for deferred
or other compensation to employees, former employees or consultants, or any
other employee benefit plan or arrangement, or any collective bargaining
agreement or any other contract with any labor union, or severance
agreements, programs, policies or arrangements;
(ii) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time, consulting or
other basis or relating to loans to officers, directors or Affiliates;
(iii) contract under which either of the Companies
has advanced or loaned any other Person amounts in the aggregate exceeding
$25,000;
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(iv) agreement or indenture relating to borrowed
money or other Indebtedness or the mortgaging, pledging or otherwise placing
a Lien on any material asset or material group of assets of either of the
Companies;
(v) Guaranty;
(vi) lease or agreement under which either of the
Companies is lessee of or holds or operates any property, real or personal,
owned by any other party, except for any lease of real or personal property
under which the aggregate annual rental payments do not exceed $25,000;
(vii) lease or agreement under which either of the
Companies is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by either of the Companies;
(viii) contract or group of related contracts with
the same party or group of affiliated parties the performance of which
involves consideration in the aggregate in excess of $25,000, other than
purchase and sales orders incurred in the ordinary course of business;
(ix) assignment, license, indemnification or
agreement with respect to any intangible property (including any Intellectual
Property Rights);
(x) warranty agreement with respect to its
services rendered or its products sold or leased;
(xi) agreement under which it has granted any
Person any registration rights (including demand or piggyback registration
rights);
(xii) sales, distribution, supply or franchise
agreement;
(xiii) agreement with a term of more than six
months which is not terminable by either of the Companies upon less than 30
days' notice without penalty and involves a consideration in excess of
$25,000 annually;
(xiv) contract regarding voting, transfer or other
arrangements related to the Companies' capital stock or partnership interests
or warrants, options or other rights to acquire any of the Companies' capital
stock or partnership interests;
(xv) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the world; or
(xvi) any other agreement which is material to its
operations and business prospects or involves a consideration in excess of
$25,000 annually.
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(b) All of the contracts, leases, agreements and
instruments set forth or required to be set forth on the CONTRACTS SCHEDULE
are valid, binding and enforceable in accordance with their respective terms
and shall be in full force and effect without penalty in accordance with
their terms upon consummation of the transactions contemplated hereby. Except
as set forth on the CONTRACTS SCHEDULE, (i) each of the Companies has
performed all obligations required to be performed by it and is not in
default under or in breach of nor in receipt of any claim of default or
breach under any contract, lease, agreement or instrument to which either of
the Companies is subject; (ii) no event has occurred which with the passage
of time or the giving of notice or both would result in a default, breach or
event of noncompliance by the Companies under any contract, lease, agreement
or instrument to which either of the Companies are subject; (iii) neither of
the Companies has any present expectation or intention of not fully
performing all such obligations; (iv) no partially-filled or unfilled
customer purchase order or sales order is subject to cancellation or any
other material modification by the other party thereto or is subject to any
penalty, right of set-off or other charge by the other party thereto for late
performance or delivery; and (v) neither of the Companies nor any Seller has
knowledge of any breach or anticipated breach by the other parties to any
contract, lease, agreement, instrument or commitment to which they are
parties. Neither of the Companies is a party to any contract, agreement or
commitment the performance of which could reasonably be expected to have a
Material Adverse Effect.
(c) Buyers and Buyers' counsel has been supplied with or
has reviewed a true and correct copy of each of the written instruments,
plans, contracts and agreements and an accurate description of each of the
oral arrangements, contracts and agreements which are referred to on the
attached CONTRACTS SCHEDULE, together with all amendments, waivers or other
changes thereto. To the extent applicable, the contracts identified on the
CONTRACTS SCHEDULE are separately identified as lump sum, unit price, cost
plus or maintenance agreements.
5.13 INTELLECTUAL PROPERTY RIGHTS.
(a) The attached INTELLECTUAL PROPERTY SCHEDULE contains a
complete and accurate list of all (i) patented or registered Intellectual
Property Rights owned or, to the Companies' or any Seller's knowledge, used
by the Companies, (ii) pending patent applications and applications for other
registrations of Intellectual Property Rights filed by or on behalf of the
Companies, and (iii) material unregistered Intellectual Property Rights owned
or used by the Companies. The attached INTELLECTUAL PROPERTY SCHEDULE also
contains a complete and accurate list of all licenses and other rights
granted by the Companies to any third party with respect to any Intellectual
Property Rights and all licenses and other rights granted by any third party
to the Companies with respect to any Intellectual Property Rights, in each
case identifying the subject Intellectual Property Rights. The Companies own
and possess all right, title and interest to, or has the right to use
pursuant to a valid and enforceable license, all Intellectual Property Rights
necessary for the operation of the businesses of the Companies as presently
conducted and as presently proposed to be conducted, free and clear of all
Liens. Without limiting the generality of the foregoing, the Companies own
and possess all right, title and interest in and to all Intellectual Property
Rights created or developed by the Companies' employees and independent
contractors or under the direction or supervision of the Companies' employees
or
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independent contractors relating to the businesses of the Companies or to the
actual or demonstratively anticipated research or development conducted by
the Companies. Except as set forth on the attached INTELLECTUAL PROPERTY
SCHEDULE, the loss or expiration of any Intellectual Property Right or
related group of Intellectual Property Rights owned or used by the Companies
have not had and would not reasonably be expected to have a Material Adverse
Effect, and no loss or expiration of any Intellectual Property Right is
threatened, pending or, to the Companies' or any Seller's knowledge,
reasonably foreseeable. The Companies have taken all necessary steps to
maintain and protect the Intellectual Property Rights which they own and use.
To the Companies' and Sellers' knowledge, the owners of any Intellectual
Property Rights licensed to the Companies have taken commercially reasonable
action to maintain and protect the Intellectual Property Rights which are
subject to such licenses.
(b) Except as set forth on the attached INTELLECTUAL
PROPERTY SCHEDULE, (i) there have been no claims made against the Companies
asserting the invalidity, misuse or unenforceability of any of the
Intellectual Property Rights owned or used by the Companies and, to the
Companies' and each Seller's knowledge, there is no basis for any such claim,
(ii) neither of the Companies nor any Seller has received any notices of, and
has no knowledge of any facts which indicate a likelihood of, any
infringement or misappropriation by, or conflict with, any third party with
respect to any Intellectual Property Rights (including any demand or request
that the Companies license any rights from a third party), (iii) the conduct
of the Companies' businesses has not infringed, misappropriated or conflicted
with and does not infringe, misappropriate or conflict with any Intellectual
Property Rights of other Persons, and (iv) to the Companies' and each
Seller's knowledge, the Intellectual Property Rights owned by or licensed to
the Companies have not been infringed, misappropriated or conflicted by other
Persons. The transactions contemplated by this Agreement will not have a
Material Adverse Effect on the Companies' right, title or interest in and to
the Intellectual Property Rights listed on the INTELLECTUAL PROPERTY SCHEDULE
and all of such Intellectual Property Rights shall be owned or available for
use by the Companies on identical terms and conditions immediately after the
Closing.
(c) Except as disclosed on the INTELLECTUAL PROPERTY
SCHEDULE, to the knowledge of the Sellers and the Companies, none of the
computer software, computer firmware, computer hardware (whether general or
special purpose) or other similar or related computer systems or software
that are used or relied on by Companies in the conduct of its business will
malfunction, will cease to function, will generate incorrect data or will
produce incorrect results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
5.14 LITIGATION. Except as set forth on the attached LITIGATION
SCHEDULE, there are no (and, during the five years preceding the date hereof,
there have not been any) actions, suits, proceedings (including any
arbitration proceedings), orders, investigations or claims pending or, to the
Companies' or any Seller's knowledge, threatened against or affecting the
Companies (or to the Companies' or any Seller's knowledge, pending or
threatened against or affecting any of the officers, directors or employees
of the Companies with respect to their business or proposed business
activities), or pending or threatened by the Companies against any Person, at
law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality (including any
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actions, suits, proceedings or investigations with respect to the
transactions contemplated by this Agreement); neither of the Companies is
subject to any arbitration proceedings under collective bargaining agreements
or otherwise or any governmental investigations or inquiries; and, to the
Companies' or any Seller's knowledge, there is no basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or
threatened involving the prior employment of any of the Companies' employees,
their use in connection with the Companies' businesses of any information or
techniques allegedly proprietary to any of their former employers or their
obligations under any agreements with prior employers. The Companies are
fully insured with respect to each of the matters set forth on the attached
LITIGATION SCHEDULE. Neither of the Companies is subject to any judgment,
order or decree of any court or other governmental agency, and neither of the
Companies has received any opinion or memorandum or advice from legal counsel
to the effect that it is exposed, from a legal standpoint, to any material
liabilities. There are no actions, suits, proceedings (including any
arbitration proceedings), orders, investigations or claims pending or, to the
Companies' or any Seller's knowledge, threatened against or affecting any
Seller in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with the transactions contemplated hereby.
5.15 COMPLIANCE WITH LAWS. Except as set forth on the attached
COMPLIANCE SCHEDULE:
(a) Each of the Companies has complied and is in compliance
with all applicable laws, ordinances, codes, rules, requirements and
regulations of foreign, federal, state and local governments and all agencies
thereof relating to the operation of its business and the maintenance and
operation of its properties and assets. No notices have been received by and
no claims have been filed against the Companies alleging a violation of any
such laws, ordinances, codes, rules, requirements or regulations. Neither of
the Companies has made any bribes, kickback payments or other similar
payments of cash or other consideration, including payments to customers or
clients or employees of customers or clients for purposes of doing business
with such Persons.
(b) Each of the Companies holds and is in compliance with
all permits, licenses, bonds, approvals, certificates, registrations,
accreditations and other authorizations of all foreign, federal, state and
local governmental agencies required for the conduct of its business and the
ownership of its properties (including as the same relate to Environmental
and Safety Requirements and International Trade Laws and Regulations), and
the attached PERMITS SCHEDULE sets forth a list of all of such material
permits, licenses, bonds, approvals, certificates, registrations,
accreditations and other authorizations. No notices have been received by the
Companies alleging the failure to hold any of the foregoing. All of such
permits, licenses, bonds, approvals, accreditations, certificates,
registrations and authorizations will be available for use by the Companies
immediately after the Closing.
5.16 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on the
attached ENVIRONMENTAL SCHEDULE:
(a) Each of the Companies has complied with and is in
compliance with all Environmental and Safety Requirements, including, without
limitation, all permits and licenses
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required thereunder. Neither of the Companies has received any oral or
written notice, report or information regarding any actual or alleged
violation of Environmental and Safety Requirements or any liabilities or
potential liabilities (contingent or otherwise), including any investigation,
correction or remedial obligations relating to it or its facilities arising
under Environmental and Safety Requirements.
(b) Neither this Agreement nor the consummation of the
transactions contemplated hereby will result in any obligations for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including any so called "transaction-triggered" or "responsible property
transfer" laws and regulations).
(c) To the knowledge of the Sellers and the Companies, none
of the following exists at any property or facility owned, occupied or
operated by the Companies: (i) underground storage tanks; (ii)
asbestos-containing material in any form or condition; (iii) materials or
equipment containing polychlorinated biphenyls; or (iv) landfills, surface
impoundments or other disposal areas.
(d) Neither of the Companies nor any of their respective
predecessors or Affiliates has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any substance
(including any hazardous substance) or owned, occupied or operated any
facility or property (and no such property or facility is contaminated by any
such substance) in a manner that has given or could give rise to any
liabilities (including any liability for response costs, corrective action
costs, personal injury, natural resource damages, property damage or
attorneys fees or any investigative, corrective or remedial obligations)
pursuant to CERCLA or any other Environmental and Safety Requirements.
(e) Neither of the Companies has, either expressly or by
operation of law, assumed or undertaken any liability or corrective,
investigatory or remedial obligation of any other Person relating to any
Environmental and Safety Requirements.
(f) The Companies have furnished to the Buyers all
environmental audits, reports and other material environmental documents
relating to the Companies and any of their facilities, which are in their
possession, custody or control.
5.17 EMPLOYEES. The attached EMPLOYEES SCHEDULE correctly sets forth
the name and current annual salary of each of the Companies' employees
receiving more than $50,000 in annual compensation and whether any employees
are absent from active employment, including, but not limited to, leave of
absence or disability. Except as set forth on the attached EMPLOYEES
SCHEDULE, (a) neither of the Companies is aware that any executive or key
employee of the Companies or any group of employees of the Companies have any
plans to terminate employment with the Companies; (b) the Companies have
complied with all laws relating to the employment of labor (including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other Taxes), and neither
of the Companies is aware that it has any labor relations problems (including
any union organization activities, threatened or actual strikes or work
stoppages
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or material grievances); and (c) neither of the Companies nor, to the best of
the Companies' or any Seller's knowledge, any of their respective employees
are subject to any noncompete, nondisclosure, confidentiality, employment,
consulting or similar agreements relating to, affecting or in conflict with
the present or proposed business activities of the Companies, except for
agreements between the Companies and their present and former employees. The
EMPLOYEES SCHEDULE sets forth the bonuses paid and reasonably expected to be
paid to the Companies' officers and employees during 1999.
5.18 EMPLOYEE BENEFIT PLANS.
(a) The attached EMPLOYEE BENEFITS SCHEDULE sets forth an
accurate and complete list of each "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) and each other employee benefit plan,
program or arrangement providing benefits to current or former employees
(including any bonus plan, plan for deferred compensation, retirement,
severance, sick leave, employee health or other welfare benefit plan or other
arrangement), at any time maintained, sponsored, or contributed to by the
Company, or with respect to which the Company has any liability or potential
liability. Each such item listed on the attached EMPLOYEE BENEFITS SCHEDULE
is referred to herein as a "PLAN."
(b) The Company does not have any obligation to contribute
to (or any other liability, including current or potential withdrawal
liability, with respect to) any "multiemployer plan" (as defined in Section
3(37) of ERISA) or any employee benefit plan which is a "defined benefit
plan" (as defined in Section 3(35) of ERISA), whether or not terminated.
(c) The Company does not have any obligation under any Plan
or otherwise to provide medical, health, life insurance or other welfare-type
benefits to current or future retired or terminated employees (except for
limited continued medical benefit coverage required to be provided under
Section 4980B of the Code or as required under applicable state law).
(d) Except as set forth on the EMPLOYEE BENEFITS SCHEDULE
under the heading "Profit Sharing Plans," the Company does not maintain,
contribute to or have any liability or potential liability under (or with
respect to) any employee benefit plan which is a "defined contribution plan"
(as defined in Section 3(34) of ERISA), whether or not terminated.
(e) For purposes of this Section 5.18, the term "Company"
includes all entities treated as a single employer with the Companies
pursuant to Section 414 of the Code.
(f) With respect to the Plans, all required or recommended
(in accordance with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the
Closing shall have been made or properly accrued on the Latest Balance Sheet.
None of the Plans has any unfunded liabilities which are not reflected on the
Latest Balance Sheet.
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(g) The Plans and all related trusts, insurance contracts
and funds have been maintained, funded and administered in compliance in all
material respects with their terms and with the applicable provisions of
ERISA, the Code and other applicable laws. Neither the Company nor, to the
knowledge of the Sellers, any trustee or administrator of any Plan has
engaged in any transaction with respect to the Plans which would subject the
Company or any trustee or administrator of the Plans, or any party dealing
with any such Plan, nor do the transactions contemplated by this Agreement
constitute transactions which would subject any such party, to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code. No actions,
suits or claims with respect to the assets of the Plans (other than routine
claims for benefits) are pending or, to the Companies' or any Seller's
knowledge, threatened which could result in or subject the Company to any
liability and there are no circumstances which would give rise to or be
expected to give rise to any such actions, suits or claims. No liability to
the Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA
has been or could be incurred by the Company.
(h) Each of the Plans which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination from
the Internal Revenue Service that such plan is qualified under Section 401(a)
of the Code, and there are no circumstances which would adversely affect the
qualified status of any such Plan.
(i) The Company has provided Buyers with true and complete
copies of all documents pursuant to which the Plans are maintained, funded
and administered, and the most recent annual reports (Form 5500 and
attachments) for the Plans, and all such reports have been filed in a timely
manner.
5.19 INSURANCE. The attached INSURANCE SCHEDULE contains a
description of each insurance policy maintained by the Companies with respect
to its properties, assets and businesses, and each such policy is in full
force and effect as of the Closing. Neither of the Companies is in default
with respect to its obligations under any insurance policy maintained by it,
and neither of the Companies has been denied insurance coverage. Except as
set forth on the INSURANCE SCHEDULE, neither of the Companies have any
self-insurance or co-insurance programs, and the reserves set forth on the
Latest Balance Sheet are adequate (and the reserves to be set forth on the
Companies' books and records as of the Closing will be adequate) to cover all
anticipated liabilities with respect to any such self-insurance or
co-insurance programs.
5.20 TAX MATTERS.
(a) The Companies and each Affiliated Group has timely
filed all Tax Returns required to be filed by it, each such Tax Return has
been prepared in compliance with all applicable laws and regulations, and all
such Tax Returns are true and accurate. All Taxes due and payable by the
Companies have been paid and the Companies have withheld and paid over to the
appropriate taxing authority all Taxes which they are required to withhold
from amounts paid or owing to any employee, stockholder, creditor or other
third party. All Taxes accrued but not yet due (other than
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Texas franchise Taxes, whether or not attributable to earned surplus
resulting from the Section 338(h)(10) election, if any) are accrued on the
Latest Balance Sheet and will be accrued on the Closing Balance Sheet.
(b) Except as set forth on the attached TAXES SCHEDULE:
(i) neither of the Companies has requested or been
granted an extension of the time for filing any Tax Return which has not yet
been filed;
(ii) neither of the Companies has consented to
extend to a date later than the date hereof the time in which any Tax may be
assessed or collected by any taxing authority;
(iii) Neither of the Companies has been a member
of an Affiliated Group for any taxable period ending on or before December
31, 1998;
(iv) no deficiency or proposed adjustment which
has not been settled or otherwise resolved for any amount of Tax has been
proposed, asserted or assessed by any taxing authority against the Companies;
(v) there is no action, suit, taxing authority
proceeding or audit now in progress, pending or, to the Companies' or any
Seller's knowledge, threatened against or with respect to the Companies;
(vi) neither of the Companies reasonably expects
any taxing authority to claim or assess any amount of additional Taxes;
(vii) no claim has ever been made by a taxing
authority in a jurisdiction where the Companies, do not file Tax Returns
claiming that the Companies are or may be subject to Taxes assessed by such
jurisdiction;
(viii) neither of the Companies has made any
election under Section 341(f) of the Code (or any corresponding provision of
state, local or foreign income Tax law);
(ix) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Companies;
(x) neither of the Companies will be required (A)
as a result of a change in method of accounting for a taxable period ending
on or prior to the Closing Date, to include any adjustment in taxable income
for any taxable period (or portion thereof) ending after the Closing Date,
(B) as a result of any "closing agreement," as described in Section 7121 of
the Code (or any corresponding provision of state, local or foreign income
Tax law), to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date, (C) as a result of any sale reported on the installment
method, to include
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in taxable income any amount from a sale in a taxable period ending on or
prior to the Closing Date, or (D) as a result of any prepaid amount received
in a taxable period ending on or prior to the Closing Date, to include in
taxable income such amount (or portion thereof) for any taxable period (or
portion thereof) ending after the Closing Date;
(xi) neither of the Companies is a party to or
bound by any Tax allocation or Tax sharing agreement and has no current or
potential contractual obligation to indemnify any other Person with respect
to Taxes; and
(xii) Buyers will not be required to deduct and
withhold any amount pursuant to Section 1445(a) of the Code upon the transfer
of any cash or property pursuant to this Agreement.
(c) C&BI made a valid election under Code Section 1362,
effective January 1, 1986, to be an S Corporation for all taxable years since
1986 through and including the current year and, except as set forth on the
TAXES SCHEDULE, has made all corresponding valid elections, where required,
in the states in which it does business and such elections have not been
terminated.
(d) Each of the Sellers is a resident of the State of Texas.
5.21 BROKERAGE AND TRANSACTION BONUSES. Except for brokerage fees
set forth on the attached BROKERAGE SCHEDULE, there are no claims for
brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement
or agreement binding upon any Seller or either of the Companies. Except as
set forth on the attached TRANSACTION BONUSES SCHEDULE, there are no special
bonuses or other similar compensation payable to any employee of the
Companies in connection with the transactions contemplated hereby. Sellers
shall pay, and hold the Companies, Buyers and its Affiliates harmless
against, any liability, loss or expense (including reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim or
special bonus or other similar compensation.
5.22 BANK ACCOUNTS. The BANK ACCOUNT SCHEDULE attached hereto lists
all of the Companies' bank accounts (designating each authorized signatory
and the level of each signatory's authorization).
5.23 NAMES AND LOCATIONS. Except as set forth on the attached NAMES
AND LOCATIONS SCHEDULE, during the five-year period prior to the execution
and delivery of this Agreement, neither of the Companies or their respective
predecessors has used any name or names under which it has invoiced account
debtors, maintained records concerning its assets or otherwise conducted
business. All of the tangible assets and properties of the Companies are
located at the locations set forth on the NAMES AND LOCATIONS SCHEDULE.
5.24 AFFILIATE TRANSACTIONS. Except as set forth on the attached
AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, shareholder, employee
or Affiliate of the Companies or, to the Companies' or any Seller's
knowledge, any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is
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a party to any agreement, contract, commitment or transaction with the
Companies or has any interest in any property used by the Companies
(including any Intellectual Property Rights). Neither of the Companies has
paid any fees, expenses or costs of the type described in Section 8.6 below
that are to be paid by Sellers pursuant to Section 8.6 below.
5.25 SERVICE WARRANTIES. To the Sellers' knowledge, all services
rendered by the Companies have been in conformity in all material respects
with all applicable contractual commitments and all express and implied
warranties, and, to the Sellers' knowledge, neither of the Companies has any
liability (and, to the Companies' or any Seller's knowledge, there is no
reasonable basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against it giving rise to
any such liability) for curing or providing additional services or other
damages in connection therewith in excess of any warranty reserve
specifically established with respect thereto and included on the face of the
Latest Balance Sheet (rather than the notes thereto), to be included on the
Closing Balance Sheet or as may be set forth on the attached WARRANTY
SCHEDULE. To the Sellers' knowledge, no services rendered by the Companies
are subject to any guaranty, warranty or other indemnity beyond the
applicable standard terms and conditions of such sale (including as a result
of any course of conduct between the Companies and any Person or as a result
of any statements in any of the Companies' service or promotional
literature). The attached WARRANTY SCHEDULE includes copies of such standard
terms and conditions of sale for the Companies (containing applicable
guaranty, warranty and indemnity provisions). To the Sellers' knowledge,
neither of the Companies has been notified of any claims for (and neither
Sellers nor the Companies has any knowledge of any threatened claims for) any
extraordinary warranty obligations or additional services relating to any of
its services.
5.26 CUSTOMERS AND SUPPLIERS. The CUSTOMERS AND SUPPLIERS SCHEDULE
attached hereto sets forth (a) a list of the top twenty customers of the
Companies (on a consolidated basis) (by volume of sales to such customers)
and (b) a list of the top ten suppliers of the Companies (on a consolidated
basis) (by volume of purchases from such suppliers), for the fiscal year
ended December 31, 1998 and the six-month period ended June 30, 1999 and,
with respect to such customers, the committed volume of purchases by such
customers for the fiscal year ending December 31, 1998 and six-month period
ended June 30, 1999 and prices related thereto. Neither of the Companies has
received any indication from any material customer of the Companies to the
effect that, and neither of the Companies has any reason to believe that,
such customer will stop, materially decrease the rate of, or materially
change the terms (whether related to payment, price or otherwise) with
respect to, buying products from the Companies (whether as a result of the
consummation of the transactions contemplated hereby or otherwise). Neither
of the Companies has received any indication from any material supplier to
the Companies to the effect that, and neither of the Companies has any reason
to believe that, such supplier will stop, materially decrease the rate of, or
materially change the terms (whether related to payment, price or otherwise)
with respect to, supplying materials, products or services to the Companies
(whether as a result of the consummation of the transactions contemplated
hereby or otherwise).
5.27 DISCLOSURE. Neither this Article V or any of the Exhibits or
Schedules attached hereto nor any of the written statements, documents,
certificates or other items prepared and supplied to
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Buyers or its Affiliates by or on behalf of the Companies or Sellers in
connection with the transactions contemplated hereby, when taken together as
a whole, contain any untrue statement of a material fact or omit a material
fact necessary to make each statement contained herein or therein, in light
of the circumstances in which they were made, not misleading. There is no
fact which the Companies have not disclosed to Buyers in writing and of which
any of its shareholders, officers, directors or executive employees is aware
which has had or would reasonably be expected to have a Material Adverse
Effect.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYERS
As an inducement to Sellers and the Companies to enter into this
Agreement and consummate the transactions contemplated hereby, Buyers hereby
represent and warrant to Sellers and the Companies as follows:
6.1 ORGANIZATION AND POWER. Each Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Each Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
6.2 CAPITALIZATION. The authorized capital stock of each Buyer
consists of 1,000 shares of common stock, par value $0.01 per share, of which
1,000 shares of common stock are issued and outstanding. All of such capital
stock has been validly issued, is fully paid and nonassessable, and has not
been issued in violation of any preemptive rights or rights of refusal. There
are no voting trusts, proxies or any other agreements or understandings with
respect to the voting of the capital stock of Buyers. Neither Buyer is
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock.
6.3 AUTHORIZATION. The execution, delivery and performance by Buyers
of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by Buyers and no other corporate
act or proceeding on the part of Buyers, their board of directors or
stockholders is necessary to authorize the execution, delivery or performance
of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Buyers and
this Agreement constitutes a valid and binding obligation of Buyers,
enforceable in accordance with its terms.
6.4 NO VIOLATION. Neither Buyer is subject to nor obligated under
its certificate of incorporation or by-laws, or any applicable law, rule or
regulation of any governmental authority, or any agreement, instrument,
license or permit, or subject to any order, writ, injunction or decree, which
would be breached or violated by its execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
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6.5 GOVERNMENTAL AUTHORITIES AND CONSENTS. Except as set forth on
the BUYERS CONSENT SCHEDULE attached hereto, no permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority or any other Person is required in connection with the
execution, delivery or performance of this Agreement by Buyers or the
consummation by Buyers of the transactions contemplated hereby.
6.6 LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or, to Buyers' knowledge, threatened against or
affecting Buyers, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which would adversely affect Buyers'
performance under this Agreement or the consummation of the transactions
contemplated hereby.
6.7 BROKERAGE. Except as set forth on the BUYERS BROKERAGE SCHEDULE
attached hereto, there are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Buyers.
ARTICLE VII
[Intentionally Omitted]
ARTICLE VIII
ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties in this Agreement and the Schedules and Exhibits attached
hereto or in any writing delivered by any party to another party in
connection with this Agreement shall survive the Closing as follows:
(a) the representations and warranties in Section 5.15
(Compliance with Laws), Section 5.16 (Environmental and Safety Matters),
Section 5.18 (Employee Benefits Plans) and Section 5.20 (Tax Matters) shall
terminate when the applicable statutes of limitations with respect to the
liabilities in question expire (after giving effect to any extensions or
waivers thereof), PLUS thirty (30) days;
(b) the representations and warranties in Section 5.2
(Capital Stock and Related Matters; Title to Shares), the first two sentences
of Section 5.3 (Authorization; Noncontravention), Section 5.21 (Brokerage and
Transaction Bonuses), Section 6.3 (Authorization) and Section 6.7 (Brokerage)
shall not terminate; and
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(c) all other representations and warranties in this
Agreement and the Schedules and Exhibits attached hereto or in any writing
delivered by any party to another party in connection with this Agreement
shall terminate on the first anniversary of the Closing;
PROVIDED THAT any representation or warranty in respect of which indemnity
may be sought under Section 8.2 below, and the indemnity with respect
thereto, shall survive the time at which it would otherwise terminate
pursuant to this Section 8.1 if notice of the inaccuracy or breach or
potential inaccuracy or breach thereof giving rise to such right or potential
right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time (regardless of when the Losses in
respect thereof may actually be incurred). The representations and warranties
in this Agreement and the Schedules and Exhibits attached hereto or in any
writing delivered by any party to another party in connection with this
Agreement shall survive for the periods set forth in this Section 8.1 and
shall in no event be affected by any investigation, inquiry or examination
made for or on behalf of any party, or the knowledge of any party's officers,
directors, stockholders, employees or agents or the acceptance by any party
of any certificate or opinion hereunder.
8.2 INDEMNIFICATION.
(a) INDEMNIFICATION BY SELLERS. Each of Sellers shall
jointly and severally indemnify Buyers and their Affiliates, stockholders,
officers, directors, employees, agents, partners, representatives, successors
and assigns (collectively, the " BUYER PARTIES") and save and hold each of
them harmless against and pay on behalf of or reimburse such Buyer Parties as
and when incurred for any loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or expense, whether or
not arising out of third-party claims (including interest, penalties,
reasonable attorneys' fees and expenses and all amounts paid in
investigation, defense or settlement of any of the foregoing) (collectively,
" LOSSES"), which any such Buyer Party may suffer, sustain or become subject
to, as a result of, in connection with, relating or incidental to or by
virtue of: (i) any breach by the Companies or any Seller of any
representation or warranty made by the Companies or any Seller in this
Agreement or any of the Schedules or Exhibits attached hereto, or in any of
the certificates or other instruments or documents furnished by the Companies
or any Seller pursuant to this Agreement; (ii) any nonfulfillment or breach
of any covenant or agreement by the Companies or any Seller under this
Agreement or any of the Schedules and Exhibits attached hereto; or (iii) any
Taxes of the Companies with respect to any Tax year or portion thereof ending
on or before the Closing Date (with it being understood that, for purposes of
this clause (iii), in the case of any Taxes that are imposed on a periodic
basis and are payable for a Taxable period that includes (but does not end
on) the Closing Date, the portion of such Tax which relates to the portion of
such Taxable period ending on the Closing Date which shall be calculated in
accordance with the provisions of Section 8.11(b) hereof; PROVIDED THAT
Sellers shall not have any liability under clause (i) above (other than with
respect to the representations and warranties contained in Section 5.2
(Capital Stock and Related Matters; Title to Shares), the first two sentences
of Section 5.3 (Authorization; Noncontravention), Section 5.20 (Tax Matters)
and Section 5.21(Brokerage and Transaction Bonuses)) unless and until the
aggregate of all Losses relating thereto for which Sellers would, but for
this proviso, be liable exceeds on a cumulative basis an amount equal to
$100,000 (and then Sellers shall be liable for all such Losses in excess of
the
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$100,000 threshold amount); and PROVIDED FURTHER that Sellers' aggregate
liability under this Section 8.2(a) (other than for a breach of Sections 8.4
or 8.10 hereof) shall in no event exceed the amount of the Purchase Price.
Nothing in this Agreement shall limit or restrict any of the Buyer Parties'
right to maintain or recover any amounts in connection with any action or
claim based upon fraudulent misrepresentation or deceit.
(b) INDEMNIFICATION BY BUYERS. Buyers agree to and shall
indemnify Sellers and hold it harmless against any Losses which Sellers may
suffer, sustain or become subject to, as the result of, in connection with,
relating or incidental to or by virtue of the breach by Buyers of any
representation, warranty, covenant or agreement made by Buyers in this
Agreement.
(c) MANNER OF PAYMENT. Except as otherwise provided herein,
any indemnification of the Buyer Parties or Sellers pursuant to this Section
8.2 shall be effected by wire transfer of immediately available funds from
Sellers or Buyers, as the case may be, to an account(s) designated by the
applicable Buyer Party or Sellers, as the case may be, within ten days after
the determination thereof. Any such indemnification payments shall include
interest at the Applicable Rate calculated on the basis of the actual number
of days elapsed over 360, from the date any such Loss is suffered or
sustained to the date of payment. Any amounts owing from Sellers pursuant to
this Section 8.2 shall first be made to the extent possible from the Escrow
Funds (as defined in the Escrow Agreement) in the Escrow Account (as defined
in the Escrow Agreement) and thereafter shall be made directly by Sellers (i)
in accordance with the terms of this Section 8.2(c) and/or (ii) if the Buyer
Parties have not been paid any amounts determined to be owing to them within
30 days of the date due based on a Final Determination or a settlement
agreement between Buyers and Sellers, then, at the option of Buyers, (x) by
delivery by Sellers to Buyers of a certificate or certificates representing
shares of Series A Preferred Stock of Xxxx.xxx having an aggregate value
(based on the liquidation value plus accrued but unpaid dividends thereon)
equal to the amounts owing, duly endorsed in blank or accompanied by duly
executed stock powers or (y) by offset against any Earnout Payment owed by
Buyers to Sellers under Section 2.4 hereof; PROVIDED THAT amounts (if any)
owing from Sellers to any Buyer Party pursuant to Section 2.3 above shall be
made from the Escrow Funds only with the prior written consent of Buyers. All
indemnification payments under this Section 8.2 shall be deemed adjustments
to the Purchase Price set forth in Section 2.3(a) above.
(d) DEFENSE OF THIRD-PARTY CLAIMS. Any Person making a
claim for indemnification under this Section 8.2 (an " INDEMNITEE") shall
notify the indemnifying party (an " INDEMNITOR") of the claim in writing
promptly after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim against it (if by a third party), describing the
claim, the amount thereof (if known and quantifiable) and the basis thereof;
PROVIDED THAT the failure to so notify an Indemnitor shall not relieve the
Indemnitor of its obligations hereunder except to the extent that (and only
to the extent that) such failure shall have caused the damages for which the
Indemnitor is obligated to be greater than such damages would have been had
the Indemnitee given the Indemnitor prompt notice hereunder. Any Indemnitor
shall be entitled to participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise to an Indemnitee's claim
for indemnification at such Indemnitor's expense, and at its option (subject
to the limitations set forth below) shall be entitled
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to assume the defense thereof by appointing a recognized and reputable
counsel acceptable to the Indemnitee to be the lead counsel in connection
with such defense; PROVIDED THAT:
(i) the Indemnitee shall be entitled to
participate in the defense of such claim and to employ counsel of its choice
for such purpose; PROVIDED THAT the fees and expenses of such separate
counsel shall be borne by the Indemnitee (other than any fees and expenses of
such separate counsel that are incurred prior to the date the Indemnitor
effectively assumes control of such defense which, notwithstanding the
foregoing, shall be borne by the Indemnitor but only to the extent of those
fees and expenses incurred after receipt by Indemnitor of notice of a claim
as required herein);
(ii) the Indemnitor shall not be entitled to
assume control of such defense (unless otherwise agreed to in writing by the
Indemnitee) or shall relinquish control of such defense and in either case
shall pay the fees and expenses of counsel retained by the Indemnitee if (1)
the claim for indemnification relates to or arises in connection with any
criminal or quasi-criminal proceeding, action, indictment, allegation or
investigation; (2) the Indemnitee reasonably believes an adverse
determination with respect to the action, lawsuit, investigation, proceeding
or other claim giving rise to such claim for indemnification would be
materially detrimental to or materially injurious to the Indemnitee's
reputation or future business prospects; (3) the claim seeks an injunction or
equitable relief against the Indemnitee; (4) the Indemnitee has been advised
by counsel that a reasonable likelihood exists of a conflict of interest
between the Indemnitor and the Indemnitee; (5) the claim involves
environmental matters in which case the Indemnitee shall have sole control
and management authority over the resolution of such claim (including hiring
legal counsel and environmental consultants, conducting environmental
investigations and cleanups, negotiating with governmental agencies and third
parties and defending or settling claims and actions); PROVIDED THAT the
Indemnitee shall keep the Indemnitor apprised of any major developments
relating to any environmental claim; (6) upon petition by the Indemnitee, the
appropriate court rules that the Indemnitor failed or is failing to
vigorously prosecute or defend such claim or (7) the Indemnitor has indicated
to the Indemnitee that it will not be responsible for any material portion of
the damages sought by the claim; and
(iii) if the Indemnitor shall control the defense
of any such claim, the Indemnitor agrees to vigorously defend such claim and
to obtain the prior written consent of the Indemnitee (which consent will not
be unreasonably withheld) before entering into any settlement of a claim or
ceasing to defend such claim; provided THAT prior written consent will not be
necessary, if pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief will be imposed against the Indemnitor
(and not the Indemnitee) or if such settlement expressly and unconditionally
releases the Indemnitee from all liabilities and obligations with respect to
such claim, with prejudice.
(iv) if the Indemnitee shall control the defense
of any such claim, the Indemnitee agrees to vigorously defend such claim and
to obtain the prior written consent of the Indemnitor (which consent will not
be unreasonably withheld) before entering into any settlement of a claim or
ceasing to defend such claim; provided THAT prior written consent will not be
necessary, if pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief will be
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imposed against the Indemnitee (and not the Indemnitor) or if such settlement
expressly and unconditionally releases the Indemnitor from all liabilities
and obligations with respect to such claim, with prejudice.
(e) CERTAIN WAIVERS; ETC. Each Seller hereby agrees that he
or she shall not make any claim for indemnification against Buyers, the
Companies or any of their respective Affiliates by reason of the fact that
such Seller is or was a shareholder, director, officer, employee or agent of
the Companies or any of its Affiliates or is or was serving at the request of
the Companies or any of its Affiliates as a partner, trustee, director,
officer, employee or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement or otherwise) with respect to any
action, suit, proceeding, complaint, claim or demand brought by any of the
Buyer Parties against such Seller pursuant to this Agreement or applicable
law or otherwise, and each Seller hereby acknowledges and agrees that he or
she shall not have any claim or right to contribution or indemnity from the
Companies or any of their Affiliates with respect to any amounts paid by him
or her pursuant to this Agreement or otherwise. Effective upon the Closing,
each Seller hereby irrevocably waives, releases and discharges the Companies
and their Affiliates from any and all liabilities and obligations to him or
her of any kind or nature whatsoever, whether in his or her capacity as a
shareholder, officer or director of the Companies or any of their Affiliates
or otherwise (including in respect of any rights of contribution or
indemnification but excluding compensation otherwise payable as an employee
of the Companies), in each case whether absolute or contingent, liquidated or
unliquidated, known or unknown, and whether arising under any agreement or
understanding (other than this Agreement and any of the other agreements
executed and delivered in connection herewith) or otherwise at law or equity,
and each Seller agrees that he or she shall not seek to recover any amounts
in connection therewith or thereunder from the Companies or any of their
Affiliates. In no event shall the Companies or any of their Affiliates have
any liability whatsoever to any Seller for any breaches of the
representations, warranties, agreements or covenants of the Companies
hereunder, and in any event no Seller may seek contribution from the
Companies or any of their Affiliates in respect of any payments required to
be made by a Seller pursuant to this Agreement.
8.3 MUTUAL ASSISTANCE . Buyers, the Companies and each of Sellers
agree that they will mutually cooperate in the expeditious filing of all
notices, reports and other filings with any governmental authority required
to be submitted jointly by the Companies and Buyers in connection with the
execution and delivery of this Agreement and/or the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby or thereby.
8.4 NON-COMPETITION; NON-SOLICITATION.
(a) Each Seller hereby acknowledges that he or she is
familiar with the Companies' trade secrets and with other Confidential
Information. Each Seller acknowledges and agrees that the Companies would be
irreparably damaged if he or she were to provide services to or otherwise
participate in the business of any Person competing with the Companies in a
similar business and that
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any such competition by such Seller would result in a significant loss of
goodwill by the Companies. Each Seller further acknowledges and agrees that
the covenants and agreements set forth in this Section 8.4 were a material
inducement to Buyers to enter into this Agreement and to perform its
obligations hereunder, and that Buyers and its stockholders would not obtain
the benefit of the bargain set forth in this Agreement as specifically
negotiated by the parties hereto if such Seller breached the provisions of
this Section 8.4. Therefore, each Seller agrees, in further consideration of
the amounts to be paid hereunder for the Shares and the goodwill of the
Companies sold by Sellers, that until the fifth anniversary of the Closing,
such Seller shall not (and shall cause his Affiliates not to) directly or
indirectly own any interest in, manage, control, participate in (whether as
an officer, director, employee, partner, agent, representative or otherwise),
consult with, render services for, or in any other manner engage anywhere in
the Restricted Territories in any business engaged directly or indirectly in
the installation and construction of telecommunication and data transmission
networks or the provision of communications infrastructure services; PROVIDED
THAT nothing herein shall prohibit a Seller or a Seller's Affiliate from
being a passive owner of not more than 2% of the outstanding stock of any
class of a corporation which is publicly traded so long as none of such
Persons has any active participation in the business of such corporation or
an owner of Buyers or its Affiliates or their successors and assigns. For
purposes of this Agreement, " RESTRICTED TERRITORIES" shall mean the United
States of America. Each Seller acknowledges that the Companies' business has
been conducted or is presently proposed to be conducted throughout the
Restricted Territories and that the geographic restrictions set forth above
are reasonable and necessary to protect the goodwill of the Companies'
business being sold by Sellers pursuant to this Agreement.
(b) No Seller may (and each Seller shall cause his
Affiliates not to) directly, or indirectly through another Person, (i) induce
or attempt to induce any employee of the Companies or any of their
Affiliates, other than those employees shown on the EXCLUDED EMPLOYEES
SCHEDULE, to leave the employ of the Companies or any of their Affiliates, or
in any way interfere with the relationship between the Companies or any of
their Affiliates and any employee thereof, (ii) hire any person who was an
employee of the Companies or any of their Affiliates, other than those
employees shown on the EXCLUDED EMPLOYEES SCHEDULE, at any time during the
six-month period immediately prior to the date on which such hiring would
take place (it being conclusively presumed by the parties so as to avoid any
disputes under this Section 8.4(b) that any such hiring within such six-month
period is in violation of clause (i) above), or (iii) for so long as any
Seller has continuing obligations under Section 8.4(a) above, call on,
solicit or service any customer, supplier, licensee, licensor or other
business relation of the Companies or any of their Affiliates in order to
induce or attempt to induce such Person to cease doing business with the
Companies or any of their Affiliates, or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Companies or any of their Affiliates (including making any
negative statements or communications about the Company or any of their
Affiliates).
(c) If, at the time of enforcement of the covenants
contained in this Section 8.4 (the " RESTRICTIVE COVENANTS"), a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope
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or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area and that the court shall be allowed and
directed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law. Each Seller has consulted with legal
counsel regarding the Restrictive Covenants and based on such consultation
has determined and hereby acknowledges that the Restrictive Covenants are
reasonable in terms of duration, scope and area restrictions and are
necessary to protect the goodwill of the Companies' business and the
substantial investment in the Companies made by Buyers hereunder. Each Seller
further acknowledges and agrees that the Restrictive Covenants are being
entered into by him in connection with the sale by such Seller of the Shares
and the goodwill of the Companies' business pursuant to this Agreement and
not directly or indirectly in connection with such Seller's employment or
other relationship with the Companies.
(d) If any Seller or an Affiliate of any Seller breaches,
or threatens to commit a breach of, any of the Restrictive Covenants, the
Companies shall have the following rights and remedies, each of which rights
and remedies shall be independent of the others and severally enforceable,
and each of which is in addition to, and not in lieu of, any other rights and
remedies available to the Companies or their Affiliates at law or in equity:
(i) the right and remedy to have the Restrictive
Covenants specifically enforced by any court of competent jurisdiction, it
being agreed that any breach or threatened breach of the Restrictive
Covenants would cause irreparable injury to the Companies and that money
damages would not provide an adequate remedy to the Companies; and
(ii) the right and remedy to require Sellers to
account for and pay over to the Companies any profits, monies, accruals,
increments or other benefits derived or received by such Person as the result
of any transactions constituting a breach of the Restrictive Covenants.
(iii) In the event of any breach or violation by
any Seller of any of the Restrictive Covenants, the time period of such
covenant shall be tolled until such breach or violation is resolved.
8.5 PRESS RELEASE AND ANNOUNCEMENTS. After the Closing, Buyers and
the Companies may issue any press releases, announcements to the employees,
customers or suppliers of the Companies or other releases of information
related to this Agreement or the transactions contemplated hereby without the
consent of any other party hereto.
8.6 EXPENSES. Except as otherwise provided herein, Sellers and
Buyers shall pay all of their own respective fees, costs and expenses
(including fees, costs and expenses of legal counsel, investment bankers,
brokers or other representatives and consultants and appraisal fees, costs
and expenses) incurred in connection with the negotiation of this Agreement,
the performance of its obligations hereunder and the consummation of the
transactions contemplated hereby. In addition, Sellers shall pay all fees,
costs and expenses of the Companies incurred in connection with the
negotiation of this Agreement, the performance of its obligations hereunder
and the consummation of the transactions contemplated hereby, and the
Companies shall not pay any fees, costs or expenses (including legal and
accounting fees, costs and expenses) arising in connection with the
transactions
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contemplated hereby if the transactions are consummated, except that Sellers
may, at Sellers' option, cause the Companies to pay all such fees, costs and
expenses at or before Closing out of the Companies' available cash.
8.7 SPECIFIC PERFORMANCE. Each of the Companies, Sellers and Buyers
acknowledges and agrees that the other parties would be damaged irreparably
in the event any of the provisions of this Agreement is not performed in
accordance with its specific terms or is otherwise breached. Accordingly,
each of the Companies, Sellers and Buyers agree that the other parties shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court in the
United States or in any state having jurisdiction over the parties and the
matter in addition to any other remedy to which they may be entitled pursuant
hereto.
8.8 ARBITRATION PROCEDURE.
(a) Each of the Buyers and Sellers agree that the
arbitration procedure set forth below shall be the sole and exclusive method
for resolving and remedying claims for money damages arising out of the
provisions this Article VIII (the " DISPUTES") following the Closing;
PROVIDED THAT nothing in this Section 8.8 shall prohibit a party hereto from
instituting litigation to enforce any Final Determination (as defined below).
The parties hereby acknowledge and agree that, except as otherwise provided
in this Section 8.8 or in the Rules for Non-Administered Arbitration of
Business Disputes (the " RULES") promulgated by the Center for Public
Resources Institute for Dispute Resolutions (the " INSTITUTE") as in effect
from time to time, the arbitration procedures and any Final Determination
hereunder shall be governed by, and shall be enforced pursuant to, the United
States Arbitration Act, 9 U.S.C. Section1 et. seq.
(b) In the event that any party asserts that there exists a
Dispute, such party shall deliver a written notice to each other party
involved therein specifying the nature of the asserted Dispute and requesting
a meeting to attempt to resolve the same. If no such resolution is reached
within ten business days after the delivery of such notice, the party
delivering such notice of Dispute (the " DISPUTING PERSON") may thereafter
commence arbitration hereunder by delivering to each other party involved
therein a notice of arbitration (a " NOTICE OF ARBITRATION"). Such Notice of
Arbitration shall specify the nature of any Dispute and any other matters
required by the Rules as in effect from time to time to be included therein.
The Arbitrator shall permit and facilitate such discovery as the party
initiating such claim shall reasonably request. Buyers and Sellers shall
mutually agree upon one arbitrator to resolve any Dispute pursuant to the
procedures set forth in this Section 8.8 and the Rules.
(c) The arbitrator selected pursuant to Section 8.8(b) will
determine the allocation of the costs and expenses of arbitration based upon
the percentage which the portion of the contested amount not awarded to each
party bears to the amount actually contested by such party. For example, if
Buyers submit a claim for $1,000 and if Sellers contest only $500 of the
amount claimed by Buyers, and if the arbitrator ultimately resolves the
dispute by awarding Buyers $300 of the $500 contested,
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then the costs and expenses of arbitration will be allocated 60% (i.e., 300 /
500) to Sellers and 40% (i.e., 200 / 500) to Buyers.
(d) The arbitration shall be conducted in Miami, Florida
under the Rules as in effect from time to time. The arbitrator shall conduct
the arbitration so that a final result, determination, finding, judgment
and/or award (the " FINAL DETERMINATION") is made or rendered as soon as
practicable, but in no event later than 90 business days after the delivery
of the Notice of Arbitration nor later than 10 days following completion of
the arbitration. The Final Determination shall be final and binding on all
parties and there shall be no appeal from or reexamination of the Final
Determination, except for fraud, perjury, evident partiality or misconduct by
an arbitrator prejudicing the rights of any party and to correct manifest
clerical errors.
(e) Buyers or Sellers may enforce any Final Determination
in any state or federal court of competent jurisdiction. For the purpose of
any action or proceeding instituted with respect to any Final Determination,
each party hereto hereby irrevocably submits to the jurisdiction of such
courts, irrevocably consents to the service of process by registered mail or
personal service and hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have as to
personal jurisdiction, the laying of the venue of any such action or
proceeding brought in any such court and any claim that any such action or
proceeding brought in any court has been brought in an inconvenient forum.
8.9 FURTHER ASSURANCES. In the event that at any time after the
Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, each of the parties hereto will take such further
action (including the execution and delivery of such further instruments and
documents) as any other party hereto reasonably may request. Sellers
acknowledge and agree that, from and after the Closing, Buyers will be
entitled to possession of all documents, books, records (including Tax
records), agreements and financial data of any sort relating to the
Companies. Sellers shall have access at reasonable times and upon reasonable
notice to the Companies' books and records for legitimate business or
personal financial purposes.
8.10 CONFIDENTIALITY. Each Seller agrees not to disclose or use at
any time (and each Seller shall cause each of his Affiliates not to use or
disclose at any time) any Confidential Information, except to the extent that
such disclosure or use is directly related to and required by the performance
of such Seller's duties to the Companies as an officer or employee. Each
Seller further agrees to take all appropriate steps (and to cause each of his
Affiliates to take all appropriate steps) to safeguard such Confidential
Information and to protect it against disclosure, misuse, espionage, loss and
theft. In the event any Seller or any Affiliates of a Seller is required by
law to disclose any Confidential Information, Sellers shall promptly notify
Buyers in writing, which notification shall include the nature of the legal
requirement and the extent of the required disclosure, and Sellers shall
cooperate with Buyers and the Companies to preserve the confidentiality of
such information consistent with applicable law.
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8.11 TAX MATTERS.
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
Sellers shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Companies for all periods ending on or prior to the
Closing Date or for which the date of measurement for such Tax occurs prior
to the Closing Date which are filed after the Closing Date. All such Tax
Returns shall be prepared in accordance with past practice insofar as they
relate to the Companies. Sellers shall permit Buyers to review and comment on
each such Tax Return prior to filing. Sellers shall reimburse Buyers for
Taxes of Sellers and the Companies with respect to such periods within
fifteen (15) days prior to any payment by Buyers or the Companies of such
Taxes to the extent such Taxes are not accrued as a liability on the Closing
Balance Sheet and used to determine the Purchase Price pursuant to Section
2.3.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE
CLOSING DATE. Buyers shall prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company for Tax periods which begin before
the Closing Date and end after the Closing Date ("STRADDLE TAX RETURNS").
Buyers shall permit Sellers to review and comment on each such Tax Return
prior to filing. Any portion of any Tax which must be paid in connection with
the filing of a Straddle Tax Return, to the extent attributable to any period
or portion of a period ending on or before the Closing Date, shall be
referred to herein as "PRE-CLOSING TAXES." Sellers shall pay to Buyers an
amount equal to the Pre-Closing Taxes due with any Straddle Tax Returns (to
the extent such Taxes are not accrued as a liability on the Closing Balance
Sheet used to determine the Purchase Price pursuant to Section 2.3) at least
ten (10) days before Buyers are required to cause to be paid the related Tax
liability. Where the Pre-Closing Taxes involve a period which begins before
and ends after the Closing Date, such Pre-Closing Taxes shall be calculated
as though the taxable year of the Companies terminated as of the close of
business on the Closing Date; PROVIDED, HOWEVER, that in the case of a Tax
not based on income, receipts, proceeds, profits or similar items,
Pre-Closing Taxes shall be equal to the amount of Tax for the taxable period
multiplied by a fraction, the numerator of which shall be the number of days
from the beginning of the taxable period through the Closing Date and the
denominator of which shall be the number of days in the taxable period. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Companies.
Notwithstanding the foregoing, Sellers shall be liable for, and shall
indemnify and hold Buyers harmless against, all Taxes attributable to or
arising out of (i) the failure of C&BI to be qualified as an "S corporation"
at any time prior to Closing and (ii) the transfer of the real property set
forth on the EXCLUDED ASSETS SCHEDULE. Notwithstanding the foregoing, it is
agreed that the Texas franchise Tax imposed on C&BI for the calendar year
2000 privilege period (which will be based upon the financial condition of
C&BI as of December 31, 1999) shall be paid as follows: (i) that portion of
the franchise Tax attributable to the earned surplus of the corporation for
the period beginning on January 1, 1999, through and including the Closing
Date (excluding any such franchise Tax attributable to earned surplus
resulting from the Section 338(h)(10) election, if any) shall be treated as
part of the Closing Tax Liability under Section 2.3(a)(ii) and (ii) the
balance of the franchise Tax payable by C&BI, including the franchise Tax
attributable to earned surplus resulting from the Section 338(h)(10) election
(if any), shall be the responsibility of C&BI or Buyers, and Sellers shall
have no liability therefor. In addition, other state or local Taxes (if any)
payable by C&BI as a result of the Section
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338(h)(10) election, shall be the responsibility of C&BI or Buyers and
Sellers shall have no liability therefor.
(c) COOPERATION ON TAX MATTERS.
(i) Sellers, the Company and Buyers shall
cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Section
8.11 and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include signing any Tax Return, amended Tax Returns,
claims or other documents necessary to settle any Tax controversy, 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. Sellers agree to retain all books and records with
respect to Tax matters pertinent to the Companies relating to any taxable
period beginning before the Closing Date until the expiration of the statute
of limitations (and, to the extent notified by Buyers, any extensions
thereof) of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority and to give
Buyers reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests,
Buyers shall allow Sellers to take possession of such books and records.
(ii) Buyers shall have the right to participate in
any Tax proceeding related to a pre-Closing Tax year of the Companies which
may have the effect of increasing Buyers' or the Companies' Tax liability for
any Tax period ending after the Closing, and Sellers shall not settle or
compromise any such proceeding without Buyers' prior written consent (which
consent will not be unreasonably withheld).
(iii) Buyers and Sellers further agree, upon
request by the other, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other Person 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
hereby).
(iv) Without the prior written consent (which
shall not be unreasonably withheld) of Buyers, neither any of Sellers nor the
Companies shall make or change any election, change an annual accounting
period, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment relating to the Companies, surrender any right to
claim a refund of Taxes, or take any other similar action, or omit to take
any action relating to the filing of any Tax Return or the payment of any
Tax, if such action or omission would have the effect of increasing the
present or future Tax liability or decreasing any present or future Tax asset
of the Companies, Buyers or any Affiliate of Buyers. Sellers shall notify
Buyers of any consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to the Company within
fifteen (15) days of making such consent or waiver.
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(d) SECTION 338(h)(10) ELECTION.
(i) Each Seller agrees to make an election under Code
Section 338(h)(10) with respect to the sale and purchase of the Shares and to
make any analogous elections under applicable state, local or foreign law
provisions (including such state, local or foreign elections) (collectively,
the "SECTION 338(h)(10) ELECTIONS"). Buyers and Sellers will jointly prepare
and timely file any forms necessary to effect the Section 338(h)(10)
Elections. Buyers and Sellers shall sign on a timely basis all federal and
state forms necessary to effect a Section 338(h)(10) Election requiring their
signatures. Promptly after the Closing Date, Buyers and each Seller shall
provide to each other any information reasonably requested by such party in
connection with its filing of a Section 338(h)(10) Election.
(ii) Buyers and Sellers agree that the computation of the
Modified Aggregate Deemed Sale Price ("MADSP") and the Aggregate Deemed Sale
Price ("ADSP") (both as defined under Treasury Regulations) and the
allocation of the MADSP and ADSP among the assets as of the Closing Date
shall be as determined by Buyers with the consent of Sellers (which consent
shall not be unreasonably withheld). Such determination will be delivered by
Buyers to Sellers no later than the date on which the Closing Balance Sheet
is delivered to Sellers pursuant to Section 2.3(c) hereof. Any Earnout
Payment made to Sellers under the provisions of Section 2.4 shall be
allocated to goodwill.
(iii) Notwithstanding the provisions of Section 2.3(c), in
the event the actual Taxes payable by MEC and BYC as a result of the sale of
the C&BI Partnership Interests (the "ACTUAL MEC/BYC TAXES") are ultimately
determined to be greater than the amount of such Taxes that were used in
determining the final Section 338(h)(10) Adjustment under Section 2.3(c),
then Buyer shall pay to MEC and BYC the difference between (x) the Section
338(h)(10) Adjustment that would have been payable had the Actual MEC/BYC
Taxes been used in making the determination under Section 2.3(c) and (y) the
Section 338(h)(10) Adjustment that was actually calculated pursuant to
Section 2.3(c). Any payment under this subparagraph (iii) shall be made to
MEC within ten (10) days after MEC and BYC deliver written notice to Buyer of
such final determination, which notice shall include a calculation of the
amount payable and evidence of such final determination.
(e) SECTION 754 ELECTION. Sellers and C&BII shall make a valid
Section 754 election as to C&BII for the Tax Return including the Closing
Date in accordance with Treasury Regulation Section 1.754-1.
(f) Notwithstanding any other provision of this Section 8.11, Buyers
shall indemnify C&BI and Sellers and hold each of them harmless against all
Taxes, if any, attributable to or resulting from the conversion of C&B
Associates, Inc., a former Texas corporation, into C&BI.
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ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT AND WAIVER. This Agreement may be amended, and any
provision of this Agreement may be waived only if such amendment or waiver is
set forth in a writing executed by Sellers, the Companies and Buyers. No
course of dealing between or among any Persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Person under or by reason
of this Agreement. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions, whether or
not similar, nor shall any waiver constitute a continuing waiver.
9.2 NOTICES. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given (i) when
personally delivered, sent by telecopy (with hard copy to follow) or sent by
reputable overnight express courier (charges prepaid), or (ii) five days
following mailing by certified or registered mail, postage prepaid and return
receipt requested. Unless another address is specified in writing, notices,
demands and communications to Sellers, the Companies and Buyers shall be sent
to the addresses indicated below:
NOTICES TO THE SELLERS:
Xxx X. Xxxxx Xxxxxxx Xxxxx
Xxxxxx X. Xxxxx C&B Associates II, Ltd.
C&B Associates, Ltd. X.X. Xxx 000
X.X. Xxx 000 Xxxxxxx Xxxxx, Xxxxx 00000
Mineral Xxxxx, Xxxxx 00000
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE
NOTICE TO THE SELLERS):
Decker, Jones, XxXxxxxx
000 Xxxxxxxxxxxx Xx., Xxxxx 0000
Xx. Xxxxx, XX 00000
Attn: Xxxxxxx X Xxxxxxxx
Xxxxx X. Xxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
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NOTICES TO THE COMPANIES AND BUYERS:
Xxxx.xxx, Inc.
000 Xxxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
WITH COPIES TO (WHICH SHALL NOT CONSTITUTE NOTICE TO THE COMPANY OR BUYERS):
First Chicago Equity Capital
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. XxXxxxxxxxx
Xxxx Xxxxxxx, Xx.
Telecopy: (000) 000-0000
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx
Xxxxxxx, XX 00000
Attn: Xxx X. Xxxx
E. Xxxx Xxxxx
Telecopy: (000) 000-0000
9.3 SUCCESSORS AND ASSIGNS. This Agreement and all of the covenants
and agreements contained herein and rights, interests or obligations
hereunder, by or on behalf of any of the parties hereto, shall bind and inure
to the benefit of the respective heirs, successors and assigns of the parties
hereto whether so expressed or not, except that neither this Agreement nor
any of the covenants and agreements herein or rights, interests or
obligations hereunder may be assigned or delegated by Sellers prior to or
after the Closing, or assigned or delegated by the Companies prior to the
Closing, without the prior written consent of Buyers. Buyers may assign its
rights and obligations hereunder (including its right to purchase the
Shares), in whole or in part, to any of its Affiliates without the consent of
any of the other parties hereto. In addition, Buyers may assign its rights
and obligations pursuant to this Agreement, including its rights and
obligations under the Escrow Agreement, in whole or in part, in connection
with any disposition or transfer of all or any portion of the Companies or
their respective businesses in any form of transaction without the consent of
any of the other parties hereto. Buyers and, following the Closing, the
Companies may assign any or all of its rights pursuant to this Agreement,
including its rights to indemnification, to any of its lenders as collateral
security.
9.4 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
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ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
9.5 INTERPRETATION. The headings and captions used in this
Agreement, in any Schedule or Exhibit hereto, in the table of contents or in
any index hereto are for convenience of reference only and do not constitute
a part of this Agreement and shall not be deemed to limit, characterize or in
any way affect any provision of this Agreement or any Schedule or Exhibit
hereto, and all provisions of this Agreement and the Schedules and Exhibits
hereto shall be enforced and construed as if no caption or heading had been
used herein or therein. Any capitalized terms used in any Schedule or Exhibit
attached hereto and not otherwise defined therein shall have the meanings set
forth in this Agreement. Each defined term used in this Agreement shall have
a comparable meaning when used in its plural or singular form. The use of the
word "including" herein shall mean "including without limitation" and, unless
the context otherwise required, "neither," "nor," "any," "either" and "or"
shall not be exclusive. The parties hereto intend that each representation,
warranty and covenant contained herein shall have independent significance.
If any party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which such party has not breached shall not
detract from or mitigate the fact that such party is in breach of the first
representation, warranty or covenant. The parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
9.6 CAPTIONS. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement
and shall not be deemed to limit, characterize or in any way affect any
provision of this Agreement, and all provisions of this Agreement shall be
enforced and construed as if no caption had been used in this Agreement.
9.7 NO THIRD-PARTY BENEFICIARIES. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any
Person other than the parties hereto and their respective permitted
successors and assigns, any rights or remedies under or by reason of this
Agreement, such third parties specifically including employees and creditors
of the Companies.
9.8 COMPLETE AGREEMENT. This Agreement and the agreements and
documents referred to herein contain the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersede
all prior agreements and understandings (including that certain letter of
intent dated June 25, 1999, between Xxxx.xxx and the Companies), whether
written or oral, relating to such subject matter in any way.
9.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by means of telecopied signature pages), all of which
taken together shall constitute one and the same instrument.
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9.10 DELIVERY BY FACSIMILE. This Agreement and any signed agreement
or instrument entered into in connection with this Agreement, and any
amendments hereto or thereto, to the extent signed and delivered by means of
a facsimile machine, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof
delivered in person. At the request of any party hereto or to any such
agreement or instrument, each other party hereto or thereto shall re-execute
original forms thereof and deliver them to all other parties. No party hereto
or to any such agreement or instrument shall raise the use of a facsimile
machine to deliver a signature or the fact that any signature or agreement or
instrument was transmitted or communicated through the use of a facsimile
machine as a defense to the formation of a contract and each such party
forever waives any such defense.
9.11 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by the internal law of the State of Texas without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Texas or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Texas.
9.12 SCHEDULES. Nothing in any schedule attached hereto shall be
adequate to disclose an exception to a representation or warranty made in
this Agreement unless such schedule identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be adequate to disclose an
exception to a representation or warranty made in this Agreement, unless the
representation or warranty has to do with the existence of the document or
other item itself. No exceptions to any representations or warranties
disclosed on one schedule shall constitute an exception to any other
representations or warranties made in this Agreement unless the exception is
disclosed as provided herein on each such other applicable schedule or is
cross-referenced to another schedule.
9.13 BYC AND EB CONSENT. BYC hereby consents to the sale of the C&BI
Partnership Interests hereunder by MEC to the Buyers and EB hereby consents
to the sale of the C&BII Partnership Interests hereunder by DC to the Buyers
pursuant to the terms and conditions of this Agreement.
9.14 XXXX.XXX GUARANTEE. Xxxx.xxx guarantees the prompt payment and
performance of all of the obligations of the Buyers hereunder.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Purchase Agreement on the date first written above.
BUYERS: XXXX.XXX ACQUISITION CORP.
By:_________________________________
Name:
Title:
XXXX.XXX ACQUISITION CORP. II
By:_________________________________
Name:
Title:
SELLERS: ___________________________________
Xxx X. Xxxxx
-----------------------------------
Xxxxxxx Xxxxx
COMPANIES: C&B ASSOCIATES, LTD.
By:________________________________
Name: Xxx X. Xxxxx, General Partner
C&B ASSOCIATES II, LTD.
By:________________________________
Name: Xxxxxxx Xxxxx, General Partner
OTHERS: ___________________________________
Xxxxxx X. Xxxxx
-----------------------------------
Xxxx Xxxxxxxx, Xx.
XXXX.XXX, INC.
By:_________________________________
Name:
Title:
Continuation of Signature Page
to Purchase Agreement
SCHEDULE OF SELLERS
Number and Type of
Partnership Interests Percentage of
Name and Address Owned Purchase Price
----------------------------------------------- -------------------------------------- -----------------
C&B ASSOCIATES, LTD.
Xxx X. Xxxxx 1% general partnership 52.019%
X.X. Xxx 000 98% limited partnership
Mineral Xxxxx, Xxxxx 00000
Xxxxxx X. Xxxxx 1% limited partnership 0.000%
X.X. Xxx 000
Xxxxxxx Xxxxx, Xxxxx 00000
C&B ASSOCIATES II, LTD.
Xxxxxxx Xxxxx 1% general partnership 47.981%
X.X. Xxx 000 49% limited partnership
Mineral Xxxxx, Xxxxx 00000
