EXHIBIT 10.9
================================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF
MARCH 29, 2004
BY AND AMONG
XXXX X. XXXXXXXXXX
MAPCO FAMILY CENTERS, INC.
A DELAWARE CORPORATION
AND
DELEK US HOLDINGS, INC.
A DELAWARE CORPORATION
REGARDING
XXXXXXXXXX OIL CO., INC.
AN ALABAMA CORPORATION
================================================================================
TABLE OF CONTENTS
1. DEFINITIONS............................................................... 1
2. SALE AND TRANSFER OF SHARES; ADDITIONAL AMOUNTS PAYABLE; CLOSING.......... 12
2.1 SHARES............................................................ 12
2.2 PURCHASE PRICE.................................................... 12
2.3 XXXXXXX MONEY..................................................... 14
2.4 CLOSING........................................................... 15
2.5 CLOSING OBLIGATIONS............................................... 16
3. REPRESENTATIONS AND WARRANTIES OF SELLER.................................. 19
3.1 ORGANIZATION AND GOOD STANDING.................................... 19
3.2 AUTHORITY; NO CONFLICT............................................ 19
3.3 CAPITALIZATION.................................................... 21
3.4 FINANCIAL STATEMENTS.............................................. 21
3.5 BOOKS AND RECORDS................................................. 21
3.6 TITLE TO PROPERTIES; ENCUMBRANCES................................. 22
3.7 CONDITION AND SUFFICIENCY OF ASSETS............................... 22
3.8 ACCOUNTS RECEIVABLE............................................... 23
3.9 BROKERS OR FINDERS................................................ 23
3.10 NO UNDISCLOSED LIABILITIES........................................ 23
3.11 TAXES............................................................. 23
3.12 NO MATERIAL ADVERSE CHANGE........................................ 26
3.13 EMPLOYEE BENEFITS................................................. 26
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS... 26
3.15 LEGAL PROCEEDINGS; ORDERS......................................... 27
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS............................. 28
3.17 CONTRACTS; NO DEFAULTS............................................ 30
3.18 INSURANCE......................................................... 33
3.19 ENVIRONMENTAL MATTERS............................................. 34
3.20 EMPLOYEES......................................................... 36
3.21 EMPLOYMENT COMPLIANCE............................................. 37
3.22 CERTAIN PAYMENTS.................................................. 37
3.23 DISCLOSURE........................................................ 38
3.24 INTELLECTUAL PROPERTY............................................. 38
3.25 RELATIONSHIPS WITH RELATED PERSONS................................ 38
3.26 CONDEMNATION...................................................... 39
4. REPRESENTATIONS AND WARRANTIES OF BUYER................................... 39
4.1 CAPACITY.......................................................... 39
4.2 INVESTMENT INTENT................................................. 39
4.3 CERTAIN PROCEEDINGS............................................... 40
i
4.4 BROKERS OR FINDERS................................................ 40
4.5 NON-CONTRAVENTION................................................. 40
4.6 FINANCIAL ABILITY................................................. 40
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE................................. 40
5.1 ACCESS AND INVESTIGATION.......................................... 40
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES............. 40
5.3 NEGATIVE COVENANTS................................................ 41
5.4 REQUIRED APPROVALS................................................ 41
5.5 NOTIFICATION...................................................... 42
5.6 NO NEGOTIATION.................................................... 42
5.7 RELEASE OF SELLER LIABILITIES: SELLER EFFORTS..................... 42
5.8 FINANCIALS: SELLER'S OBLIGATIONS.................................. 42
5.9 AIRPLANE.......................................................... 43
5.10 SELLER INDEBTEDNESS TO ACQUIRED COMPANIES......................... 43
5.11 ENVIRONMENTAL DUE DILIGENCE....................................... 43
5.12 ENVIRONMENTAL REMEDIATION......................................... 44
5.13 SATISFACTION OF CLOSING CONDITIONS................................ 45
5.14 EMPLOYEE BENEFITS ACCRUAL......................................... 45
6. COVENANTS OF BUYER PRIOR AND SUBSEQUENT TO CLOSING DATE................... 45
6.1 APPROVALS OF GOVERNMENTAL BODIES.................................. 45
6.2 SATISFACTION OF CLOSING CONDITIONS................................ 46
6.3 RELEASE OF SELLER LIABILITIES: BUYER EFFORTS...................... 46
6.4 FINANCIALS: BUYER'S OBLIGATIONS................................... 46
6.5 ENVIRONMENTAL DUE DILIGENCE....................................... 46
6.6 NOTIFICATION...................................................... 47
6.7 REMEDIATION OF KNOWN BUYER REMEDIATION FACILITIES................. 47
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE....................... 48
7.1 ACCURACY OF REPRESENTATIONS....................................... 48
7.2 SELLER'S PERFORMANCE.............................................. 49
7.3 ADDITIONAL DOCUMENTS.............................................. 49
7.4 NO PROCEEDINGS.................................................... 49
7.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS............... 49
7.6 NO PROHIBITION.................................................... 49
7.7 REQUIRED CONSENTS................................................. 50
7.8 ACQUIRED COMPANY LOANS............................................ 50
7.9 ACQUIRED COMPANY LIABILITIES...................................... 50
7.10 [INTENTIONALLY OMITTED]........................................... 50
7.11 AUDIT OF NOVEMBER 30 FINANCIALS................................... 50
7.13 ENVIRONMENTAL INSURANCE POLICY.................................... 50
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE...................... 51
8.1 ACCURACY OF REPRESENTATIONS....................................... 51
ii
8.2 BUYER'S PERFORMANCE............................................... 51
8.3 ADDITIONAL DOCUMENTS.............................................. 51
8.4 NO INJUNCTION..................................................... 51
8.5 RELEASE OF OTHER PERSONAL LIABILITIES............................. 52
9. TERMINATION............................................................... 52
9.1 TERMINATION EVENTS................................................ 52
9.2 EFFECT OF TERMINATION............................................. 53
10. INDEMNIFICATION; REMEDIES................................................ 53
10.1 SURVIVAL.......................................................... 53
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER.................. 53
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER................... 54
10.4 TIME LIMITATIONS.................................................. 54
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS................. 55
10.6 INDEMNIFICATION AND PROCEDURE FOR INDEMNIFICATION--TAX MATTERS.... 56
10.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS....................... 57
10.8 LIMITATIONS....................................................... 57
10.9 SOLE REMEDY....................................................... 59
10.10 TAX TREATMENT OF INDEMNIFICATION PAYMENTS......................... 59
11. TAX MATTERS.............................................................. 59
11.1 RESPONSIBILITY FOR FILING INCOME TAX RETURNS...................... 60
11.2 STRADDLE PERIODS.................................................. 60
11.3 REFUND AND TAX BENEFITS........................................... 61
11.4 CARRYBACKS........................................................ 61
11.5 COOPERATION ON TAX MATTERS........................................ 61
11.6 TAX-SHARING AGREEMENTS............................................ 62
11.7 CERTAIN TAXES AND FEES............................................ 62
12. GENERAL PROVISIONS....................................................... 62
12.1 EXPENSES.......................................................... 62
12.2 NOTICES........................................................... 63
12.3 CHOICE OF LAW..................................................... 64
12.4 FURTHER ASSURANCES................................................ 64
12.5 AGREEMENT OF SELLER NOT TO COMPETE................................ 64
12.6 WAIVER............................................................ 66
12.7 ENTIRE AGREEMENT AND MODIFICATION................................. 66
12.8 DISCLOSURE LETTER................................................. 66
12.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS................ 66
12.10 SEVERABILITY...................................................... 67
12.11 SECTION HEADINGS, CONSTRUCTION.................................... 67
12.12 TIME OF ESSENCE................................................... 67
12.13 CONFIDENTIALITY; NO PUBLIC DISCLOSURE............................. 67
iii
12.14 SUNTRUST LITIGATION............................................... 68
12.15 DELEK GUARANTEE................................................... 69
12.16 INCORPORATION OF EXHIBITS AND DISCLOSURE LETTER................... 69
12.17 COUNTERPARTS...................................................... 69
iv
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of March 29, 2004,
by and among DELEK US HOLDINGS, INC., a Delaware corporation ("Delek US
Holdings"), MAPCO FAMILY CENTERS, INC., a Delaware corporation ("Buyer") and
XXXX X. XXXXXXXXXX, an individual residing in the State of Alabama ("Seller").
RECITALS:
Seller desires to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of Xxxxxxxxxx Oil Co.,
Inc., an Alabama corporation (the "Company"), for the consideration and on the
terms set forth in this Agreement and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged. In furtherance
thereof, and to induce Seller to proceed with the Contemplated Transactions (as
herein defined), Delek US Holdings has heretofore deposited One Million Dollars
($1,000,000) and will within twenty-four (24) hours hereof deposit an additional
One Million Dollars ($1,000,000) (as herein defined) as more fully described in
Section 2.3.
AGREEMENT:
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUIRED COMPANIES" means the Company, Gasoline Associated Services, Inc., an
Alabama corporation, and Liberty Wholesale Co., Inc., an Alabama corporation.
"ADJUSTMENT AMOUNT" is defined in Section 2.2(b).
"AIRPLANE" - means 1984 Citation III, Serial Number: 650-0058, Registration:
N70DJ, which is currently owned by the Company.
"AIRPLANE DEBT" means that certain portion of the loan incurred by the Company
in connection with the acquisition of the Airplane which is designated by Seller
(in a writing to Buyer no later than five (5) days prior to Closing) to be paid
by Buyer at Closing, which amount shall not exceed One Million, Nine Hundred
Thousand Dollars ($1,900,000).
"APPLICABLE CONTRACT" means any Contract (a) under which any Acquired Company
has or may acquire any rights, (b) under which any Acquired Company has or may
become subject to any obligation or liability, or (c) by which any Acquired
Company or any of the
1
assets owned or used by it is or may become bound.
"ASSESSMENTS" is defined in Section 6.5.
"ASSETS" means all property owned by any of the Acquired Companies, leased by
any of the Acquired Companies or used in their operations.
"BASE PURCHASE PRICE" is defined in Section 2.2(a).
"BEST EFFORTS" means the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible; provided, however, that an obligation to use Best
Efforts under this Agreement shall not require a change in the business of such
Person, the expenditure of money, or the incurrence of any other financial
burden.
"BOOKS AND RECORDS" is defined in Section 3.5.
"BREACH" means (a) any inaccuracy in or breach of, or any failure to perform or
comply with, a representation, warranty, covenant, obligation, or other
provision of this Agreement or any instrument delivered pursuant to this
Agreement, or (b) any claim (by any Person) or other occurrence or circumstance
that is or was inconsistent with such representation, warranty, covenant,
obligation, or other provision.
"BUYER" is defined in the first paragraph of this Agreement.
"CLOSING" is defined in Section 2.4.
"CLOSING DATE" means the date and time as of which the Closing actually takes
place.
"CLOSING DATE INVENTORY" is defined in Section 2.2(c).
"CLOSING PURCHASE PRICE" is defined in Section 2.2(a).
"COMPANY" is defined in the Recitals of this Agreement.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSULTANTS" is defined in Section 5.11.
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their respective covenants and
2
obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the Shares and exercise of control
over the Acquired Companies.
"CONTRACT" means any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"COVERED UST" is defined in Section 3.19(k).
"DAMAGES" is defined in Section 10.2.
"DEBT PORTION" is defined in Section 2.5(f).
"DELEK US HOLDINGS" is defined in the first paragraph of this Agreement.
"DISCLOSURE LETTER" means the disclosure letter delivered by Seller to Buyer in
connection with this Agreement and made a part hereof by this reference.
"XXXXXXX MONEY" is defined in Section 2.3.
"XXXXXXX MONEY ESCROW AGENT" is defined in Section 2.3.
"EMPLOYEE KNOWLEDGE GROUP" shall mean those certain individuals who are listed
on EXHIBIT A hereto, which is incorporated by reference herein.
"ENCUMBRANCE" means any charge, claim, community property interest, condition,
encumbrance, lease, license, sublease, right, equitable interest, easement,
mortgage, deed of trust, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL CONDITION" or "ENVIRONMENTAL CONDITIONS" means any pollution,
contamination, degradation, damage or injury caused by, related to, arising
from, or in connection with the generation, handling, use, treatment, storage,
transportation, disposal, discharge, Release, or emission of any Hazardous
Materials.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" shall mean any and all
liabilities, responsibilities, claims, suits, losses, costs (including
remediation, removal, response, abatement, clean-up, investigative, and/or
monitoring costs and any other related costs and expenses), other causes of
action recognized now or at any later time, damages,
3
settlements, expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, attorney fees and other legal fees (a)
pursuant to any agreement, order, notice, requirement, responsibility, or
directive (including directives embodied in Environmental Law or Occupational
Safety and Health Law), injunction, judgment or similar documents (including
settlements) arising out of or in connection with any Environmental Law or
Occupational Safety and Health Law, or (b) pursuant to any claim by a
Governmental Body or other Person for personal injury, property damage, damage
to natural resources, remediation, or similar costs or expenses incurred or
asserted by such Person pursuant to common law or statute.
"ENVIRONMENTAL INSURANCE POLICY" is defined in Section 2.5(g).
"ENVIRONMENTAL LAW" or "ENVIRONMENTAL LAWS" means any Legal Requirement relating
to (i) the control of any potential pollutant or protection of the air, water or
land, (ii) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal or transportation, and (iii) exposure to hazardous, toxic or
other substances alleged to be harmful, and includes without limitation, (1) the
terms and conditions of any license, permit, approval, or other authorization by
any Governmental Body, and (2) judicial, administrative, or other regulatory
decrees, judgments, and orders of any Governmental Body. The term "Environmental
Laws" shall include, but not be limited to the following statutes and the
regulations promulgated thereunder: the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the
Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 11011 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Safe Drinking Water
Act, 42 U.S.C. Section 300f et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., and
any state, county, or local regulations similar thereto.
"EQUITY PORTION" is defined in Section 2.5(f).
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES" mean any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, trailers and rolling stock)
currently or formerly owned or operated by any Acquired Company.
"FINANCIAL STATEMENTS" is defined in Section 3.4.
"FIVE STAR MEMBERSHIP PAYMENT" shall be Fifty-Five Thousand Dollars ($55,000).
"GAAP" means generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Financial Statements and the
other financial statements referred to in Section 3.4 were prepared.
4
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) multinational organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that materially increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may have a Material Adverse Effect on the value of the
Facilities or any Acquired Company.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise has been determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, or that is regulated by any Governmental Body
under any Environmental Law, including any mixture or solution thereof, and
specifically including petroleum and all derivatives thereof or synthetic
substitutes therefore, asbestos or asbestos-containing materials,
polychlorinated biphenyls, mercury, buried contaminants, chemicals, and
flammable or explosive materials.
"INCOME TAX" means any Federal, state, local, or foreign income tax, including
any interest, penalty, or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Income Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
5
"INTERIM FINANCIAL STATEMENTS" is defined in Section 3.4.
"IRC" means the Internal Revenue Code of 1986, as amended, or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE": an individual will be deemed to have "Knowledge" of a particular
fact or other matter if such individual is actually aware of such fact or other
matter; A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if, and only if, any individual who is
serving as a director, officer, partner, shareholder, member, executor, or
trustee of such Person (or in any similar capacity) has Knowledge of such fact
or other matter. For purposes of this Agreement, the Knowledge of the Acquired
Companies shall be limited to the Knowledge of the Employee Knowledge Group.
"KNOWN BUYER REMEDIATION FACILITIES" is defined in Section 6.7(a).
"KNOWN NON-TRUST FUND CONTAMINATION FACILITIES" is defined in Section 5.12(a).
"LEASE LIABILITIES" is defined in Section 6.3(a).
"LEASEHOLD STORES" is defined in Section 2.5(a)(ix).
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MANAGEMENT KNOWLEDGE GROUP" shall have the meaning set forth in EXHIBIT C
hereto which is incorporated by reference herein.
"MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT" means any change or
effect that by itself or in combination with other changes or effects would
cause an adverse change or effect of Five Hundred Thousand Dollars ($500,000) or
more to the business, properties, financial condition, results of operations or
prospects of one or more of the Acquired Companies; provided, however, that none
of the following shall, by itself, be deemed to constitute a Material Adverse
Change or to have a Materially Adverse Effect, unless it affects the Acquired
Companies disproportionately to others in the industry: (a) any adverse change
or effect arising from or relating to (1) general business or economic
conditions, (2) national or international political or social conditions,
including the engagement by the United States in hostilities whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack upon the United States, or any of its
territories, possessions, or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States, (3) financial,
6
banking, or security markets (including, but not limited to, any disruption
thereof and any decline in the price of any security or any market index), (4)
changes in the United States generally accepted accounting principles, or (5)
changes in laws, rules, regulations, orders, or other binding directives issued
by any governmental entity, and (b) any adverse change in or effect on the
business of the Acquired Companies that is fully cured by Seller to the
reasonable satisfaction of Buyer before the earlier of (1) the Closing Date and
(2) the date on which this Agreement is terminated pursuant to Article 9 hereof.
"MATRIX" is defined in Section 3.9.
"MISCELLANEOUS PROPERTY" shall mean the following parcels of property: (i) that
certain parcel of property located at 000 Xxxxxxxx Xxxx., Xxxxxxxxxxxx,
Xxxxxxxxx 00000, (ii) that certain parcel of property located at 0000 XX Xxx.
000 Xxxxx, Xxxxxxxx, Xxxxxxx 00000, (iii) that certain vacant parcel of property
located at Xxxx 00xx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000, and (iv) that certain
parcel of property located at 0000 XxXxxxxxx Xxxx. Xxxxxxxx, Xxxxxxx 00000.
"MISCELLANEOUS PROPERTY PAYMENT" is defined in Section 2.2(d).
"MONTHLY FINANCIALS" is defined in Section 5.8.
"NOL" is defined in Section 10.8(f).
"NOVEMBER 30 FINANCIALS" is defined in Section 5.8.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is either (i) in the case of a Person who is not a Related
Party, on an arm's length basis, or (ii) in the case of a Related Party, upon
terms no less favorable to such Person than those that would be obtained in an
arm's-length transaction with a Person who is not a Related Party;
7
(c) such action is not required to be formally authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); or
(d) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
"ORGANIZATIONAL DOCUMENTS" mean (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) the
articles of organization and operating agreement of any limited liability
company; (e) any charter or similar document adopted or filed in connection with
the creation, formation, or organization of a Person; and (f) any amendment to
any of the foregoing.
"OTHER PERSONAL LIABILITIES" is defined in Section 5.7.
"PERMITTED EXCEPTIONS" means (a) mortgages or security interests shown on the
Financial Statements or the Interim Financial Statements as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Financial Statements (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens for current taxes
not yet due, and (d) easements, rights of way, servitudes, restrictions and
other matters of record which, individually or in the aggregate, do not
adversely affect the current use or value of the Real Property except to a de
minimis extent.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PROPRIETARY RIGHTS" means all patents, patent applications, copyrights,
trademarks, service marks, trade names, service marks, corporate names, and
domain names; computer software and related documentation; confidential
information, trade secrets and know-how; financial, business and marketing plans
and related information; and all other intellectual property rights.
"REAL PROPERTY" means all real property owned or leased by, or used in the
operations of,
8
any of the Acquired Companies on the date of this Agreement, and all real
property owned or leased by, or used in the operations of, any of the Acquired
Companies acquired after the date of this Agreement, including all buildings,
fixtures, structures and improvements situated thereon and all rights and
appurtenances thereto.
"RELATED PERSON" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such individual
or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, shareholder, partner,
member, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, shareholder, partner,
member, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse (and former spouses), (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 50% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 50% of the outstanding equity securities or
equity interests in a Person.
9
"RELEASE" means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, depositing, injecting, escaping, leaching, dumping, or disposing
into the Environment, whether intentional or unintentional, of any Hazardous
Materials.
"REMEDIATE", "REMEDIATION", or "REMEDIAL ACTION" shall mean the removal,
abatement, response, investigative, cleanup, and/or monitoring activities
undertaken to address any Environmental Conditions, or Release of Hazardous
Materials, including without limitation excavation, transportation and disposal
of Hazardous Materials, any investigation, study, assessment, testing,
monitoring, containment, removal, disposal, closure, corrective action, passive
remediation, natural attenuation, or bioremediation, and the installation and
operation of remediation systems.
"REPRESENTATIVE" means, with respect to a particular Person, any director,
officer, shareholder, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLER" is defined in the first paragraph of this Agreement.
"SHARES" are defined in the Recitals of this Agreement.
"SMLLC" is defined in Section 5.9.
"STOCK PURCHASE ESCROW AGREEMENT" is defined in Section 2.5(c).
"STOCK PURCHASE ESCROW AMOUNT" is One Million, Five Hundred Thousand Dollars
($1,500,000) during the period from the date hereof through and including the
first anniversary of the Closing Date, One Million Dollars ($1,000,000) during
the period from the first anniversary of the Closing Date through and including
the second anniversary of the Closing Date, and Five Hundred Thousand Dollars
($500,000) during the period from the second anniversary of the Closing Date
through and including the third anniversary of the Closing Date; provided,
however, that if a claim for indemnification shall have been made but not
resolved prior to the date on which a reduction otherwise would have occurred,
the amount of such claim shall be added to the Stock Purchase Escrow Amount
otherwise in effect until the claim is resolved.
"STORE 102/182 SELLER CONTRIBUTION" is defined in Section 2.5(f).
"STORE 184 PERSONAL DEBT" means that certain portion of the loan incurred in
connection with Store 184 which is designated by Seller (in a writing to Buyer
no later than five (5) days prior to Closing) to be paid by Buyer at Closing,
which amount shall not exceed Six Hundred Fifty Thousand Dollars ($650,000).
"SUBSIDIARY" is, with respect to any Person (the "Owner"), any corporation or
other Person
10
of which securities or other interests having the power to elect a majority of
the corporation's or other Person's board of directors or similar governing
body, or otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred) are
held by the Owner or one or more of its Subsidiaries; when used without
reference to a particular Person, "Subsidiary" means a Subsidiary or the
Company.
"SUNTRUST ESCROW AGREEMENT" is defined in Section 2.5(d).
"SUNTRUST ESCROW AMOUNT" is One Million, Three Hundred Seventy-Five Thousand
Dollars ($1,375,000).
"SUNTRUST LITIGATION" is defined in Section 12.14.
"SUPERVISOR KNOWLEDGE GROUP" is defined in EXHIBIT B hereto which is
incorporated by reference herein.
"SURVEYS" is defined in Section 2.5(e).
"XXXXXXX PAYMENT" means that certain payment to Xxxxx Xxxxxxx, in the amount
designated by Seller (in a writing to Buyer no later than five (5) days prior to
Closing) to be paid by Buyer at Closing, which amount shall not exceed One
Million Dollars ($1,000,000).
"TAX" OR "TAXES" means (a) any federal, state, local or foreign income, gross
receipts, capital, franchise, business privilege, import, goods and services,
value added, sales and use, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, 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 withholding, unclaimed property, escheat
or other tax or business license fee of any kind whatsoever, including any
interest, penalties or additions to tax or additional amounts in respect of the
foregoing, (b) any liability for the payment of any amounts of the type
described in clause (a) as a result of being a member of a consolidated,
combined, unitary or aggregate group for any Taxable period, and (c) any
liability for the payment of any amounts of the type described in clause (a) or
(b) as a result of being a transferee or successor to any person or as a result
of any express or implied obligation to indemnify any other Person.
"TAX BENEFIT" is defined in Section 10.8(e).
"TAX CLAIM" is defined in Section 10.6(a).
"TAX RETURN" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the
11
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"THIRD PARTY CONSENT" is defined in Section 2.5(a)(xii).
"THREAT OF RELEASE" means a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"THREATENED" means a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing).
"TITLE COMMITMENTS" is defined in Section 2.5(e).
"TRUCKING CONTRACT ADJUSTMENT AMOUNT" shall be equal to Seven Hundred Thousand
Dollars ($700,000).
"UST PROGRAM" is defined in Section 3.19(k).
"WORKING CAPITAL ADJUSTMENT" is defined in Section 7.1.
2. SALE AND TRANSFER OF SHARES; ADDITIONAL AMOUNTS PAYABLE; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Shares to Buyer, and Buyer will purchase the
Shares from Seller.
2.2 PURCHASE PRICE
(a) Buyer agrees to pay to Seller at the Closing, in immediately available
funds, Twenty-Four Million, Five Hundred Fifty Thousand Dollars ($24,550,000)
(the "Base Purchase Price"),
(i) LESS the Stock Purchase Escrow Amount;
(ii) LESS the SunTrust Escrow Amount;
(iii) LESS the Xxxxxxx Money in the amount of Two Million Dollars
($2,000,000), plus any accrued interest thereon, which will be paid to Seller
directly by the Xxxxxxx Money Escrow Agent in accordance with Section 2.3(d);
(iv) LESS the Trucking Contract Adjustment Amount;
(v) LESS the Airplane Debt, which amount shall be paid by Buyer at
12
Closing in immediately available funds directly to Fleet Capital Leasing in
partial satisfaction of such debt;
(vi) LESS One Hundred Thousand Dollars ($100,000) or one-half (1/2) of
the estimated cost of the Surveys, whichever amount is smaller;
(vii) LESS the Store 102/Store 182 Seller Contribution, which amount
shall be paid by Buyer at Closing in immediately available funds directly to the
lending institutions and individuals more fully described in Section 2.5(f);
(viii) LESS One Hundred Fifty Thousand Dollars ($150,000) or one
quarter (1/4) of the cost of the Environmental Insurance Policy, whichever
amount is smaller, which amount shall be paid by Buyer at Closing in immediately
available funds to the insurer providing the Environmental Insurance Policy, as
more fully described in Section 2.5(g), but only if such policy names Seller as
an insured thereunder;
(ix) LESS the Xxxxxxx Payment, which amount shall be paid by Buyer at
Closing in immediately available funds directly to Xxxxx X. Xxxxxxx;
(x) LESS the Store 184 Personal Debt, which amount shall be paid by
Buyer at Closing in immediately available funds directly to the lending
institution to satisfy in full such debt;
(xi) LESS an amount equal to the Five Star Membership Payment; and
(xii) PLUS an amount equal to any principal payments made by the
Company subsequent to April 1, 2004, on the term loans and capitalized leases of
the Company.
(the Base Purchase Price, as adjusted by the items above, is herein referred to
as the "Closing Purchase Price"). Buyer agrees at the Closing to pay the amounts
listed above to the parties listed above or otherwise identified by Seller, by
wire transfer or delivery of other immediately available funds. The parties
further understand and agree that, following the Closing, the Closing Purchase
Price may be further adjusted by a payment, either by Buyer to Seller or by
Seller to Buyer, in accordance with the working capital adjustment more fully
described in Section 2.2(b) hereof and by the Miscellaneous Property Payment
more fully described in Section 2.2(d) hereof.
(b) For purposes of this Section 2.2(b), the Closing Working Capital (as
herein defined) of the Acquired Companies will be determined in accordance with
the procedures set forth in EXHIBIT 2.2(B) hereto. For purposes of this Section
2.2(b), the definition of "Target Working Capital" is Two Million, Six Hundred
Eleven Thousand Dollars ($2,611,000). Within thirty (30) days after the Closing,
Seller and Buyer will calculate the actual working capital of the Acquired
Companies as of the Closing (the "Closing Working Capital"), and either (1) if
the Closing Working Capital exceeds the Target Working Capital by more than One
Hundred Thousand Dollars ($100,000), Buyer will pay to Seller the
13
amount by which the Closing Working Capital exceeds the Target Working Capital,
or (2) if the Target Working Capital exceeds the Closing Working Capital by more
than One Hundred Thousand Dollars ($100,000), Seller will refund to Buyer the
amount by which Target Working Capital exceeds the Closing Working Capital. No
additional payments will be made by either party if the Closing Working Capital
is within One Hundred Thousand Dollars ($100,000) of Target Working Capital. If
the parties are unable to agree upon the amount of the Closing Working Capital
within thirty (30) days after Closing, they shall select an accounting firm
mutually acceptable to them to resolve the disagreement. If the parties are
unable to agree on the choice of an accounting firm, they will select a
nationally-recognized accounting firm by lot (after excluding their respective
regular outside accounting firms). In the event that the parties submit any
unresolved objections to an accounting firm, they will each bear and be
responsible for one-half (1/2) of the costs of such services. Upon final
determination of the amount to be paid hereunder, the party to pay such amount
shall promptly make such payment, in immediately available funds, to the other
party.
(c) As part of the process of determining the Closing Working Capital,
Buyer and Seller will engage the services of a third party mutually agreeable to
Buyer and Seller to undertake an inventory (the "Closing Date Inventory") audit
of the Acquired Companies as of the Closing Date. The Closing Date Inventory
shall exclude items which (i) such third party determines are damaged, spoiled,
or out of date, and (ii) are not guaranteed by a vendor of an Acquired Company.
The Closing Date Inventory shall be conducted in accordance with the procedures
described on EXHIBIT 2.2(C) hereto.
(d) At or before Closing, Buyer shall retain the services of an appraiser
reasonably acceptable to Seller to undertake an appraisal of the Miscellaneous
Property. Within thirty (30) days after Closing, such appraiser shall provide to
Buyer and Seller an appraisal of the Miscellaneous Property setting forth the
fair market value of the Miscellaneous Property. If either Buyer or Seller
disagree with the findings in such appraisal, such party shall have ten (10)
days from receipt of such appraisal to formally object to the findings contained
therein. If neither party so objects, they shall be deemed to have agreed to the
findings contained therein. In the event of an objection to appraised value of
the Miscellaneous Property which the parties are unable to resolve through good
faith negotiation within five (5) days of such objection, the parties shall
select an appraisal firm mutually acceptable to conduct a second appraisal. If
the parties are unable to agree on the choice of a second appraiser, they will
each select an appraiser, which appraisers shall select a third appraiser who
will undertake a second appraisal of the fair market value of the Miscellaneous
Property. The appraised amount of the Miscellaneous Property in such second
appraisal shall be binding on the parties hereto. In the event of such second
appraisal, the parties hereto will each bear and be responsible for one-half
(1/2) of the costs of such services. Within five (5) days after final
determination of the appraised amount of the Miscellaneous Property, Buyer shall
pay to Seller in immediately available funds an amount equal to twenty five
percent (25%) of such appraised value (the "Miscellaneous Property Payment").
2.3 XXXXXXX MONEY
14
Delek US Holdings has heretofore deposited One Million Dollars ($1,000,000)
and Delek US Holdings shall, within twenty-four (24) hours of execution of this
Agreement, deposit an additional One Million Dollars ($1,000,000) (such Two
Million Dollars ($2,000,000) is herein collectively referred to as the "Xxxxxxx
Money") with AmSouth Bank, as escrow agent (the "Xxxxxxx Money Escrow Agent")
pursuant to an amended and restated agreement among Delek US Holdings, Seller
and the Xxxxxxx Money Escrow Agent, which agreement shall be dated as of the
date hereof. Buyer's right to a return of all, a portion, or none of the Xxxxxxx
Money will be governed by the following provisions:
(a) If Buyer elects not to consummate the Contemplated Transactions due to
(i) failure to satisfy the conditions to Buyer's obligation to close the
Contemplated Transactions (other than a failure to satisfy the condition to
Closing described in Section 7.8 hereof or failure to receive any of the items
identified in Section 2.5(a)(xii)) or (ii) a Breach or default by Seller or an
Acquired Company with respect to his or its obligations under this Agreement,
Buyer shall be entitled to return of all of the Xxxxxxx Money.
(b) (i) If Buyer elects not to consummate the Contemplated Transactions due
to any of the following: (A) failure to satisfy the condition to Closing
described in Section 7.8 hereof, (B) failure of Buyer to receive any of the
items identified in Section 2.5(a)(xii), (C) failure of Buyer to obtain
financing to replace the Acquired Companies' existing financing with Textron
Financial, or (ii) if the Agreement is terminated as provided in Section 9.1 (f)
hereof, Seller shall be entitled to Two Hundred Fifty Thousand Dollars
($250,000) of the Xxxxxxx Money and Buyer shall be entitled to the remainder
thereof, subject to the increase of such amount to Five Hundred Thousand Dollars
($500,000) as more fully described in Section 2.4 hereof.
(c) If Buyer fails to consummate the Contemplated Transactions for any
reason other than those listed above in Sections 2.3(a) and 2.3(b), Seller shall
be entitled to all of the Xxxxxxx Money.
(d) If the Contemplated Transactions are consummated, the Xxxxxxx Money
will be distributed by the Letter of Intent Escrow Agent to Seller and credited
against Buyer's obligation to pay the Base Purchase Price as more fully
described in Section 2.2(a) hereof.
(e) Buyer and Seller agree that payment of all or part of the Xxxxxxx Money
to Seller under this Section 2.3 shall be deemed liquidated damages for the
failure of Buyer to consummate the Contemplated Transactions and will not
constitute a penalty. This Section 2.3 shall be the sole remedy of Seller if
Buyer fails to consummate the Contemplated Transactions, and notwithstanding
anything in this Agreement to the contrary, total amount of Buyer's liability to
Seller for such failure shall not exceed the amount provided in this Section
2.3.
2.4 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will
take place
15
at the offices of Xxxxxxx Xxxxx Xxxx & White LLP, in Birmingham, Alabama, on or
before April 30, 2004, at 10:00 a.m. (Birmingham time) or at such other time and
place as the parties may agree, provided that if the parties are unable to
consummate the Contemplated Transactions on or before April 30, 2004, and the
Agreement has not been terminated pursuant to Sections 9.1 (a), 9.1(b), 9.1(c),
9.1(e), or 9.1 (f), then the Closing Date shall be extended to May 14, 2004, and
the Two Hundred Fifty Thousand Dollars ($250,000) referenced in Section 2.3(b)
hereof will be increased, without further action on the part of any of the
parties to this Agreement, to Five Hundred Thousand Dollars ($500,000). The
Closing shall be effective as of 11:59 p.m. (Birmingham Time) on the Closing
Date.
2.5 CLOSING OBLIGATIONS
At the Closing:
(a) Seller will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers) for transfer to Buyer;
(ii) a certificate executed by Seller representing and warranting to
Buyer that all of Seller's representations and warranties in this Agreement
(considered collectively), and each of such representations and warranties
(considered individually) were accurate as of the date of this Agreement (except
for any representation or warranty made as of a specified date, which shall be
true and correct as of such specified date) and are accurate in all material
respects (except for such representations and warranties that by their terms are
qualified by reference to materiality, which representations and warranties
shall be accurate in all respects) as of the Closing Date as if made on the
Closing Date (giving full effect to any supplements to the Disclosure Letter
that were delivered by Seller to Buyer prior to the Closing Date in accordance
with Section 5.5);
(iii) a certificate with respect to each of the Acquired Companies
executed by an officer of such Acquired Company attesting to (A) its
Organizational Documents, (B) the completeness and accuracy of attached
resolutions of the board of directors and stockholders and (C) incumbency of
officers;
(iv) certificates of the Probate Court of DeKalb County, Alabama or
other appropriate authority (in each case dated within five (5) days of Closing)
attaching copies of the Articles of Incorporation of each Acquired Company and
all amendments thereto;
(v) certificates of existence and good standing certificates (in each
case dated within five (5) days of Closing), including tax clearances (dated
within thirty (30) days of Closing), for each Acquired Company from,
respectively, the Alabama Department of Revenue and the Alabama Secretary of
State;
(vi) certificates of existence and good standing certificates (dated
within
16
thirty (30) days of Closing) for every other state jurisdiction where each
Acquired Company does business;
(vii) a duly executed certificate of Seller in the form specified by
Treasury Regulation Section 1.1445-2(b)(2);
(viii) resignations of all of the directors and officers of the
Acquired Companies effective as of the Closing Date;
(ix) landlord estoppels in the form attached hereto as EXHIBIT
2.5(A)(IX) from the landlord of discount food marts 111,116,125,192, 204 and 205
(the "Leasehold Stores");
(x) an opinion of counsel to Seller and the Acquired Companies
substantially in the form set forth as EXHIBIT 2.5(A)(X);
(xi) a schedule indicating the amount of borrowings by the Acquired
Companies as of the Closing Date in a form reasonably acceptable to Buyer;
(xii) Consents of (A) Compass Bank, (B) ExxonMobil Oil Corporation,
(C) Chevron Products Company, (D) Motiva Enterprises, LLC, (E) Commonwealth
Brands, Inc., (F) Xxxxx & Xxxxxxxxxx, (G) Xxxxxxx Xxxxxx USA, and (H) X.X.
Xxxxxxxx Tobacco Company to the change of control of the Acquired Companies
(collectively, the "Third Party Consents");
(xiii) [INTENTIONALLY OMITTED];
(xiv) all books of account, minute books, stock record books, and
other records of each of the Acquired Companies;
(xv) evidence satisfactory to Buyer that the Acquired Companies have
good and marketable fee simple title to discount food mart 102 and discount food
mart 182, free and clear of all Encumbrances other than Permitted Exceptions;
and
(xvi) such other affidavits, documents, instruments and certificates
as Buyer reasonably may request, including without limitation those required by
Buyer's title insurance company, consistent with Seller's obligations under this
Agreement.
(b) Buyer will deliver to Seller:
(i) the Closing Purchase Price;
(ii) a letter, signed by Buyer, authorizing and instructing the
Xxxxxxx Money Escrow Agent to disburse all of the Xxxxxxx Money to Seller;
(iii) a certificate executed by Buyer representing and warranting to
Seller
17
that all of Buyer's representations and warranties in this Agreement (considered
collectively), and each of such representations and warranties (considered
individually) were accurate as of the date of this Agreement and are accurate in
all material respects (except for such representations and warranties that by
their terms are qualified by reference to materiality, which representations and
warranties shall be accurate in all respects) as of the Closing Date as if made
on the Closing Date;
(iv) the Lease Liability insurance policy or other security more fully
described in Section 6.3(a) hereof, unless such personal liabilities of Seller
have all been released at or prior to Closing; and
(v) an opinion of counsel to Buyer in substantially the form set forth
as EXHIBIT 2.5(B)(V).
(c) Buyer and Seller will enter into an escrow agreement in a form
reasonably acceptable to Buyer and Seller (the "Stock Purchase Escrow
Agreement"). The Stock Purchase Escrow Agreement shall provide (i) that Seller
is entitled to, and may at any time withdraw, all interest and other earnings
that accrue on the Stock Purchase Escrow Amount; and (ii) that Buyer will be
solely responsible for the payment of all fees and costs charged by the escrow
agent named in the Stock Purchase Escrow Agreement.
(d) Buyer and Seller will enter into an escrow agreement in a form
reasonably acceptable to Buyer and Seller (the "SunTrust Escrow Agreement"). The
SunTrust Escrow Agreement shall provide (i) that Seller is entitled to, and may
at any time withdraw, all interest and other earnings that accrue on the
SunTrust Escrow Amount; and (ii) that Seller will be solely responsible for the
payment of all fees and costs charged by the escrow agent named in the SunTrust
Escrow Agreement.
(e) Buyer has ordered binding commitments (the "Title Commitments") for the
issuance of current extended coverage ALTA Owner's Policies (1992) of title
insurance with respect to all owned Real Property and current extended coverage
ALTA Leasehold Policies (1992) of insurance for the Leasehold Stores, and
surveys of the owned Real Property and certain of the Leasehold Stores
(collectively, "Surveys"). Notwithstanding anything to the contrary contained in
this Agreement, Buyer shall not be obligated to close unless (i) such Title
Commitments shall in all cases insure fee title in the name of the Company to
each parcel of owned Real Property, including but not limited to discount food
mart 102 and discount food mart 182, and leasehold title in the name of the
Company to each parcel of the Leasehold Stores, in all cases free and clear of
all Encumbrances other than the Permitted Exceptions, and (ii) such Surveys, if
any, as have been received prior to Closing, shall show no Encumbrances other
than the Permitted Exceptions.
(f) At Closing, the Company shall exercise (i) its right to purchase from
Xxxxxxx Xxxxxxxx discount food mart 182 in accordance with that certain
Commercial Lease Agreement by and between Xxxxxxx Xxxxxxxx and the Company dated
August 27, 1999, and (ii) its right to purchase discount food mart 102 in
accordance with that certain Commercial Lease Agreement by and between Xxxxx X.
Xxxxxxx and the Company dated
18
February 20, 2001. A portion of such purchase price shall be paid to the lending
institutions which have provided financing in connection with the acquisition of
such stores (such portion is herein referred to as the "Debt Portion"). The
remaining portion of such purchase price shall be paid directly to Xxxxxxx
Xxxxxxxx and Xxxxx X. Xxxxxxx (such portion is herein referred to as the "Equity
Portion"). Buyer shall pay to said financial institutions the Debt Portion and
shall pay to Xxxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxx the Equity Portion, a
portion of which payments shall reduce the Purchase Price as described in
Section 2.2(a)(vii) hereof. Each such financial institution and each of Xxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxxxxxx shall deliver releases to Buyer at Closing,
including without limitation a release by each such financial institution of any
Encumbrances relating to such Real Property. For purposes of this Agreement, (i)
the Equity Portion, (ii) Fifty Percent (50%) of all costs and expenses arising
out of or in connection with the acquisition of discount food mart 102 and
discount food mart 182 (including but not limited to all deed, transfer,
mortgage recording, income and other Taxes and fees, and costs associated with
the release of Encumbrances), and (iii) Fifty Percent (50%) of the Debt Portion,
which is the amount set forth in Section 2.2(a)(vii), shall be referred to,
collectively, as the "Store 102/Store 182 Seller Contribution."
(g) Buyer shall use its reasonable best efforts to obtain, at or before
Closing, an environmental insurance policy covering the Acquired Companies (the
"Environmental Insurance Policy"). In connection with the purchase of the
Environmental Insurance Policy, Seller has agreed that it will be responsible
for the payment of the amount specified in Section 2.2(a)(viii) hereof in
connection with such policy, which amount shall be paid by Buyer and deducted
from the Base Purchase Price.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
Each Acquired Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Alabama, with full corporate
power and authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and to perform
all its obligations under Applicable Contracts. Each Acquired Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws
19
which affect the enforcement of creditors rights generally and by equitable
principles, including the availability of specific performance. Upon the
execution and delivery by Seller of the Stock Purchase Escrow Agreement, the
Stock Purchase Escrow Agreement will constitute the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws which affect the
enforcement of creditors rights generally and by equitable principles, including
the availability of specific performance. Seller has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Stock Purchase Escrow Agreement, to perform his obligations
under this Agreement and the Stock Purchase Escrow Agreement and to consummate
the Contemplated Transactions.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions by Seller will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired Companies as currently
in effect, or (B) any resolution adopted by the board of directors or the
shareholders of the Acquired Companies currently in effect;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Acquired Companies or Seller, or
any of the assets owned or used by the Acquired Companies, is currently subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by the Acquired Companies or that otherwise relates to the business
of, or any of the assets owned or used by, the Acquired Companies;
(iv) cause Buyer or the Acquired Companies to become subject to, or
liable for, the payment of any Tax arising prior to the date of Closing;
(v) cause any of the Assets of the Acquired Companies to be reassessed
or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon or
with
20
respect to the Shares or any of the assets owned or used by the Acquired
Companies.
Except as set forth in Part 3.2 of the Disclosure Letter, neither Seller nor any
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of One Thousand
(1,000) shares of common stock, par value Ten Dollars ($10.00) per share, of
which Three Hundred and One (301) shares are issued and outstanding and
constitute the Shares. Seller is the record and beneficial owner and holder of
the Shares, free and clear of all Encumbrances. With the exception of the Shares
(which are owned by Seller), all of the outstanding equity securities and other
stock or securities of each Acquired Company are owned of record and
beneficially by the Company, free and clear of all Encumbrances. Except as
disclosed in Part 3.3 of the Disclosure Letter, no legend or other reference to
any purported Encumbrance appears upon any certificate representing equity
securities or shares of any Acquired Company. All of the outstanding equity
securities and stock of each Acquired Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities, the Shares
or other securities of any Acquired Company. None of the outstanding equity
securities, the Shares or other securities of any Acquired Company have been
issued in violation of the Securities Act or any other Legal Requirement. No
Acquired Company owns, or has any Contract to acquire, any equity securities or
other securities of any Person (other than Acquired Companies) or any direct or
indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Seller has delivered to Buyer (a) an interim consolidated balance sheet of
the Acquired Companies as of November 30, 2003, and the related unaudited
consolidated statement of income, changes in stockholders' equity, and cash flow
for the twelve (12) months then ended (the "Interim Financial Statements"); (b)
a consolidated balance sheet of the Acquired Companies as of April 30, 2003, and
the related consolidated statement of income, changes in stockholders' equity,
and cash flow, together with the report thereon of the Acquired Companies'
independent certified public accountants (including the notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and the results of operations of the Company as of the respective
dates and for the respective periods referred to therein, all in accordance with
GAAP.
3.5 BOOKS AND RECORDS
All of the books of account, minute books, stock record books, and other
records of each of the Acquired Companies (the "Books and Records") have been
made available to Buyer. The Books and Records accurately reflect the accounts
of each Acquired Company
21
in conformity with GAAP, to the extent applicable, accurately reflect all
corporate actions taken at all meetings of, or by written consents of, directors
(including committees thereof) and stockholders, accurately reflect all
transfers of stock of each Acquired Company and contain all cancelled stock
certificates, if any. At the Closing, the Books and Records will be in the
possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of
all Real Property, leaseholds, or other interests therein owned by the Acquired
Companies. The Acquired Companies own all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that they purport
to own located in the Facilities currently owned or operated by the Acquired
Companies or reflected as owned in the Books and Records, including all of the
properties and assets reflected in the Financial Statements and the Interim
Financial Statements (except for assets held under capitalized leases disclosed
or not required to be disclosed in Part 3.6 of the Disclosure Letter and
personal property sold since the date of the Financial Statements and the
Interim Financial Statements, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by the Acquired Companies since the date of the Financial Statements (except for
personal property acquired and sold since the date of the Financial Statements
in the Ordinary Course of Business and consistent with past practice) which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed in Part 3.6 of the Disclosure Letter. All
properties and assets reflected in the Financial Statements and the Interim
Financial Statements are free and clear of all Encumbrances, except (a)
mortgages or security interests reflected on the Financial Statements or the
Interim Financial Statements, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Financial Statements (such
mortgages and security interests being limited to the property or assets so
acquired) all of which are disclosed in Part 3.6 of the Disclosure Letter, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists and (c) liens for current taxes not yet
due. At the Closing, the Company shall, except as shown in Part 3.6 of the
Disclosure Letter, hold good and marketable fee title to the owned Real Property
and good and marketable leasehold title to the leased Real Property, free and
clear of all Encumbrances other than the Permitted Exceptions. No person other
than Seller owns any Real Property, other than the leased Real Property, and no
person other than Buyer has any right or option (including, without limitation,
a right of first refusal) to purchase or lease all or any portion of the Real
Property.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
Except as described in Part 3.7 of the Disclosure Letter, the buildings,
plants, structures, and equipment of the Acquired Companies are in sufficient
condition and repair for the use and operation of the Real Property for their
current use. Except as described in Part 3.7 of the Disclosure Letter, (a) there
are no ongoing capital repairs to the Real
22
Property, (b) no portion of the Real Property has suffered any damage by fire or
other casualty which heretofore has not been repaired and restored, (c) there
are no conditions that would, either individually or in the aggregate, have a
Material Adverse Effect on the ownership, possession, use or occupancy of any of
parcels of Real Property or upon Buyer's ability to use the Real Property for
its current use, and (d) to the Knowledge of Seller and the Acquired Companies,
no repairs or replacements are required to be made to the Real Property that,
either individually or in the aggregate, would have a Material Adverse Effect.
3.8 ACCOUNTS RECEIVABLE
(a) All accounts receivable of the Acquired Companies that are reflected on
the Financial Statements, the Interim Financial Statements, or on the accounting
records of the Acquired Companies as of the Closing Date (collectively, the
"Accounts Receivable"), as adjusted by the working capital adjustment process
more fully described in Section 2.2(b) hereof, represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business.
(b) There are no personal loans or loans or cash advances to employees
included in the accounts receivable of the Acquired Companies or otherwise
payable to any Acquired Company, except for the loan to Seller more fully
described in Section 5.10 hereof.
3.9 BROKERS OR FINDERS
Seller has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement or the sale of the Shares to
Buyer or otherwise, except for any amounts that are or may be due to Matrix
Capital Markets Group, Inc. ("Matrix"). Seller shall be responsible for paying
any and all amounts that are or may become due to Matrix in connection herewith.
3.10 NO UNDISCLOSED LIABILITIES
The Acquired Companies have no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except (a) as set forth in Part 3.10 of the Disclosure Letter or as
otherwise disclosed in the Disclosure Letter, (b) for liabilities or obligations
reflected or reserved against in the Financial Statements or Interim Financial
Statements, (c) for current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof, or (d) for obligations under leases
for real and personal property, copies of which have been heretofore provided to
Buyer.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed on a timely
basis all
23
Tax Returns that are or were required to be filed by or with respect to the
Acquired Companies. The Acquired Companies have paid all Taxes that have or may
have become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Seller or the Acquired Companies, except such Taxes, if
any, as are listed in Part 3.11 of the Disclosure Letter and are being contested
in good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Balance Sheet and the Interim Balance Sheet.
(b) Part 3.11 of the Disclosure Letter lists each category of federal,
state, local and foreign Tax Returns filed with respect to the Acquired
Companies for taxable periods ended on or after December 31, 1993 along with the
jurisdiction with which such Tax Returns have been filed and frequency of
filing, and indicates those Tax Returns that currently are the subject of audit.
Seller has made available to Buyer correct and complete copies of all such
federal Income Tax Returns, examination reports, and statements of deficiencies
assessed against, or agreed to by the Acquired Companies since April 30, 2000.
(c) Part 3.11 of the Disclosure Letter contains a complete and accurate
list of all audits and examinations completed since April 30, 2000, of the Tax
Returns (other than gasoline excise tax returns) by any Governmental Body
described in Section 3.11 (a) hereof, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits and examinations have been paid or, as described in
Part 3.11 of the Disclosure Letter, are being contested in good faith by
appropriate proceedings. Except as listed on Part 3.11 of the Disclosure Letter,
there are no other audits or investigations by and Governmental Body in
progress, nor have Seller nor any Acquired Company received any notice from any
Governmental Body that it intends to conduct such an audit or investigation.
Except as described in Part 3.11 of the Disclosure Letter, neither Seller nor
any of the Acquired Companies have given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the assessment,
collection, or payment of Taxes of any of the Acquired Companies or for which
any of the Acquired Companies may be liable. None of the Acquired Companies is
the beneficiary of any extension of time within which to file any Tax Return. No
power of attorney on behalf of any of the Acquired Companies with respect to any
Tax matter is currently in force. There are no liens for Taxes (other than Taxes
not yet due and payable) upon any of the assets of any of the Acquired
Companies.
(d) All Taxes that any of the Acquired Companies is or was required by
Legal Requirements to withhold or collect have been duly withheld and collected
and, to the extent required, have been paid over to the proper Governmental Body
or other Person.
(e) There is no dispute or claim concerning any Tax liability of any of the
Acquired Companies either (i) claimed or raised by any Governmental Body in
writing or (B) as to which any of the Acquired Companies, Seller or any director
or officer (or employee responsible for Tax matters) of any of the Acquired
Companies has Knowledge based upon personal contact with any agent of such
Governmental Body.
24
(f) All Tax Returns described in Section 3.11 (a) hereof are true, correct,
and complete in all material respects.
(g) None of the Acquired Companies is a party to any agreement, contract,
arrangement, or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of IRC Section 280G (or any corresponding provision of state, local or foreign
Tax law). None of the Acquired Companies is a party to or bound by any tax
allocation or sharing agreement. None of the Acquired Companies (A) has been a
member of an affiliated group filing a consolidated federal Income Tax Return
(other than a group the common parent of which was the Company) or (B) has any
liability for the Taxes of any Person (other than any of the Acquired Companies)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.
(h) None of the Acquired Companies will be required 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 as a result of any:
(i) change in method of accounting for a taxable period ending on or
prior to the Closing Date;
(ii) "closing agreement" as described in Section 7121 of the IRC (or
any corresponding or similar provision of state, local or foreign Tax law);
(iii) installment sale or open transaction disposition made on or
prior to the Closing Date; or
(iv) prepaid amount received on or prior to the Closing Date.
(i) None of the Acquired Companies has distributed stock of another
corporation, or has had its stock distributed by another corporation, in a
transaction that was purported or intended to be governed in whole or in part by
Section 355 or Section 361 of the IRC.
(j) No claim has been made by any Governmental Body in a jurisdiction where
any of the Acquired Companies do not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. No issue has been raised by any
Governmental Body in any current or prior audit, examination or similar
proceeding which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
(k) No property owned by any of the Acquired Companies is (i) property
required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) constitutes "tax-exempt use property" within the meaning of Section
168(h)(1) of the IRC or (iii) is "tax-exempt bond financed property" within the
meaning of Section 168(g) of the IRC.
(l) None of the Acquired Companies is subject to any private letter ruling
of the
25
IRS or comparable rulings of other Governmental Bodies.
(m) None of the Acquired Companies has any elections in effect for U.S.
federal income Tax purposes under Sections 108,168,441,463,472,1017, 1033 or
4977 of the IRC.
(n) None of the Acquired Companies has taken any reporting position on a
Tax Return, which reporting position (i) if not sustained would be reasonably
likely, absent disclosure, to give rise to a penalty for substantial
understatement of federal income Tax under Section 6662 of the IRC (or any
predecessor statute or any corresponding provision of any such predecessor
statute or state, local or foreign Tax law), and (ii) has not adequately been
disclosed on such Tax Return in accordance with Section 6662(d)(2)(B) of the IRC
(or corresponding provision of any such predecessor statute or state, local or
foreign Tax law).
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Financial Statements, other than customary
seasonal fluctuations in the business of the Acquired Companies, there has not
been any Material Adverse Change in the business, properties, financial
condition, results of operations or properties of the Acquired Companies, and no
event has occurred or circumstance exists that may result in such a Material
Adverse Change.
3.13 EMPLOYEE BENEFITS
Except as set forth in Part 3.13 of the Disclosure Letter, the Acquired
Companies do not have any employee benefit plans of any type, including plans
governed by ERISA, or any non-ERISA plans or any type of deferred compensation
plans which benefit employees. Except as set forth in Part 3.13 of the
Disclosure Letter, no employee is under any contract of employment, and no
bonuses, fringe benefits or other compensation arrangements or contracts,
written or oral, have been entered into by any of the Acquired Companies with
any employee of any of the Acquired Companies. No employee has received any
assurances from Seller of continued employment with the any of the Acquired
Companies and no employee has any employment claim or other claims, pending or
Threatened, against any of the Acquired Companies or Seller. No employee or
other Person holds any stock option or other right to demand any equity interest
in any of the Acquired Companies, whether now or in the future. As of the
Closing, the Acquired Companies shall have accrued an amount equal to the amount
of all employee accrued vacation time and severance pay, including, without
limitation, all Taxes payable by the Acquired Companies in connection with such
obligations.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) to the Knowledge of Seller, each Acquired Company is, and at all
26
times since December 31, 1999, has been, in full compliance in all material
respects with each Legal Requirement and Governmental Authorization that is or
was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) to the Knowledge of Seller, no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may constitute or
result in a material violation by any of the Acquired Companies of, or a
material failure on the part of any of the Acquired Companies to comply with,
any Legal Requirement or Governmental Authorization, or (B) may give rise to any
obligation on the part of any of the Acquired Companies to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature; and
(iii) no Acquired Company has received, at any time since December 31,
1999, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement or Governmental Authorization or (B) any actual, alleged, possible,
or potential obligation on the part of any Acquired Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature.
(b) The Acquired Companies have at all times maintained all permits,
licenses and other governmental approvals necessary to allow the Company to make
sales of its inventory, products and services or otherwise conduct its business
in compliance with all applicable federal, state and local laws, ordinances and
regulations. Part 3.14(b) of the Disclosure Letter lists all such permits,
licenses and approvals.
(c) Except as set forth in Part 3.14(c) of the Disclosure Letter, all
permits, licenses and other governmental approvals necessary to allow the
Company to make sales of its inventory, products and services or otherwise
conduct its business in compliance with all applicable federal, state and local
laws, ordinances and regulations will remain in full force and effect following
the closing of the Contemplated Transactions, including without limitation the
change of control of the Acquired Companies.
(d) The present use of the Real Property is in substantial conformity with
all applicable Legal Requirements and all restrictions of record, and Seller has
not received any notice of any violation or alleged violation thereof. There are
no material capital expenditures required to be made in connection with the Real
Property in order to comply with applicable Legal Requirements.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding:
(i) that has been commenced by or against any Acquired Companies or,
to the Knowledge of Seller or any Acquired Company, that otherwise relates to or
may affect the business of, or any of the assets owned or used by, any Acquired
Company or
27
which may affect Shares of any Acquired Company; or
(ii) that, to the Knowledge of Seller or any Acquired Company,
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions.
To the Knowledge of Seller and each Acquired Company (1) no such Proceeding has
been Threatened, and (2) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such Proceeding.
Seller has delivered to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Disclosure
Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter will not
have a Material Adverse Effect on Acquired Companies.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or any
of the assets owned or used by the Acquired Companies, is subject;
(ii) Seller is not subject to any Order that relates to the business
of, or any of the assets owned or used by, the Acquired Companies; and
(iii) to the Knowledge of Seller and each Acquired Company, no
officer, director, agent, or employee of the Acquired Companies is subject to
any Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating to the
business of the Acquired Companies.
(c) Except as set forth is Part 3.15 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since December 31,
1999, has been, in full compliance with all of the terms and requirements of
each Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or failure
to comply with any term or requirement of any Order to which any Acquired
Company, or any of the assets owned or used by any Acquired Company, is subject;
and
(iii) No Acquired Company has received, at any time since December 31,
1999, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which any Acquired Company, or any of the assets owned or used by
any Acquired Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
28
Except as set forth in Part 3.16 of the Disclosure Letter, since the date
of the Interim Financial Statements, each Acquired Company has conducted its
business only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of any
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Acquired Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, greater than Two Hundred
Fifty Thousand Dollars ($250,000) in a single instance or in the aggregate;
(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, contractor,
supplier, service, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction (excluding leases of real or personal property)
involving a total remaining commitment by or to any Acquired Company of at least
Ten Thousand Dollars ($10,000);
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any asset
or property of any Acquired Company, including the sale, lease, or other
disposition of any of such Acquired Company's intellectual property;
(h) change in the accounting methods used by any Acquired Company;
(i) transaction by any Acquired Company with a Related Person except as
expressly required by or described in this Agreement;
(j) (i) additional borrowing under existing credit facilities other than
borrowings of up to one million dollars ($1,000,000) under the Company's
existing short-term line of credit, (ii) failure to make any timely payment on
an existing credit facility, or (iii) additional
29
long term liability, incurred by the Acquired Companies; or
(k) agreement, whether oral or written, by Seller or any Acquired Company
to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17 of the Disclosure Letter lists, and Seller has delivered to
Buyer true and complete copies of:
(i) each Applicable Contract that involves performance of services or
delivery of goods or materials by any Acquired Company in excess of Ten Thousand
dollars ($10,000);
(ii) each Applicable Contract that involves performance of services or
sales by, or delivery of goods or materials to, an Acquired Company in excess of
Ten Thousand dollars ($10,000);
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business;
(iv) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, contractor agreement, service or sale agreement
and other Applicable Contract affecting the ownership of, leasing of, title to,
use of, or any leasehold or other interest in personal property requiring annual
payment in excess of Twenty-Five Thousand Dollars ($25,000) or any Real
Property, of an Acquired Company, including all assignments, amendments and
modifications thereof;
(v) each licensing agreement or other Applicable Contract with respect
to patents, trademarks, copyrights, or other intellectual property, including
agreements with current or former employees, consultants, suppliers or
contractors regarding the appropriation or the nondisclosure of any of any of
the Acquired Company's intellectual property;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
an Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of an Acquired Company or limit the
freedom of an Acquired Company to engage in any line of business or to compete
with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person
30
based on sales, purchases, or profits, other than direct payments for goods;
(x) each power of attorney made by an Acquired Company that is
currently effective and outstanding;
(xi) each Applicable Contract that contains or provides for an express
undertaking by an Acquired Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of
Ten Thousand Dollars ($10,000);
(xiii) each warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by an Acquired Company; and
(xiv) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) Seller has not nor will he acquire any rights under, and Seller
has not nor will he become subject to any obligation or liability under, any
material Contract that relates to the business of, or any of the assets owned or
used by, an Acquired Company; and
(ii) no officer, director, agent, employee, consultant, or contractor
of an Acquired Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of an Acquired Company, or (B) assign to an Acquired Company or to any
other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each
Applicable Contract of the Acquired Companies listed in Part 3.17(c) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms. Seller has disclosed all material oral or written
contracts with contractors, subcontractors or suppliers with which any Acquired
Company does business, and such Acquired Company is not in default of any such
Contracts. All Contracts directly applicable to such Acquired Company's business
and necessary for the continued conduct of such Acquired Company's business
after the Closing in substantially the same manner as conducted prior to the
Closing are in the name of the Acquired Companies and not in the name of Seller
or any other Person instead of the Acquired Companies.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) each Acquired Company is, and at all times since December 31,1999,
has been, in material compliance with all applicable terms and requirements of
each
31
material Contract under which the Acquired Company has or had any obligation or
liability or by which the Acquired Company or any of the assets owned or used by
the Acquired Company is or was bound;
(ii) to the Knowledge of Seller and each Acquired Company, each other
Person that has or had any obligation or liability under any Contract under
which any Acquired Company has or had any rights is, and at all times since
December 31, 1999, has been, in full compliance with all applicable terms and
requirements of such Contract;
(iii) to the Knowledge of Seller and each Acquired Company, no event
has occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation or breach of, or
give any Acquired Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other
Person, at any time since December 31, 1999, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to any Acquired
Company under current or completed Contracts with any Person and, to the
Knowledge of Seller and each Acquired Company, no such Person has made any
demand for such renegotiation.
(f) The Applicable Contracts have been entered into in the Ordinary Course
of Business and have been entered into without the commission of any act alone
or in concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
(g) Part 3.17(g) of the Disclosure Letter sets forth an accurate and
complete list of all Real Property leases, subleases, licenses and use
agreements (collectively, the "Real Estate Leases") pursuant to which Seller
and/or an Acquired Company is a party, which Exhibit specifies for each such
Real Estate Lease (i) the type of agreement and parties thereto (e.g., lease,
sublease, license or use agreement), (ii) the address and store number of the
Real Property affected thereby, (iii) the term commencement, expiration and rent
commencement dates, (iv) the rent payable, (v) the terms of any renewal,
expansion or purchase option, or offer or first refusal rights, (vi) the terms
of any cancellation or termination rights (other than for default, casualty or
condemnation), and (vii) any security deposit and guaranty.
(h) The Real Estate Leases are legally valid, binding and enforceable in
accordance with their respective terms and are in full force and effect; (ii)
there are no defaults by Seller or any Acquired Company or, to the Knowledge of
Seller and each Acquired Company, any other party to the Real Estate Leases;
(iii) neither Seller nor any of
32
the Acquired Companies has received notice of any default, offset, counterclaim
or defense under any of the Real Estate Leases nor, to the Knowledge of Seller
and each Acquired Company, has a default been threatened; (iv) no condition or
event has occurred that with the passage of time or the giving of notice or both
would constitute a default or breach by Seller or an Acquired Company of the
material terms of any of the Real Estate Leases; and (v) all allowances,
work-letters and other amounts payable by Seller and each Acquired Company under
the Real Estate Leases (other than the rent) have been paid in full and all work
to be performed by Seller or any Acquired Company under the Real Estate Leases
has been completed. The consummation of the Contemplated Transactions does not
require the consent of any party under the Real Estate Leases.
3.18 INSURANCE
(a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of insurance to which any
Acquired Company is a party or under which any Acquired Company, or any
shareholder, director, officer or employee of any Acquired Company (in such
capacity), is or has been covered at any time within the three (3) years
preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for policies
of insurance; and
(iii) any statement by the auditor of the Acquired Companies'
financial statements with regard to the adequacy of the Acquired Companies'
coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting any Acquired
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by any Acquired Company; and
(iii) all obligations of any Acquired Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth by year, for the
current policy year and each of the three (3) preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance policy for
an amount in excess of Ten Thousand Dollars ($10,000) including the name of the
claimant,
33
affected policy, and brief description of the claim; and
(iii) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate costs of such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) All policies to which any Acquired Company is a party or that
provide coverage to any Acquired Company, or any shareholder, director, officer
or employee of any Acquired Company (in such capacity):
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) are sufficient for compliance with all Legal Requirements and
Contracts to which any Acquired Company is a party or by which it is bound;
(D) will continue in full force and effect despite the execution
of this Agreement and the occurrence of the Closing; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any Acquired Company.
(ii) No Acquired Company has received (A) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.
(iii) Each Acquired Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to which such
Acquired Company is a party or that provides coverage to such Acquired Company
or any shareholder, director, officer or employee thereof.
(iv) Each Acquired Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) Each Acquired Company is, and at all times has been, in compliance, in
all material respects, with, all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements and obligations of
Environmental Laws and related orders of any court or other Governmental Body,
and has not been and is not in material violation of or
34
liable under, any Environmental Law. Neither Seller nor any Acquired Company has
any reasonable basis to expect, nor has he or it received, any actual or
Threatened order, notice, or other communication from any Person of any actual
or potential violation or failure to comply with any Environmental Law, or of
any actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Seller or any Acquired Company has had an interest, or with respect to
any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Seller or
any Acquired Company, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Seller or any Acquired
Company, Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which Seller or any Acquired Company has or had an interest.
(c) Neither Seller nor any Acquired Company has Knowledge of, nor has any
Acquired Company or Seller received, any citation, directive, inquiry, notice,
Order, summons, warning, or other communication from any Person that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Seller or any Acquired Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by Seller or any Acquired
Company have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(d) During the period of time that the Acquired Companies owned or leased
the Facilities, there has been no Release or, to the Knowledge of Seller or any
Acquired Company, Threat of Release, of any Hazardous Materials at or from the
Facilities. Except in the Ordinary Course of the Acquired Companies' business,
neither Seller nor any Acquired Company has permitted or conducted any Hazardous
Activity with respect to the Facilities.
(e) Seller has made available to Buyer true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by Seller or any Acquired Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by Seller,
any Acquired Company, or any other Person for whose conduct they are or may be
held responsible, with Environmental Laws.
(f) With respect to permits and licenses, (i) all licenses, permits,
consents, or
35
other approvals required under Environmental Laws that are necessary to the
operations of the Acquired Companies have been obtained and are in full force
and effect and neither Seller nor any Acquired Company has Knowledge of any
basis for revocation or suspension of any such licenses, permits, consents or
other approvals; (ii) to the Knowledge of Seller and the Acquired Companies, no
Environmental Laws impose any obligation upon Buyer, as a result of any
transaction contemplated hereby, requiring prior notification to any
Governmental Body of the transfer of any permit, license, consent, or other
approval which is necessary to the operations of the Acquired Companies; (iii)
all of the operations of the Acquired Companies were constructed and have been
operated in accordance with the representations and conditions made or set forth
in the permit applications and the permits for the Acquired Companies; and (iv)
the Acquired Companies have at all times been operated in material compliance
with such permits, licenses, consents, or approvals, and at the production
levels or emission levels specified in such permits, licenses, consents, or
approvals;
(g) No portion of the Facilities is part of a site listed on the National
Priorities List under CERCLA or any similar ranking or listing under any state
law;
(h) To the Knowledge of Seller and the Acquired Companies, all Hazardous
Materials generated by the Acquired Companies have been transported, stored,
treated and disposed of by carriers or treatment, storage and disposal
facilities authorized or maintaining valid permits under all applicable
Environmental Laws;
(i) To the Knowledge of Seller and the Acquired Companies, no Person has
disposed or Released any Hazardous Materials on, at, or under the Facilities;
(j) To the Knowledge of Seller and the Acquired Companies, no facts or
circumstances exist which could reasonably be expected to result in any
liability to any Person with respect to the current or past business and
operations of the Acquired Companies in connection with (i) any Release,
transportation or disposal of any Hazardous Materials, or (ii) any action taken
or omitted that was not in full compliance with or was in violation of any
applicable Environmental Law.
(k) All underground storage tanks (each such tank a "Covered UST") owned or
operated by any Acquired Company are eligible for coverage under applicable
Federal or State underground storage tank trust fund programs (each a "UST
Program").
(l) Each of the Acquired Companies has submitted all registrations and paid
all deductibles and other fees and has complied with all other applicable Legal
Requirements necessary to establish eligibility for, reimbursement from, funding
under, or otherwise participation in the UST Program applicable to any or all of
the Facilities.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each shareholder, employee or director of
each Acquired
36
Company, including each employee on leave of absence or layoff status: employer;
name; job title; current compensation paid; vacation accrued, severance pay,
insurance, medical, welfare, or vacation plan, or any other employee benefit
plan.
(b) Except as disclosed in Part 3.20 of the Disclosure Letter, no
shareholder, employee or director of any Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such shareholder,
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or could reasonably be expected to affect (i) the
performance of his duties as an employee or director of an Acquired Company, or
(ii) the ability of an Acquired Company to conduct its business, including any
Proprietary Rights Agreement with Seller or an Acquired Company by any such
shareholder, employee or director. To the Knowledge of Seller and each Acquired
Company, no key employee of an Acquired Company, other than Seller, intends to
terminate his employment with such Acquired Company within the next twelve (12)
months.
(c) There is no retired or former employee of any Acquired Company
receiving any benefits or other compensation from Seller or any Acquired Company
and no Acquired Company has agreed to pay Seller or any current employee any
benefits or other compensation following the termination of his or her
employment.
3.21 EMPLOYMENT COMPLIANCE
Except as disclosed in Part 3.21 of the Disclosure Letter, no Acquired
Company is now nor has it been, since December 31, 1999, a party to any
Proceeding against or affecting any Acquired Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters including any charge or complaint filed by any employee with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, or other labor employment dispute against or
affecting any Acquired Company or its assets. To the Knowledge of Seller and
each Acquired Company, no event has occurred or circumstance exists that could
provide the basis for any labor dispute or complaint regarding wages, fringe
benefits, or other compensation owed to any employee of any Acquired Company.
Each Acquired Company has complied in all material respects with all Legal
Requirements relating to equal employment opportunity, non-discrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
Social Security and similar taxes, and occupation safety and health matters. No
Acquired Company is liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.22 CERTAIN PAYMENTS
Except for customary gifts and entertainment consistent with industry
practices (and that do not violate any Legal Requirement), since December 31,
1999, neither any Acquired Company nor any shareholder, director, officer,
agent, or employee of any Acquired Company has directly or indirectly (a) made
any contribution, gift, bribe, rebate,
37
payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of such Acquired
Company, or (iv) in violation of any Legal Requirement, (b) established or
maintained any fund or asset of such Acquired Company that has not been recorded
in the books and records of such Acquired Company.
3.23 DISCLOSURE
No representation or warranty of Seller in this Agreement and no statement
in the Disclosure Letter contains an untrue statement of material fact or omits
to state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
3.24 INTELLECTUAL PROPERTY
(a) The Acquired Companies own or have a valid right to use all of the
Proprietary Rights necessary for the operation of the businesses of the Acquired
Companies as presently conducted, including without limitation the trade names
"Discount Food Mart" and "Victory Fuels" and related marks, although the
Acquired Companies have sought no formal legal protection of such Proprietary
Rights. No patents or copyright, trademark or service xxxx registrations have
been issued to any Acquired Company, nor has any Acquired Company filed any
patent application or application for copyright, trademark or service xxxx
registration with respect to any of its Proprietary Rights.
(b) No Acquired Company has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Proprietary Rights of
third parties, and neither Seller nor any of the Acquired Companies has ever
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including any claim
that the Company must license or refrain from using any Proprietary Rights of
any third party).
(c) To the Knowledge of Seller and the Acquired Companies, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Proprietary Rights of the Acquired Companies.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure Letter, neither Seller
nor any Related Person of Seller or of an Acquired Company has, or since
December 31, 1999, has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Acquired Companies' business. Except as set forth in Part 3.25 of the
Disclosure Letter, neither Seller nor any Related Person of Seller or of any
Acquired Company is, or since the first day of the next to last completed fiscal
year of such Acquired Company has owned (of record or as a beneficial owner) an
38
equity interest or any other financial or profit interest in, a Person that has
(i) had business dealings or a material financial interest in any transaction
with such Acquired Company other than business dealings or transactions
conducted in the Ordinary Course of Business with such Acquired Company at
substantially prevailing market prices and on substantially prevailing market
terms, or (ii) engaged in competition with any Acquired Company with respect to
any line of the products or services of any Acquired Company (a "Competing
Business") in any market presently served by any Acquired Company except for
less than one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the over-the-counter
market. Except as set forth in Part 3.25 of the Disclosure Letter, neither
Seller nor any Related Person of Seller nor of any Acquired Company is a party
to any Contract with, or has any claim or right against, any Acquired Company.
3.26 CONDEMNATION
Except as disclosed in Part 3.26 of the Disclosure Letter, neither the
whole nor any portion of the Real Property has been condemned, requisitioned or
otherwise taken by any public authority (a "Public Taking"), and no notice of
any Public Taking has been received by Seller or any Acquired Company with
regard to the Real Property. To the Knowledge of Seller and each Acquired
Company, no Public Taking is threatened or contemplated with respect to the Real
Property.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 CAPACITY
Buyer has the requisite corporate power and authority to execute and
deliver this Agreement and the Stock Purchase Escrow Agreement, and to perform
its obligations hereunder and thereunder. This Agreement and the Stock Purchase
Escrow Agreement, and the consummation of the Contemplated Transactions, have
been duly authorized and approved by all necessary corporate action on the part
of Buyer. This Agreement constitutes and upon the execution and delivery by
Buyer of the Stock Purchase Escrow Agreement, the Stock Purchase Escrow
Agreement will constitute the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws which affect the enforcement of
creditors rights generally and by equitable principles, including the
availability of specific performance.
4.2 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
Buyer confirms that Seller has made available to Buyer and its representatives
and agents the opportunity to ask questions of the officers and management
employees of the Acquired Companies and
39
to acquire such additional information about the business and financial
condition of the Acquired Companies as Buyer has requested.
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To the
Knowledge of the executive officers of Buyer, no such Proceeding has been
Threatened.
4.4 BROKERS OR FINDERS
Buyer has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement or Buyer's acquisition of the
Shares except for any amounts that are or may be due to Xxxxxx Xxxxxx, which
shall be paid by Buyer.
4.5 NON-CONTRAVENTION
Neither the execution and delivery of this Agreement, nor the consummation
of the Contemplated Transactions, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Buyer is
subject or any provision of its charter, bylaws, or other governing documents.
4.6 FINANCIAL ABILITY
Buyer has the financial ability to pay the Base Purchase Price when due.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Seller will, and
will cause each Acquired Company and its Representatives to, (a) afford Buyer
and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") reasonable access, during regular business
hours and upon reasonable advance written notice to Seller, to each Acquired
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
40
Between the date of this Agreement and the Closing Date, Seller will, and
will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a material nature;
and
(d) otherwise report periodically to Buyer concerning the status of the
business, properties, financial condition, results of operations and prospects
of such Acquired Company.
5.3 NEGATIVE COVENANTS
(a) Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Seller will not, and will cause
each Acquired Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
(b) Between the date of this Agreement and the Closing Date, neither Seller
nor any Acquired Company will (i) make additional borrowings under existing
credit facilities other than borrowings of up to one million dollars
($1,000,000) under the Company's existing short-term line of credit, (ii) fail
to make timely payment on existing loans, or (iii) incur additional long-term
liabilities.
(c) Between the date of this Agreement and the Closing Date, neither Seller
nor any Acquired Companies will, without prior written consent of Buyer (which
will not be unreasonably withheld), (i) make or change any election in respect
of Taxes, (ii) adopt or change any accounting method in respect of Taxes, (iii)
file any amendment to a Tax Return, (iv) enter into any closing agreement, (v)
settle any claim or assessment in respect of Taxes, or (vi) consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller will,
and will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Seller
will, and will cause each Acquired Company to cooperate with Buyer with respect
to all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions.
41
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Seller will
promptly notify Buyer in writing if he becomes aware of any fact or condition
that causes or constitutes a Breach of any of Seller's representations and
warranties as of the date of this Agreement, or if Seller becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, Seller will promptly deliver to
Buyer a supplement to the Disclosure Letter specifying such change. During the
same period, Seller will promptly notify Buyer of the occurrence of any Breach
of any covenant of Seller in this Section 5 or of the occurrence of any event
that may make the satisfaction of the conditions in Section 7 impossible or
unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller will not, and will cause each Acquired Company and each of
their Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of any Acquired Company, or any of the capital
stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company. Seller will
notify Buyer promptly in writing of any such unsolicited inquiries or proposal
received by Seller, any Acquired Company or, or to the Knowledge of Seller, any
of their Representatives.
5.7 RELEASE OF SELLER LIABILITIES: SELLER EFFORTS
During the period prior to the Closing, Seller will use his reasonable Best
Efforts (and cause the Acquired Companies to use their respective reasonable
Best Efforts) to obtain a release from (a) all of Seller's personal liabilities
arising from the Acquired Companies' properties which are leased from third
parties (the "Lease Liabilities") and (b) all of Seller's personal guarantees
and other personal liabilities in connection with obligations of the Acquired
Companies (such obligations, other than the Lease Liabilities, the "Other
Personal Liabilities").
5.8 FINANCIALS: SELLER'S OBLIGATIONS
Seller has heretofore caused the Company to provide to Buyer the unaudited
balance sheet, income statement and cash flow statement of the Company as of
November 30, 2003 and for the twelve (12) months then ended (the "November 30
42
Financials"). As provided for in Section 6.4 hereof, Buyer will select and pay
for an auditor to audit the November 30 Financials. To the extent that the
assistance of the Companies' auditor is necessary to assist Buyer's auditor in
auditing the November 30 Financials, Seller shall be solely responsible for the
costs and expenses of such assistance. In addition, Seller will cause the
Company to provide to Buyer, on a monthly basis, an unaudited balance sheet,
income statement, and cash flow statement of the Acquired Companies for each
calendar month (beginning with the month of December) as completed by the
Company in accordance with its customary schedule (the "Monthly Financials").
5.9 AIRPLANE
The Airplane will be contributed to a newly-formed limited liability
company (the "SMLLC") in exchange for all of the membership interests therein
and the membership interests will be distributed to Seller in the form of a
dividend by the Company at or immediately prior to the Closing, at which xxxx
Xxxxxx (or in Seller's sole discretion the SMLLC) shall assume, and the Company
shall be released from (or shall make other arrangements reasonably satisfactory
to Buyer with respect to), the indebtedness of the Company secured by or
otherwise related to the Airplane. Seller shall be solely responsible for
Seller's income tax obligation with respect to such dividend. The Acquired
Companies shall be solely responsible for the income Tax consequences, if any,
to the Acquired Companies of the distribution of the SMLLC membership interests
to Seller and the related assumption by Seller of the related indebtedness, all
of which shall be deemed to constitute Taxes with respect to a taxable period
ending on or prior to the Closing Date. Any transfer, documentary, sales, use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with the contribution of the Airplane to the SMLLC or the
distribution of the SMLLC membership interests shall be borne by Seller.
5.10 SELLER INDEBTEDNESS TO ACQUIRED COMPANIES
Funds previously received by Seller from the Acquired Companies and
evidenced by either a note or accounted for as a receivable on the books of the
Acquired Companies in the amount of Eight Hundred Seventeen Thousand Four
Hundred and Ninety-Six Dollars ($817,496) will be declared and treated as a
dividend to Seller at or immediately prior to the Closing. Seller shall be
solely responsible for Seller's income tax obligations with respect to such
dividend.
5.11 ENVIRONMENTAL DUE DILIGENCE
(a) Seller has heretofore selected one or more environmental consultants
reasonably satisfactory to Buyer (collectively, the "Consultants") and Buyer has
engaged and instructed the Consultants to undertake the Assessments, as more
fully described in Section 6.5(a) hereof. Seller and Buyer will each be
responsible for the payment of fifty percent (50%) of the amount of all invoices
submitted by the Consultants; provided, however, that the aggregate amount
payable by Seller for the preparation of the
43
Assessments shall not exceed Sixty-Two Thousand Five Hundred Dollars ($62,500).
Seller will be entitled, at his own expense, to obtain copies of any materials
prepared by the Consultants in connection with the services hereunder.
(b) To the extent that Buyer reasonably concludes or has concluded that
Phase II soil or groundwater sampling is necessary or appropriate as part of the
due diligence process, Seller shall cause such testing to be undertaken by the
Consultants. Buyer will engage the services of the Consultants and Buyer and
Seller each will be responsible for the payment of fifty percent (50%) of the
amount of all invoices submitted by the Consultants. Seller will be entitled, at
his own expense, to obtain copies of any materials prepared by the Consultants
in connection with the services provided under this Section 5.11(b).
(c) Seller covenants that prior to Closing, it will, at its sole expense,
remove and dispose of off-site the drums of waste material stored at its Bulk
Plant located at 0000 Xxxxxxx Xxxxxx xx Xxxx Xxxxx, Xxxxxxx.
5.12 ENVIRONMENTAL REMEDIATION
(a) Seller covenants that, at its sole expense, it will use its
commercially reasonable efforts to undertake and diligently complete the
Remediation at those Facilities identified on EXHIBIT 5.12(a) hereto at which
contamination has been determined to be present as of the Closing Date
(hereinafter the "Known Non-Trust Fund Contamination Facilities").
(b) With respect to any Environmental Liabilities relating to the Known
Non-Trust Fund Contamination Facilities, Seller's obligation to implement and
complete such Remediation shall be subject to the following requirements:
(i) Buyer shall have the right to participate in the planning and
design of the Remediation and the right to participate in any meetings with,
hearings before, or other sessions or communications with any Governmental Body
regarding the Remediation;
(ii) Seller will coordinate the schedule of the Remediation with Buyer
so that disruptions of the business will be minimized;
(iii) Seller will conduct the Remediation in compliance with all
applicable Environmental Laws and as directed by the appropriate Governmental
Body;
(iv) Seller will not agree to or elect any Remediation that imposes
any obligations on Buyer without the prior written consent of Buyer, which
consent shall not be unreasonably withheld;
(v) Seller will provide Buyer draft copies of any report or plan
related to the Remediation at least ten (10) days before such report or plan is
to be submitted to the Governmental Body and shall give due consideration to any
comments, suggestions or
44
requests of Buyer in connection with the finalization of such draft report or
plan; and
(vi) Seller will provide Buyer with copies of all reports, plans and
correspondence submitted to or received from a Governmental Body with respect to
the Remediation.
(c) The parties understand and acknowledge that the Remediation described
above in paragraphs (a) and (b) may be undertaken by a corporation or limited
liability company of which Seller is the sole shareholder, or by an
environmental consulting firm retained by Seller and reasonably acceptable to
Buyer. Nothing in the foregoing sentence shall, however, be deemed to nor shall
it limit the liability of Seller to Buyer under this Agreement.
(d) If, after Closing, a Covered UST at a Known Non-Trust Fund
Contamination Facility ceases to be eligible for coverage under applicable UST
Programs as a result of the actions or inactions of any Acquired Company or
Buyer (or any of their respective officers, directors, employees, or agents),
then Seller shall be released from any further obligations under this Section
5.12 with regard to the Remediation of such Known Non-Trust Fund Contamination
Facility (such release is in addition to the release more fully provided in
Section 10.8(d) hereof).
5.13 SATISFACTION OF CLOSING CONDITIONS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Seller will use its reasonable Best Efforts to
cause the conditions in Articles 7 and 8 to be satisfied.
5.14 EMPLOYEE BENEFITS ACCRUAL
Prior to the Closing Date, Seller will accrue an amount equal to the amount
of all employee accrued vacation time and severance pay, including, without
limitation, all Taxes payable by the Acquired Companies in connection with such
obligations.
6. COVENANTS OF BUYER PRIOR AND SUBSEQUENT TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Buyer
will, and will cause each Related Person to, cooperate with Seller with respect
to all filings that Seller is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Seller in
obtaining all consents identified in Part 3.2 of the Disclosure Letter; provided
that this Agreement will not require Buyer to dispose of or make any change in
45
any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
6.2 SATISFACTION OF CLOSING CONDITIONS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its reasonable Best Efforts to
cause the conditions in Sections 7 and 8 to be satisfied.
6.3 RELEASE OF SELLER LIABILITIES: BUYER EFFORTS
(a) During the period prior to the Closing, Buyer will use its reasonable
Best Efforts to obtain the release of Seller from all personal liabilities
arising from the Acquired Companies' properties which are leased from third
parties (the "Lease Liabilities"). To the extent that Buyer is unsuccessful in
obtaining Seller's unconditional release from all personal liabilities with
respect to each of the leases included within the Lease Liabilities, Buyer will
provide to Seller at Closing (i) lease liability insurance with a reputable
insurance company reasonably satisfactory to Seller, in form reasonably
satisfactory to Seller, which will cover the unreleased personal liabilities of
Seller included in the Lease Liabilities up to the dollar amount equal to the
aggregate of one year's rent under all those leases included within the Lease
Liabilities as to which Seller's personal liability has not been released or
(ii) guarantees, insurance, a letter of credit or other security, in each case
reasonably satisfactory to Seller, with respect to any Lease Liabilities as to
which Seller's personal liability has not been released.
(b) During the period prior to the Closing, Buyer will use its reasonable
Best Efforts to assist Seller in obtaining his release from the Other Personal
Liabilities.
6.4 FINANCIALS: BUYER'S OBLIGATIONS
Buyer will select an auditor to audit the November 30 Financials and to
review the Monthly Financials. Buyer will be solely responsible for the costs
and expenses of such auditor.
6.5 ENVIRONMENTAL DUE DILIGENCE
(a) As more fully described in Section 5.11(a) hereof, Buyer has engaged
the Consultants and instructed them to commence the preparation of ASTM Phase I
Environmental Site Assessments of all the Acquired Companies' owned or leased
properties (the "Assessments"). Buyer and Seller's responsibility for payment of
the Assessment costs, and Seller's rights to copies of materials prepared by the
Consultants, are more fully described in Section 5.11(a) hereof.
(b) As more fully described in Section 5.11(b) hereof, Buyer has engaged
or may engage the services of the Consultants to undertake certain soil or
groundwater testing. Buyer and Seller's responsibility for payment of such
testing, and Seller's rights to copies of
46
materials prepared by the Consultants, are more fully described in Section 5.11
(b) hereof.
6.6 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer will
promptly notify Seller in writing if it becomes aware of any fact or condition
that causes or constitutes a Breach of any of Buyer's representations and
warranties as of the date of this Agreement, or if Buyer becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Prior to the Closing, Buyer will promptly notify Seller of the
occurrence of any Breach of any covenant of Buyer in this Section 6 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 8 impossible or unlikely.
6.7 REMEDIATION OF KNOWN BUYER REMEDIATION FACILITIES
(a) With respect to any remediation of those certain facilities identified
on EXHIBIT 6.7 hereto, where there are indications that contamination is or has
been present as of the Closing Date (the "Known Buyer Remediation Facilities"),
the parties understand and agree that Buyer shall be responsible, to the extent
required by the applicable Governmental Body, for the remediation of such
facilities and that Seller shall, to the extent applicable, indemnify, defend,
and hold Buyer harmless from Damages arising from such contamination and for
such remediation, as described in Article 10 hereof. With regard to the
remediation undertaken by Buyer:
(i) Seller shall have the right to participate in the planning and
design of the Remediation and the right to participate in any meetings with,
hearings before, or other sessions or communications with any Governmental Body
regarding the Remediation;
(ii) Buyer will conduct the Remediation in compliance with all
applicable Environmental Laws and as directed by the appropriate Governmental
Body;
(iii) Buyer will not agree to or elect any Remediation that imposes
any obligations on Seller without the prior written consent of Seller, which
consent shall not be unreasonably withheld;
(iv) Buyer will provide Seller draft copies of any report or plan
related to the Remediation at least ten (10) days before such report or plan is
to be submitted to the Governmental Body and shall give due consideration to any
comments, suggestions or requests of Buyer in connection with the finalization
of such draft report or plan;
(v) Buyer will provide Seller with copies of all reports, plans and
correspondence submitted to or received from a Governmental Body with respect to
the Remediation; and
47
(vi) To the extent that a Facility is, as of Closing, under
remediation, Buyer will not alter the type of remediation in place at such
Facility unless and until the applicable Governmental Body requires such change.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Seller's representations and warranties in this Agreement
(considered collectively), and each of such representations and warranties
(considered individually), must have been accurate as of the date of this
Agreement (except for any representation or warranty made as of a specified
date, which shall be true and correct as of such specified date), and must be
accurate in all material respects (except for such representations and
warranties that by their terms are qualified by reference to materiality, which
representations and warranties shall be accurate in all respects) as of the
Closing Date as if made on the Closing Date. In the event the Disclosure Letter
is supplemented with matters which are not caused by the seasonality or other
customary course of business of the Acquired Companies, the parties agree that
the following provision shall apply: (i) If the adverse change requires a
supplementation and the change is covered by the working capital adjustment
mechanism described in Section 2.2(b) hereof (the "Working Capital Adjustment")
or by insurance held by the Acquired Companies, Buyer shall not be allowed to
use such change as the basis for refusing to consummate the Contemplated
Transactions; (ii) If the adverse change is not covered by the Working Capital
Adjustment or by insurance held by the Acquired Companies, can be cured, and is
Five Hundred Thousand Dollars ($500,000) or less, then Seller has the right to
cure such change (including, but not limited to, through a reduction in the
Purchase Price) and Buyer shall not be allowed to use such change as the basis
for refusing to consummate the Contemplated Transactions; (iii) if the adverse
change is not covered by the Working Capital Adjustment or by insurance held by
the Acquired Companies, cannot be cured, and is Five Hundred Thousand Dollars
($500,000) or less, then Seller has the right to agree to indemnify and hold
Buyer harmless from and against such change (which indemnification obligation
shall be in addition to and not included in the amount of three million dollars
($3,000,000) set forth in Section 10.8(b) and if due shall be paid by Seller
directly rather than from the Stock Purchase Escrow) and Buyer shall not be
allowed to use such change as the basis for refusing to consummate the
Contemplated Transactions; and (iv) If the adverse change is not covered by the
Working Capital Adjustment or by insurance held by the Acquired Companies and is
more than Five Hundred Thousand Dollars ($500,000), then (regardless of whether
such change can be cured), Seller can offer to address such change (through
reduction in purchase price, cash payment, indemnification, or otherwise), but
Buyer has the right to refuse to consummate the Contemplated Transactions as a
result of such change.
48
7.2 SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of such covenants and obligations
(considered individually), must have been duly performed and complied with in
all respects.
(b) Each document required to be delivered pursuant to Section 2.5 must
have been delivered and each of the conditions set forth in Section 2.5(d)-(g)
must have been satisfied.
7.3 ADDITIONAL DOCUMENTS
All documents delivered by Seller at Closing must be received by Buyer in
form and content reasonably acceptable to Buyer and his counsel, together with
such other documents as Buyer may reasonably request for the purpose of (i)
evidencing the accuracy of any of Seller's representations and warranties, (ii)
evidencing the performance by Seller of, or the compliance by Seller with, any
covenant or obligation required to be performed or complied with by Seller,
(iii) evidencing the satisfaction of any condition referred to in this Article
7, or (iv) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.4 NO PROCEEDINGS
(a) Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer or any Acquired Company, or against any Person
affiliated with Buyer, any third party Proceeding (i) involving any challenge
to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (ii) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
(b) There shall not be in effect, or Threatened, any Legal Requirement or
any injunction or other Order that (i) prohibits the sale of the Shares by
Seller to Buyer, and (ii) has been adopted or issued, or has otherwise become
effective, or have been Threatened, since the date of this Agreement.
7.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any Acquired Company, or (b) is
entitled to all or any portion of the Purchase Price payable for the Shares.
7.6 NO PROHIBITION
49
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene, or conflict with, or result in a violation of, or cause Buyer
or any Person affiliated with Buyer to suffer any material adverse consequence
under any applicable Legal Requirement or Order.
7.7 REQUIRED CONSENTS
(a) Each of the consents identified in Part 3.2 of the Disclosure Letter
shall have been obtained and must be in full force and effect.
(b) [INTENTIONALLY OMITTED]
(c) Seller shall have received the Third Party Consents.
7.8 ACQUIRED COMPANY LOANS
Seller shall not be in breach of any of its agreements for borrowed money,
unless such breach has been waived or otherwise excused for a period of at least
six (6) months from the Closing Date by the lender (without an increase in the
applicable rate of interest or other change adverse to the Acquired Companies).
7.9 ACQUIRED COMPANY LIABILITIES
Since November 30, 2003, there shall have been no increase, individually or
in the aggregate, in any liabilities of an Acquired Company that are not
included in (or are excluded from) the procedures set forth in Exhibit 2.2(b)
hereto for the calculation of working capital.
7.10 [INTENTIONALLY OMITTED]
7.11 AUDIT OF NOVEMBER 30 FINANCIALS
The audit of the November 30 Financials pursuant to Section 5.8 shall have
confirmed that (a) the working capital of the Acquired Companies at November 30,
2003, determined in accordance with Exhibit 2.2(b) hereto, was at least Two
Million, Six Hundred Eleven Thousand Dollars ($2,611,000); (b) the 12-month
trailing EBITDA of the Acquired Companies through November 30, 2003, as
determined in accordance with Exhibit 9.1(e) hereto, was at least Ten Million,
Six Hundred Eighty Thousand Dollars ($10,680,000); and (c) the November 30
Financials otherwise were accurate in all material respects.
7.13 ENVIRONMENTAL INSURANCE POLICY
At or before Closing, Buyer shall have obtained the Environmental Insurance
Policy.
50
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of such representations and warranties (considered
individually), must have been accurate as of the date of this Agreement (except
for any representation or warranty made as of a specified date, which shall be
true and correct as of such specified date) and must be accurate in all material
respects (except for such representations and warranties that by their terms are
qualified by reference to materiality, which representations and warranties
shall be accurate in all respects) as of the Closing Date as if made on the
Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of such covenants and obligations
(considered individually), must have been performed and complied with in all
respects.
(b) Buyer must have made the payments required to be made by Buyer pursuant
to Section 2.2 and otherwise have fully complied with Section 2.2.
8.3 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Seller:
(a) those documents more fully described in Section 2.5(b) hereof;
(b) the Stock Purchase Escrow Agreement, duly executed by Buyer; and
(c) such other documents as Seller may reasonably request for the purpose
of (i) evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(iv) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.4 NO INJUNCTION
There shall not be in effect, or Threatened, any Legal Requirement or any
injunction or other Order that (a) prohibits the sale of the Shares by Seller to
Buyer, and (b) has been
51
adopted or issued, or has otherwise become effective, or have been Threatened,
since the date of this Agreement.
8.5 RELEASE OF OTHER PERSONAL LIABILITIES
Seller shall have been released from all of the Other Personal Liabilities
or received guarantees, insurance, a letter of credit or other security, in each
case satisfactory to Seller, in his reasonable discretion, with respect to any
Other Personal Liability that has not been released.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Seller if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived or cured within fifteen (15) days following written notice of such
Breach;
(b) (i) by Buyer if any of the conditions in Section 7 have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Seller, if any of the conditions in Section
8 have not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Seller to
comply with his obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller;
(d) by either Buyer or Seller if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before May 14, or such
later date as the parties may agree upon in writing;
(e) by Buyer if (i) the Acquired Companies' 12-month trailing EBITDA
through November 30, 2003, as determined in accordance with Exhibit 9.1(e)
hereto is less than Ten Million, Six Hundred Eighty Thousand Dollars
($10,680,000); or (ii) the auditor selected pursuant to Section 6.4 hereof is
unable to deliver an unqualified audit opinion with respect to the November 30
Financials; or
(f) by Seller if the additional One Million Dollars ($1,000,000) referenced
in Section 2.3 hereof is not deposited with the Xxxxxxx Money Escrow Agent
within twenty-four (24) hours of the execution of this Agreement.
52
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any
other rights a party may have under this Agreement or otherwise, including, but
not limited to, those rights of Buyer and Seller in and to the Xxxxxxx Money
which are more fully described in Section 2.3 hereof, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Section 12.1 will
survive; provided, however, that if this Agreement is terminated by a party
because of the Breach of the Agreement by the other party or because one or more
of the conditions to the terminating party's obligations under this Agreement is
not satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered by Seller to Buyer pursuant to Section 2.5(a)(ii), the
certificate delivered by Buyer to Seller pursuant to Section 2.5(b)(iii), and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Subject to the provisions of Section 10.4 and Section 10.8 hereof, other
than Tax Claims, with respect to which Seller's indemnification obligations
shall be governed exclusively by the provisions of Section 10.6 hereof, Seller
will indemnify and hold harmless Buyer, Acquired Companies, and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (excluding, however,
incidental, consequential and special or punitive damages, except as expressly
provided for in Section 10.8(c)), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller in this
Agreement (considered without regard to any qualifications by, or references to,
materiality or Knowledge), the Disclosure Letter and the supplements to the
Disclosure Letter;
(b) any Breach by Seller of any covenant or obligation of Seller in this
Agreement;
(c) any Damage incurred by any Acquired Company as a result of any product
sold or service rendered by or on behalf of any Acquired Company on or prior to
the
53
Closing Date;
(d) any and all Environmental Liabilities that may be imposed upon or
incurred by Buyer or any of the Acquired Companies arising out of or in
connection with: (i) any and all Environmental Conditions, known or unknown,
existing on or prior to the Closing Date on, at, or underlying any of the
Facilities, (ii) the ownership or operation of the Acquired Companies on or
prior to the Closing Date, or (iii) the on-site or off-site handling, storage,
treatment or disposal of any Hazardous Materials generated by Seller or any of
the Acquired Companies on or prior to the Closing Date, in each case whether or
not there has been any breach by Seller of any representation or warranty
contained in Section 3.19 hereof;
(e) any Damage arising from the transfer of the Airplane from the Company
to Seller; or
(f) any Damage arising from the SunTrust Litigation;
provided, however, that the term "Damages" shall not include or otherwise take
into account any reduction in or application, utilization or diminution of any
"net operating loss" of any of the Acquired Companies, as such term is defined
respectively for federal and state income tax purposes in Section 172 of the IRC
and Section 40-18-35.1 of the Code of Alabama 1975.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Subject to the provisions of Section 10.4 and Section 10.8 hereof, Buyer
will indemnify and hold harmless Seller, and will pay to Seller the amount of
any Damages arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement (considered without regard to any qualifications by, or references to,
materiality or Knowledge);
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement; or
(c) any Damage incurred by Seller as a result of any product sold or
service rendered by or on behalf of any Acquired Company after the Closing Date.
10.4 TIME LIMITATIONS
Neither Buyer nor Seller will have any liability (for indemnification or
otherwise) with respect to any indemnification obligation arising under Section
10.2 or Section 10.3 hereof, unless on or before the third (3rd) anniversary of
the Closing Date the other party notifies such party of a claim, specifying the
factual basis of that claim in reasonable detail; provided, however, that this
Section 10.4 shall not limit liability for a matter (a) in the case
54
of the indemnification obligations of Seller if, (i) such matter was within the
area of responsibility of a member of the Supervisor Knowledge Group and such
member of the Supervisor Group had Knowledge of such matter prior to Closing,
(ii) a member of the Management Knowledge Group had Knowledge of such matter
prior to Closing, or(iii) such matter is an Environmental, Health, and Safety
Liability relating to either the Known Non-Trust Fund Contamination Facilities
or the Known Buyer Remediation Facilities, where such Environmental, Health, and
Safety Liability arises out of an Environmental Condition existing on, at, or
underlying such Facilities on or prior to the Closing Date, which were Known to
Seller or the Acquired Companies at or prior to the Closing Date, and (b) in the
case of the indemnification obligations of Buyer, if Uzi Yemin had Knowledge of
such matter prior to Closing; provided, further, that this Section 10.4 shall
not limit liability for the matters described in Section 10.2(b), (e), or (f) or
Section 10.3(b); and provided, further, that Seller's representations and
warranties made in Section 3.11 and Part 3.11 of the Disclosure Letter shall
continue in full force and effect until ninety (90) days after the expiration of
the applicable statutes of limitation (including any extensions thereto, whether
automatic or permissive).
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
This Section 10.5 applies to all third party claims, except for Tax Claims,
which are addressed in Section 10.6.
(a) Promptly after receipt by an indemnified party under Section 10.2 or
Section 10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnified party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that it has
differing or conflicting defenses from the indemnifying parties, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of such
Proceeding with counsel reasonably satisfactory to the indemnified party and,
after notice in writing from the indemnifying party to the indemnified party of
its election to assume the defense of such Proceeding, the indemnifying party
will not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such Proceeding, other
55
than reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes of
this Agreement that the claims made in that Proceeding are within the scope of
and subject to indemnification; (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten (10) days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding at the expense of the
indemnifying party, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld or
delayed).
10.6 INDEMNIFICATION AND PROCEDURE FOR INDEMNIFICATION--TAX MATTERS
(a) Except to the extent Taxes are reserved for on Interim Balance Sheet,
Seller agrees to be responsible for and to indemnify and hold the Indemnified
Persons harmless from and against any and all Taxes (or any asserted deficiency,
claim, demand, action, suit, proceeding, judgment or assessment, including the
defense or settlement thereof, relating to such Taxes) that may be imposed upon
or assessed against any of the Acquired Companies, or the assets thereof:
(i) with respect to all taxable periods of the Acquired Companies
ending on or prior to the Closing Date;
(ii) with respect to any and all Taxes of the Acquired Companies
allocated to Seller pursuant to Section 11.2;
(iii) by reason of being a successor-in-interest or transferee of
another entity; and
(iv) with respect to any and all Taxes of any member of a
consolidated, combined or unitary group of which any of the Acquired Companies
is or was a member on
56
or prior to the Closing Date, by reason of the liability of such Acquired
Company pursuant to Treas. Reg. Section 1.1502-6(a) or any analogous or similar
state, local or foreign law or regulation (collectively, "Tax Claims").
For the purpose of clarification, it is the intention of the parties that an
indemnifiable Tax Claim shall exist under this section 10.6(a) only if and to
the extent that an Acquired Company is determined to be liable for an additional
payment of Taxes after giving effect to all tax attributes permitted by
applicable law for the relevant pre-Closing period, including without limitation
net operating losses and credits against tax; provided, however, the amount of
any Tax Claim shall not take into account a carry back of any Tax loss,
deduction or credit of the Acquired Companies from any taxable period beginning
after the Closing Date. Seller also agrees to be responsible for and to
indemnify and hold the Indemnified Persons harmless from and against any Damages
incurred in connection with the Taxes (or any asserted deficiency, claim,
demand, action, suit, proceeding, judgment or assessment, including the defense
or settlement thereof, relating to such Taxes) for which Seller is responsible
to indemnify the Indemnified Persons pursuant to this Section 10.6(a) or the
enforcement of this Section 10.6(a).
(b) Buyer shall have full responsibility for and discretion in handling any
Tax controversy, including, without limitation, an audit, a protest to the
Appeals Division of the IRS or any other governmental authority and litigation
in Tax Court or any other court or tribunal of competent jurisdiction (a "Tax
Proceeding") involving any Acquired Company. However, Seller shall have the
right, at his sole expense, to consult with Buyer regarding any Tax Proceeding
with respect to any Tax Claim. Buyer agrees not to enter into or permit any of
the Acquired Companies to enter into any agreement or settlement with a taxing
authority with respect to any Tax Proceeding involving a Tax Claim without the
consent of Seller, which consent shall not be unreasonably conditioned,
withheld, or delayed. If Seller withholds his consent to any agreement or
settlement, all out-of-pocket expenses subsequently incurred by such Acquired
Company in connection with any such Tax Proceeding shall be treated as Damages
for purposes of this Section 10.6(b).
10.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
10.8 LIMITATIONS
Any other provision of this Agreement to the contrary notwithstanding:
(a) no claim for indemnification by either party under Sections 10.2(a),
(c) or (d) or Section 10.3(a) or (c) hereof may be made unless and until the
total amount of all claims by such party has exceeded Five Hundred Thousand
Dollars ($500,000), and then only to the extent of such excess; provided,
however, that this limitation shall not apply to: (i) claims relating to a
Breach of Sections 3.3, 3.8(b), or 3.9; (ii) with regard to the indemnification
obligation of Seller to Buyer, any Breach or Damages of which (A) a
57
member of the Supervisor Group had Knowledge of prior to Closing and such matter
was within the area of responsibility of such member of the Supervisor Knowledge
Group, (B) a member of the Management Knowledge Group had Knowledge prior to
Closing; (iii) with regard to the indemnification obligation of Buyer to Seller,
any Breach or Damages of which Uzi Yemin had Knowledge prior to Closing; and
(iv) Environmental, Health, and Safety Liabilities relating to either the Known
Non-Trust Fund Contamination Facilities or the Known Buyer Remediation
Facilities, where such Environmental, Health, and Safety Liabilities arise out
of Environmental Conditions existing on, at, or underlying such Facilities on or
prior to the Closing Date, which were Known to Seller or the Acquired Companies
at or prior to the Closing Date, and provided further that the amount of any
claim asserted against Seller under the preceding proviso shall not be treated
as a claim for purposes of establishing that claims in excess of Five Hundred
Thousand Dollars ($500,000) have been made against Seller. The parties
understand and acknowledge that nothing in this Section 10.8(a) is intended to
nor shall it be construed as imposing any limitation on the Tax indemnity in
Section 10.6 hereof.
(b) in no case shall the aggregate liability of either party to the other
under Sections 10.2(a), (c) or (d) or Sections 10.3(a) or (c) hereof exceed
Three Million Dollars ($3,000,000); provided, however, that these limitations
shall not apply to (i) claims relating to: a Breach of Sections 3.3; (ii) with
regard to the indemnification obligation of Seller to Buyer, any Breach or
Damages of which (A) a member of the Supervisor Group had Knowledge of prior to
Closing and such matter was within the area of responsibility of such member of
the Supervisor Knowledge Group, (B) a member of the Management Knowledge Group
had Knowledge of prior to Closing; (iii) with regard to the indemnification
obligation of Buyer to Seller, any Breach or Damages of which Uzi Yemin had
Knowledge prior to Closing; and (iv) Environmental, Health, and Safety
Liabilities relating to either the Known Non-Trust Fund Contamination Facilities
or the Known Buyer Remediation Facilities, where such Environmental, Health, and
Safety Liabilities arise out of Environmental Conditions existing on, at, or
underlying such Facilities on or prior to the Closing Date, which were Known to
Seller or the Acquired Companies at or prior to the Closing Date; and provided
further, that if a claim for indemnification shall have been made but not
resolved prior to the date on which a reduction in the maximum potential
liability otherwise would have occurred, the amount of such claim shall be added
to the maximum potential liability otherwise in effect until the claim is
resolved. The parties understand and acknowledge that nothing in this Section
10.8(b) is intended to nor shall it be construed as imposing any limitation on
the Tax indemnity in Section 10.6 hereof.
(c) neither party shall be liable to the other party for any consequential,
incidental, special or punitive damages suffered by the other party arising from
Section 10.2 or Section 10.3 hereof; provided, however, that this provision
shall not in any manner limit the liability of either party to the other party
with respect to damages suffered by such other party arising from claims or
actions by third parties that include consequential, incidental, special or
punitive damages.
(d) if, a Covered UST ceases to be eligible for coverage under applicable
UST Programs as a result of the actions or inactions after Closing of any
Acquired Company or
58
Buyer (or of any of their respective officers, directors, employees, or agents),
then Buyer will not be entitled to any indemnification from Seller in connection
with liabilities related to or arising from such Covered UST.
(e) Seller's obligation to indemnify Buyer with respect to any Tax Claim
will be reduced by any Tax Benefits (hereinafter defined) available to Buyer or
any Acquired Company as a result of the payment, loss or cost giving rise to
such indemnification. For this purpose, a tax benefit shall be deemed available
to Buyer or any Acquired Company with respect to a taxable year if, and to the
extent that, Buyer or any Acquired Companies' cumulative liability for Taxes
through the end of such taxable year, calculated by excluding any Tax items
attributable to the Tax Claim from all taxable years, exceeds Buyer or any
Acquired Companies' actual cumulative liability for Taxes through the end of
such taxable year, calculated by taking into account any Tax items attributable
to the Tax Claims for all taxable years (to the extent permitted by relevant Tax
law and treating such Tax items as the last items claimed for any taxable year)
(a "Tax Benefit").
(f) The indemnity obligations of Seller shall be reduced by any net
insurance proceeds actually received by Buyer under the Environmental Insurance
Policy to be secured in connection with this transaction, after deducting all
costs incurred by Buyer in recovering such proceeds. Buyer agrees to look first
to the Environmental Insurance Policy with respect to any matter covered by the
Environmental Insurance Policy, and Seller shall not be obligated to indemnify
Buyer to the extent that Buyer's damages for any matter are covered by the
Environmental Insurance Policy; provided, however, that any deductible amount
paid by Buyer under the Environmental Insurance Policy shall constitute
Environmental Liabilities under Section 10.2(d) and otherwise, subject to the
provisions of Section 10.8(a).
(g) Notwithstanding anything in this Agreement to the contrary, neither the
total amount of Seller's liability to indemnify Buyer hereunder nor the total
amount of Buyer's liability to indemnify Seller hereunder shall exceed the Base
Purchase Price.
10.9 SOLE REMEDY
This Section 10 sets forth the exclusive and entire remedy of the parties
hereto against one another in respect of any Breach of any representation,
warranty, or covenant in this Agreement or the Disclosure Letter other than the
provisions of Sections 12.5 and 12.13 (for which the parties shall be entitled
to specific performance).
10.10 TAX TREATMENT OF INDEMNIFICATION PAYMENTS
Seller and Buyer agree to treat any indemnity payment made pursuant to this
Article 10 as an adjustment to the purchase price for federal, state, local and
foreign income tax purposes.
11. TAX MATTERS
59
The following provisions shall govern the allocation of responsibility as
between Buyer and Seller for certain tax matters following the Closing Date:
11.1 RESPONSIBILITY FOR FILING INCOME TAX RETURNS
(a) Seller shall prepare (or cause to be prepared) and file (or cause to be
filed) all Tax Returns of the Acquired Companies required to be filed by the
Acquired Companies on or prior to the Closing Date and shall cause the Acquired
Companies to pay any and all Taxes due with respect to such Tax Returns. All
such Tax Returns shall be prepared in a manner consistent with prior practice
unless otherwise required by applicable laws. Seller shall provide Buyer with
copies of such Tax Returns at least 15 days prior to the due date for filing
such Tax Returns and Buyer shall have the right to review and approve (which
approval shall not be unreasonably withheld) such Tax Returns and supporting
workpapers and schedules prior to the filing of such Tax Returns. The failure of
Buyer to propose any changes to any such Tax Return within such 15 days shall be
deemed to constitute its approval thereof.
(b) Buyer shall prepare (or cause to be prepared) and file (or cause to be
filed) all Tax Returns of the Acquired Companies required to be filed by the
Acquired Companies after the Closing Date. To the extent any Taxes shown due on
such Tax Returns are indemnifiable by Seller, (i) such Tax Returns shall be
prepared in a manner consistent with prior practice unless otherwise required by
applicable laws; (ii) Buyer shall provide Seller with copies of each such Tax
Return at least 30 days prior to the due date for filing such Tax Return; and
(iii) Seller shall have the right to review and approve (which approval shall
not be unreasonably withheld) such Tax Returns for 15 days following the receipt
thereof. The failure of Seller to propose any changes to any such Tax Return
within such 15 days shall constitute its approval thereof. Not later than ten
(10) days before the due date for payment of Taxes with respect to any such Tax
Returns, Seller shall pay to Buyer an amount equal to that portion of the Taxes
shown on such Tax Return for which Seller has an obligation to indemnify Buyer
pursuant to the provisions of Section 10.6(a).
11.2 STRADDLE PERIODS
For federal income tax purposes, the taxable year of each of the Acquired
Companies shall end as of the close of the Closing Date and, with respect to all
other Taxes, Seller and Buyer will, unless prohibited by applicable law, close
the taxable period of the Acquired Companies as of the close of the Closing
Date. Neither Seller nor Buyer shall take any position inconsistent with the
preceding sentence on any Tax Return. In any case where applicable law does not
permit any of the Acquired Companies to close its taxable year on the Closing
Date or in any case in which a Tax is assessed with respect to a taxable period
which includes the Closing Date (but does not begin or end on that day), then
Taxes, if any, attributable to the taxable period of such Acquired Company
beginning before and ending after the Closing Date shall be allocated (i) to
Seller for the period up to and including the Closing Date, and (ii) to Buyer or
the period subsequent to the Closing Date. Any allocation of income of
deductions required to determine any Taxes attributable
60
to any period beginning before and ending after the Closing Date shall be made
by means of a closing of the books and records of any such Acquired Company as
of the close of the Closing Date, provided that exemptions, allowances, or
deductions that are calculated on an annual basis (including, but not limited
to, depreciation and amortization deductions) and any annual property or ad
valorem Taxes shall be allocated between the period ending on the Closing Date
and the period after the Closing Date in proportion to the number of days in
each such period.
11.3 REFUND AND TAX BENEFITS
Subject to the provisions of Section 11.4 and in Buyer's good faith
determination, any Income Tax refunds that are received by Buyer or any Acquired
Company, and any amounts credited against Income Tax to which Buyer or any
Acquired Company becomes entitled, that are attributable to any Tax periods or
portions thereof ending on or before the Closing Date shall be for the account
of Seller, and Buyer shall pay over to Seller any such refund or the amount of
any such credit within fifteen (15) days after receipt thereof, provided,
however, such refund or such credit shall not include any amount that the IRS
may have over-refunded as described in Part 3.11 of the Disclosure Letter. In
addition, to the extent that a claim for refund or a proceeding results in a
payment or credit against Income Tax by a taxing authority to Buyer or any
Acquired Company of any amount accrued on the Closing Date Balance Sheet, Buyer
shall pay such amount to Seller within fifteen (15) days after receipt thereof
or entitlement thereto. Any payments made under this Section 11.3 shall be net
of any Taxes payable with respect to such refund (taking into account any actual
reduction in Tax liability realized upon the payment pursuant to this Section
11.3).
11.4 CARRYBACKS
Notwithstanding the provisions of Section 11.3, any income tax refunds
(including any interest thereon) realized by any Acquired Company as a result of
the carryback of any Tax loss, deduction or credit of such Acquired Company from
any taxable period beginning after the Closing Date to a taxable period
beginning ending on or before the Closing Date shall not be for the account of
Seller and shall be retained by such Acquired Company.
11.5 COOPERATION ON TAX MATTERS
(a) Buyer and Seller shall cooperate fully, and Buyer shall ensure that
each Acquired Company will also cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Article 11 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information that 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. Buyer and Seller
agree, and Buyer shall ensure that each Acquired Company agrees (A) to retain
all books and records with respect to Tax matters pertinent to the Acquired
Companies relating to any
61
taxable period before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Seller, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, Buyer (or the
Acquired Companies) or Seller, as the case may be, shall allow the other party
to take possession of such books and records.
(b) Buyer and Seller further agree, upon written request, to use their
reasonable Best Efforts to obtain any certificate or other document from any
Governmental Body 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 Contemplated Transactions).
11.6 TAX-SHARING AGREEMENTS
All tax-sharing agreements or similar agreements with respect to or
involving any Acquired Company, if any, shall be terminated as of the Closing
Date and, after the Closing Date, the Acquired Companies shall not be bound
thereby or have any liability thereunder.
11.7 CERTAIN TAXES AND FEES
All transfer, documentary, sales, use, stamp, registration and other such
Taxes, and all conveyance fees, recording charges and other fees and charges
(including any penalties and interest) incurred in connection with the
Contemplated Transactions shall be shared equally by Buyer and Seller, except
(i) as otherwise provided in Section 5.9 and Section 12.1 of the Agreement, and
(ii) with regard to such transfer, documentary, sales, use, stamp, registration
and other such Taxes, conveyance fees, recording charges and other fees and
charges which are incurred solely in connection with financing arrangements of
Buyer, which shall be borne entirely by Buyer.
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Buyer shall also pay:
(i) 50% of the costs of the Surveys, the title insurance search and
exam fees and premiums, including the cost of non-imputation endorsements, until
Buyer's portion of such aggregate costs exceed One Hundred Thousand Dollars
($100,000) and 100% of the costs thereafter,
(ii) 50% of the reasonable costs incurred in connection with the
purchase
62
of discount food mart 102 and discount food mart 182 (including, but not limited
to, recording taxes and attorneys fees, but not including the purchase price
paid for such stores);
(iii) 100% of the costs of the Title Commitments; and
(iv) all other customary closing costs normally paid by a purchaser.
Seller shall also pay:
(x) 50% of the costs of the Surveys, the title insurance search and
exam fees and premiums, including the cost of non-imputation endorsements, but
only until Seller's portion of such aggregate costs equals One Hundred Thousand
Dollars ($100,000) (thereafter Buyer shall be solely responsible for such
costs);
(y) 50% of the costs incurred in connection with the purchase of
discount food mart 102 and discount food mart 182 (including, but not limited
to, recording taxes and attorneys fees, but not including the purchase price
paid for such stores); and
(z) all other customary closing costs normally paid by a Seller.
In the event of termination of this Agreement, the obligation of each party to
pay its own expenses will be subject to any rights of such party arising from a
Breach of this Agreement by another party.
12.2 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
certified mail, return receipt requested, or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service, in each case to
the appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate by notice to the
other parties):
SELLER:
Xxxx X. Xxxxxxxxxx
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxxx Xxxxx Rose & White LLP
0000 Xxxxx Xxxxxx Xxxxx
00
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
BUYER OR DELEK US HOLDINGS:
MAPCO Family Centers, Inc.
Delek US Holdings, Inc.
000 Xxxxxxxx
Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Mr. Uzi Yemin
with a copy to:
Fulbright & Xxxxxxxx, L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
12.3 CHOICE OF LAW
This Agreement will be governed by the laws of the State of Alabama without
regard to conflicts of laws principles.
12.4 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
12.5 AGREEMENT OF SELLER NOT TO COMPETE
As an inducement for Buyer to enter into this Agreement and as additional
consideration for the consideration to be paid to Seller under this Agreement,
Seller hereby agrees that:
(a) Negative Covenants. For a period of three years after the Closing Date:
(i) Seller will not, directly or indirectly, engage in; invest in;
own; manage; operate; finance; control; participate in the ownership,
management, operation, financing or control of; be employed by, associated with
or in any way be connected with; lend his name or any similar name to; lend his
credit to; or render services or advice to; any business whose products or
activities include the sale of fuel and lubricants or the operation of
convenience stores, or otherwise compete in whole or in part with the products
or activities of any of the Acquired Companies within the State of Alabama or
within a
64
boundary which begins with each convenience store location of an Acquired
Company, as listed in Attachment 3.6 to the Disclosure Letter, and extends
twenty (20) miles in every direction, provided, however, that Seller may
continue to own, purchase or otherwise acquire up to (but not more than) five
percent (5%) of any class of securities of any enterprise if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934. Seller hereby agrees
that this covenant is reasonable with respect to its duration, geographical area
and scope; and
(ii) Seller will not, directly or indirectly, either for himself or
for any other Person, (A) induce or attempt to induce any employee of an
Acquired Company to leave the employ of such Acquired Company, (B) in any way
interfere with the relationship between Buyer or any Acquired Company and any
employee of an Acquired Company, (C) employ, or otherwise engage as an employee,
independent contractor or otherwise, any employee of an Acquired Company, or (D)
induce or attempt to induce any customer, supplier, licensee or business
relation of any Acquired Company to cease doing business with Buyer or such
Acquired Company, or in any way interfere with the relationship between Buyer or
an Acquired Company and any such customer, supplier, licensee or business
relation.
(b) Remedies. Because of the difficulty of measuring economic losses to
Buyer as a result of a breach of the foregoing covenants, and because of the
immediate and irreparable damage that could be caused to Buyer for which it
would have no other adequate remedy, Seller hereby agrees that the foregoing
covenants may be enforced by Buyer in the event of breach of any of them, by
sanctions, restraining orders and other equitable actions and that Buyer will
not be obligated to post bond or other security in seeking such relief.
(c) Severability; Reformation. The agreements and covenants in this Section
12.5 are severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other agreement or covenant.
Moreover, in the event any court of competent jurisdiction shall determine that
the scope, time or territorial restrictions set forth in this Section 12.5 are
unreasonable, then it is the intention of the parties that such restrictions be
in force to the fullest extent which such court deems reasonable, and this
Agreement shall thereby be reformed.
(d) Independent Agreement. Seller hereby acknowledges that the covenants
set forth in this Section 12.5 are material conditions to Buyer's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the agreements and covenants in this Section 12.5
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of Seller against
Buyer, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Buyer of such agreements and covenants.
(e) Compensation. Ten Thousand Dollars ($10,000) of the purchase price
65
hereunder shall be deemed compensation to Seller for entering into the negative
covenants set forth in this Section 12.5.
12.6 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
12.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
12.8 DISCLOSURE LETTER
In the event of any inconsistency between the statements in the body of
this Agreement and those of the Disclosure Letter (other than an exception
expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
12.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of their rights under this Agreement without
the prior consent of the other party, except (a) Buyer may assign its rights
hereunder to a wholly owned subsidiary, provided, however, that in the event of
any such assignment, Buyer shall remain unconditionally liable as a guarantor
for Buyer's obligations under this Agreement and (b) Buyer may grant a security
interest in its rights hereunder to any financial institution extending credit
to Buyer for the purpose of completing the Contemplated Transactions or with
respect to the operation of the Acquired Companies following the Closing.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the heirs, successors and
permitted assigns of the parties. Except as
66
aforesaid, nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. Except as aforesaid, this Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their heirs, successors and assigns.
12.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect and the parties hereto shall negotiate in good
faith to modify this Agreement to effect the original intent of the parties as
closely as possible so that the transaction contemplated hereby is fulfilled to
the extent possible. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
12.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event that an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by Buyer and Seller and no presumption or burden of proof shall arise favoring
or disfavoring either party by virtue of authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
12.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
12.13 CONFIDENTIALITY; NO PUBLIC DISCLOSURE
(a) Between the date of this Agreement and the Closing Date, Buyer and
Seller will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and Seller to maintain in confidence,
and not use to the detriment of another party or an Acquired Company any
written, or other information obtained in confidence from another party or an
Acquired Company in connection with this Agreement or the Contemplated
Transactions, unless (i) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (ii) the use of such
information is
67
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated Transactions, or
(iii) the furnishing or use of such information is required by legal
proceedings.
(b) If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information described above in Section
12.13(a) as the other party may reasonably request.
(c) Neither Buyer nor Seller shall issue any press release or make any
public announcement relating to the Contemplated Transactions prior to the
Closing without the prior written approval of the other party; provided,
however, that either Buyer or Seller may make any public disclosure that it
believes is required by applicable law. In the event that either party
determines that an announcement is required by law, it will promptly: (i) notify
the other party in writing that it has made such a determination; (ii) provide
the other party with a written draft of the form of such announcement; (iii)
notify the other party of the proposed timing of such announcement; and allow
the other party the opportunity to make a similar contemporaneous public
announcement. The party that has determined that such an announcement is
required by law will complete actions (i) - (iii) as soon as reasonably
practicable and prior to the making of such public announcement.
12.14 SUNTRUST LITIGATION
The parties hereto understand and acknowledge that the Company and Seller
are currently parties to that certain litigation in the Circuit Court of DeKalb
County, Alabama, styled Xxxxxxxxxx Oil Company, Inc. v. Suntrust Bank, Atlanta,
Suntrust Capital Markets, Inc., and Suntrust Xxxxxxxx Xxxxxxxx, Civil Action No.
CV 2002-258 (the "SunTrust Litigation"). At all times following the date of
execution of this Agreement, Seller shall have full and complete control, in his
sole and absolute discretion, over the pursuit, prosecution, defense,
settlement, dismissal, or other resolution of the SunTrust Litigation, provided
that Seller shall promptly notify Buyer of any material developments in
connection therewith. Following the date of execution of this Agreement, the
Company shall (i) provide to Seller a corporate representative for trial,
depositions, mediation, or other legal proceedings related to the SunTrust
Litigation and for reasonable related preparation (such corporate representative
may, at the option of Seller, be Xxxxxx X. Xxxxxx or Seller), (ii) provide
access, upon reasonable advance notice during regular business hours, to (A) all
documents belonging to the Company or in the Company's custody or control
related to the SunTrust Litigation and agree to make such related compilations
of documents as Seller shall reasonably request, and (B) all Company personnel,
(iii) not hinder or otherwise obstruct Seller's prosecution and defense of
claims and counterclaims in the SunTrust Litigation, (iv) join in a motion in
limine to attempt to prevent SunTrust from introducing into fact in the SunTrust
Litigation that the Acquired Companies are banking again with SunTrust, (v) join
or not obstruct such other motions or filings as Seller shall make in the
SunTrust Litigation, and (vi) agree that Seller shall have the sole right to
select and pay the law firm which is defending the Company in the SunTrust
Litigation and that such law firm shall be representing the Company in such
litigation. Seller shall be entitled to any payments to the Company arising from
the SunTrust Litigation; provided, further, that any
68
payments to Seller under this Section 12.14 shall (i) be reduced by an amount
equal to the product of (a) the amount of such payment and (b) the actual
combined marginal effective federal and Alabama state income tax rate applicable
to corporations for the taxable year in which such payment is received and (ii)
be increased by the amount that Taxes otherwise due with respect to such
payments are reduced by reason of the availability under applicable Tax law of
any net operating loss carryforwards of the Acquired Companies as of the Closing
Date provided that for purposes of this clause (ii) the amount of such reduction
in Taxes shall be determined without regard to any utilization of the net
operating loss carryforwards of the Acquired Companies against income earned or
accrued in periods following the Closing Date. Seller shall indemnify and hold
harmless Buyer and the Company from and against any Damages to Buyer or the
Company arising from the SunTrust Litigation. Buyer shall first look to the
SunTrust Escrow Amount for any such indemnification and shall not make any claim
against Seller unless and until the SunTrust Escrow Amount has been exhausted.
The SunTrust Escrow Amount shall be released to Seller in full immediately upon
settlement and dismissal of the SunTrust Litigation or, in the absence of any
such settlement, upon entry of a final, non-appealable judgment in the
litigation and the satisfaction by Seller of any judgment entered in such case
(provided that all or a portion of the SunTrust Escrow Amount may be paid
directly from the escrow account holding such amount in order to satisfy of such
judgment).
12.15 DELEK GUARANTEE
Delek US Holdings hereby absolutely and unconditionally guarantees the
payment and performance, when due, of all Buyer's obligations hereunder.
12.16 INCORPORATION OF EXHIBITS AND DISCLOSURE LETTER
The Exhibits and Disclosure Letter identified in this Agreement are
incorporated herein by reference and made a part hereof.
12.17 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
69
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement,
as of the date first written above.
BUYER:
MAPCO FAMILY CENTERS, INC.
By: /s/ Uzi Yemin
------------------------------------
Uzi Yemin
President
DELEK US HOLDINGS, INC.
By: /s/ Uzi Yemin
------------------------------------
Uzi Yemin
President
SELLER:
/s/ XXXX X. XXXXXXXXXX
----------------------------------------
XXXX X. XXXXXXXXXX
70
