ASSET PURCHASE AGREEMENT
by and among
RADCO INDUSTRIES, INC.
and
MIDWEST TRUCK AFTER MARKET, INC.
and
XXXXXXX X. XXXXX, XX.
and
XXXXX X. XXXXX
Dated as of October 31, 1997
Table of Contents
Page
ARTICLE I
DEFINITIONS...........................................................1
1.1 Definitions..................................................1
ARTICLE II
SALE, PURCHASE AND OBLIGATIONS........................................7
2.1 Transfer of Assets...........................................7
2.2 Purchase Price...............................................8
2.3 Payment of Purchase Price....................................8
2.4 Adjustments to Purchase Price................................8
2.5 Assumed Obligations; Excluded Obligations....................9
2.6 Risk of Loss and Allocation of Purchase Price...............10
2.7 Deliveries..................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
AND STOCKHOLDER......................................................10
3.1 Due Incorporation; Subsidiaries.............................10
3.2 Authority; Consents; No Defaults............................10
3.3 Seller Consents and Approvals...............................11
3.4 Title; Condition of Assets..................................12
3.5 Financial Statements; Undisclosed Liabilities;
Other Documents.............................................12
3.6 No Adverse Effects or Changes...............................12
3.7 Accounts Receivable and Advances............................14
3.8 Contracts...................................................14
3.9 Permits.....................................................15
3.10 Insurance...................................................16
3.11 Employment and Labor Matters................................16
3.12 Capital Improvements; Adequacy and Condition of Property....17
3.13 Taxes.......................................................18
3.14 No Defaults or Violations...................................19
3.15 Litigation..................................................20
3.16 No Conflict of Interest.....................................20
3.17 Bank Accounts...............................................20
3.18 Due Diligence Materials.....................................20
3.19 Accuracy of Statements......................................20
3.20 Inventories.................................................21
3.21 Employee Benefit Matters....................................21
3.22 Environmental Matters.......................................22
3.23 Customers and Suppliers.....................................23
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Table of Contents
continued
Page
3.24 Claims Against Officers and Directors.......................24
3.25 Brokers.....................................................24
3.26 Products Liability..........................................24
3.27 Intellectual Property.......................................24
3.28 Transactions with Affiliates................................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................25
4.1 Due Incorporation; Financial Condition......................25
4.2 Due Authorization...........................................25
4.3 Consents and Approvals; Authority Relative to this
Agreement...................................................25
4.4 Litigation..................................................26
4.5 Accuracy of Statements......................................26
4.6 Brokers.....................................................26
ARTICLE V
COVENANTS............................................................26
5.1 Access to Information and Facilities........................26
5.2 [Intentionally Omitted].....................................26
5.3 Consents and Approvals......................................26
5.4 [Intentionally Omitted].....................................27
5.5 Exclusivity.................................................27
5.6 Additional Financial Statements.............................27
5.7 Stockholder's Actions.......................................27
5.8 Non-Competition.............................................27
5.9 Employment Matters..........................................28
5.10 Taxes on Transfer...........................................28
5.11 Use of Name.................................................28
5.12 Benefit of Contracts. ......................................29
5.13 Accounts Receivable.........................................29
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.....................29
6.1 Warranties True as of Both Present Date and Closing Date....29
6.2 Compliance with Agreements and Covenants....................29
6.3 Consents and Approvals......................................29
6.4 Non-Competition Agreement...................................30
6.5 Facility Lease..............................................30
ii
Table of Contents
continued
Page
6.6 Documents...................................................30
6.7 Due Diligence Review........................................30
6.8 No Material Adverse Change..................................30
6.9 Actions or Proceedings......................................30
6.10 Financing...................................................30
6.11 Other Agreements............................................30
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER........................31
7.1 Warranties True as of Both Present Date and Closing Date....31
7.2 Compliance with Agreements and Covenants....................31
7.3 Documents...................................................31
7.4 Actions or Proceedings......................................31
7.5 Consulting Agreement........................................31
7.6 Other Agreements............................................31
7.7 Assumed Obligations.........................................31
7.8 Note, Security Agreement and Financing Statements...........31
ARTICLE VIII
CLOSING..............................................................32
8.1 Closing.....................................................32
8.2 Deliveries by Seller........................................32
8.3 Deliveries by Purchaser.....................................32
ARTICLE IX
TERMINATION..........................................................33
9.1 Termination.................................................33
9.2 Effect of Termination.......................................33
ARTICLE X
INDEMNIFICATION......................................................34
10.1 Survival....................................................34
10.2 Indemnification by Seller...................................34
10.3 Indemnification by Purchaser................................34
10.4 Notice of Claim.............................................35
10.5 Indemnifying Person's Opportunity to Defend.................35
10.6 Indemnifying Person's Failure to Act........................35
10.7 Settlement or Compromise....................................35
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10.8 Right of Set-Off............................................36
10.9 Limitations on Liability....................................36
ARTICLE XI
MISCELLANEOUS........................................................36
11.1 Expenses....................................................36
11.2 Amendment...................................................37
11.3 Notices.....................................................37
11.4 Effect of Investigation.....................................38
11.5 Waivers.....................................................38
11.6 Counterparts................................................38
11.7 Interpretation..............................................38
11.8 Applicable Law..............................................39
11.9 Assignment..................................................39
11.10 No Third Party Beneficiaries................................39
11.11 Publicity...................................................39
11.12 Further Assurances..........................................39
11.13 Severability................................................39
11.14 Remedies Cumulative.........................................39
11.15 Entire Understanding........................................40
iv
Exhibits
Exhibit 1.1A -- Equipment Leases
Exhibit 2.3 -- Form of Note
Exhibit 6.4 -- Form of Non-Competition Agreement
Exhibit 6.5 -- Facility Lease
Exhibit 7.5 -- Form of Consulting Agreement
Schedules
Schedule 1.1A -- Financial Statements
Schedule 2.1 -- Assets
Schedule 2.1(a)(i) -- Inventories
Schedule 2.1(a)(ii) -- Expenses, Deposits, Etc.
Schedule 2.1(a)(iii) -- Equipment
Schedule 2.1(a)(iv) -- Intellectual Property
Schedule 2.1(a)(vi) -- Assumed Contracts
Schedule 2.1(a)(vii) -- Furnishings, Fixtures & Related Items
Schedule 2.1(a)(viii) -- Licenses, Certificates, Permits, Etc.
Schedule 2.1(b) -- Excluded Assets
Schedule 3.4 -- Exceptions to Title or Condition of Assets
Schedule 3.5 -- Liabilities of Company
Schedule 3.6 -- Material Adverse Effect or Changes
Schedule 3.7 -- Accounts Receivable and Advances
Schedule 3.8(i) -- Guaranties
Schedule 3.8(ii) -- Contracts
Schedule 3.9 -- Permits
Schedule 3.10 -- Insurance
Schedule 3.11 -- Directors, Officers and Employees
Schedule 3.12A -- Capital Expenditures
Schedule 3.12B -- Problems to Title of Assets
Schedule 3.12E -- Legal Description of Property; Leases;
Contaminants
Schedule 3.14 -- Compliance with Laws
Schedule 3.17 -- Bank Accounts
Schedule 3.20 -- List of Unmerchantable Inventory
Schedule 3.21 -- Employee Benefit Plans
Schedule 3.22 -- Environmental Matters
Schedule 3.23 -- Customers and Suppliers
Schedule 3.26 -- Products Liability Claims
Schedule 3.27 -- Exceptions to Intellectual Property Rights
Schedule 3.28 -- Affiliate Transactions
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of the 31st
day of October, 1997, by and among, RADCO INDUSTRIES, INC., a Minnesota
corporation, ("Purchaser") and MIDWEST TRUCK AFTER MARKET, INC., an Oklahoma
corporation ("Seller") and XXXXXXX X. XXXXX, XX. and XXXXX X. XXXXX, two
individuals whose address is X.X. Xxx 0000, Xxxxxxx Xxxxx, Xxxxxxx 00000
(collectively, the "Stockholder").
W I T N E S S E T H:
WHEREAS, Seller owns certain assets (defined below as the "Assets")
relating to the Business (as defined below) that Purchaser desires to purchase,
and Seller has agreed to transfer the Assets to Purchaser, and Purchaser has
agreed to purchase the Assets, upon the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements, representations and warranties herein contained, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
"Accepted Inventory on Order" shall mean all products ordered in the
ordinary course of business consistent with past practice but not received by
the Seller prior to the Closing Date.
"Accounts Receivable" shall have the meaning set forth in Section 3.7.
"Advances" shall have the meaning set forth in Section 3.7.
"Affiliate" shall mean, with respect to any specified Person: (i) any
other Person which directly or indirectly owns or controls, is under common
ownership or control with, or is owned or controlled by such specified Person;
(ii) any other Person which is a director, officer or partner or is directly or
indirectly the beneficial owner of ten percent (10%) or more of any class of
equity securities of the specified Person or a Person described in (i); (iii)
another Person of which the specified Person is a director, officer or partner,
or is directly or indirectly the beneficial owner
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of ten percent (10%) or more of any class of equity securities; or (iv) any
relative or spouse of the specified Person or any of the foregoing Persons, any
relative of such spouse, or any spouse of any such relative. Without limiting
the foregoing, "Affiliates" of the Seller include the Stockholder, the
Stockholder's spouse and their children.
"Agreement" shall mean this Asset Purchase Agreement, including all
exhibits hereto, as it may be amended from time to time.
"Assumed Contracts"shall have the meaning set forth in Section 2.1(vi).
"Assumed Obligations" shall have the meaning set forth in Section 2.5.
"Bank" shall mean Congress Financial Corporation.
"Business" shall mean the wholesale distribution of light truck after
market accessories engaged in by Seller.
"Business Day" shall mean any day of the year other than (i) any
Saturday or Sunday or (ii) any other day on which banks located in Tulsa,
Oklahoma generally are closed for business.
"Claim" shall have the meaning set forth in Section 10.4.
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Article VIII.
"Closing Date" shall mean the date on which the Closing occurs or is to
occur.
"COBRA" shall mean the Consolidated Omnibus Reconciliation Act of 1986,
as amended.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Confidential Information" shall mean all confidential information
concerning Seller that (i) is not and has not become ascertainable or obtainable
from public or published information, (ii) is not received from a party other
than the parties to this Agreement or Seller, (iii) was not in Purchaser's
possession prior to disclosure thereof to Purchaser in connection with (A) this
Agreement, or (B) that certain Letter of Intent between X.X. Xxxxxxxxxx & Co.,
Inc., the parent company of the Purchaser, and the Seller, and (iv) was not
independently developed by X.X.
Xxxxxxxxxx & Co., Inc. or Purchaser.
"Contract" shall mean any contract, lease, commitment, understanding,
arrangement, sales order, purchase order, agreement, indenture, mortgage, note,
bond, right, warrant, instrument,
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plan, permit or license, whether written or verbal, which is intended or
purports to be binding and enforceable.
"Employee Arrangement" shall mean any and all Contracts to which Seller
is a party or as to which it participates relating to or affecting its
employees, officers, directors, agents or representatives, or as to which they
are beneficiaries, including, without limitation, (a) any "employee welfare
benefit plan," "employee pension benefit plan" or "multi-employer plan" as those
terms are respectively defined in sections 3(1), 3(2) and 3(37) of ERISA or any
other plan or arrangement subject to ERISA (referred to collectively hereinafter
as "ERISA Plans"), and (b) any retirement or deferred compensation plan,
incentive compensation plan, profit sharing, pension, performance unit, stock
appreciation right, employee benefit agreements, stock and stock option plans,
unemployment compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance, medical (both insured and uninsured, including, without
limitation, retiree medical programs) or hospitalization program or any other
trusts, plans or funds, fringe benefit arrangements for the benefit or welfare
of any current or former employee, director, consultant or agent, which does not
constitute an ERISA Plan.
"Employee Benefit Plans" shall have the meaning set forth in Section
3.21.
"Employee Claims" shall mean any and all claims of current or former
employees of the Seller relating to or arising out of (a) Seller employment of
such employee (including termination of such employment) or (b) any existing or
former Employment Arrangement of Seller.
"Environmental Law" shall mean any Law which relates to or otherwise
imposes liability or standards of conduct concerning mining or reclamation of
mined land, discharges, emissions, releases or threatened releases of noises,
odors or any pollutants, contaminants or hazardous or toxic wastes, substances
or materials, whether as matter or energy, into ambient air, water, or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous or toxic wastes, substances or materials, including
(but not limited to) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution
Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, any
so-called "Superlien" law, and any other similar Federal, state or local
statutes.
"Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"Environmental Statute of Limitations Date" shall mean (i) five (5)
years from the Closing Date for any Claim arising under any Environmental Law
except the Comprehensive
3
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), and
(ii) for any Claim arising under CERCLA, the close of business on the ninetieth
(90th) day after the expiration of any applicable statute of limitations under
CERCLA, including any extensions thereof and after giving effect to any tolling
thereof (or if such date is not a Business Day, the next Business Day).
"Environmental Warranty" shall mean a representation or warranty
contained in Section 3.22.
"Equipment" shall have the meaning set forth in Section 2.1.
"Equipment Leases" shall mean those certain equipment leases listed in
Exhibit 1.1A.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Obligations" shall have the meaning set forth in Section 2.5.
"Facility" shall mean the premises owned by Stockholder and currently
leased by Seller located at 000 X. 000xx X. Xxxxxx, Xxxxx, Xxxxxxxx 00000.
"Facility Lease" shall have the meaning set forth in Section 6.5.
"Financial Statements" shall mean the Unaudited Financial Statements
and the Interim Financial Statements.
"GAAP" shall mean United States Generally Accepted Accounting
Principles at the time in effect.
"Governmental Authority" shall mean the government of the United States
or any foreign country, or any state or political subdivision thereof, and any
entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, including
the Pension Benefit Guaranty Corporation and other quasi-governmental entities
established to perform such functions.
"Hazardous Substance" shall mean any material or substance which (i)
constitutes a hazardous substance, toxic substance or pollutant (as such terms
are defined by or pursuant to any Environmental Law) or (ii) is regulated or
controlled as a hazardous substance, toxic substance, pollutant or other
regulated or controlled material, substance or matter pursuant to any
Environmental Law.
"Indemnified Person" shall mean the Person or Persons entitled to, or
claiming a right to, indemnification under Article X.
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"Indemnifying Person" shall mean the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under Article X.
"Intellectual Property"shall have the meaning set forth in Section 2.1.
"Interim Financial Statements" shall mean the unaudited
internally-prepared balance sheet of Seller as of August 31, 1997, which is
included in Schedule 1.1A.
"Inventories" shall have the meaning set forth in Section 2.1.
"Kilgore Facility" shall mean Seller's leased premises located at 000
Xxxxxxx 000 Xxxxx, Xxxxxxx, Xxxxx.
"Law" shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Lien" shall mean any mortgage, lien (except for any lien for taxes not
yet due and payable), charge, restriction, pledge, security interest, proxy,
option, claim, right of any third party, easement, encroachment or encumbrance.
"Loan" shall mean the obligations arising under or evidenced by that
certain Loan and Security Agreement by and between the Bank and the Purchaser of
even date herewith.
"Loss" or "Losses" shall mean any and all liabilities, losses, costs,
claims, damages (including consequential damages), fines, penalties and expenses
(including reasonable attorneys' fees and expenses and costs of investigation
and litigation). In the event any of the foregoing are indemnifiable hereunder,
the terms "Loss" and "Losses" shall include any and all reasonable attorneys'
fees and expenses and costs of investigation and litigation incurred by the
Indemnified Person in enforcing such indemnity.
"Material Adverse Change" shall mean a change, or any fact,
circumstance or event that could reasonably be expected to result in a change,
in the business, operations, assets, liabilities, results of operations, cash
flows, condition (financial or otherwise) or prospects of Seller which is
materially adverse.
"Material Adverse Effect" shall mean an effect, or any fact,
circumstance or event that could reasonably be expected to result in an effect,
on the business, operations, assets, liabilities, results of operations, cash
flows, condition (financial or otherwise) or prospects of Seller which is
materially adverse.
"Note" shall have the meaning set forth in Section 2.3.
5
"Permits" shall have the meaning set forth in Section 2.1.
"Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, trust, association or other entity.
"Purchase Price" shall mean $2,600,000 in U.S. Dollars, subject to
adjustment after the Closing pursuant to Section 2.4.
"Purchaser Indemnified Parties" shall mean Purchaser and each of its
Affiliates and their respective officers, directors, employees, agents and
representatives.
"Real Property" shall have the meaning set forth in Section 3.12(g).
"Real Property Leases" shall have the meaning set forth in Section
3.12(g).
"Related Agreements" shall mean the Non-Competition Agreement, Facility
Lease Agreement, Consulting Agreement and other agreements necessary to conclude
the transactions contemplated in this Agreement.
"Seller Indemnified Parties" shall mean Seller and each of his
Affiliates, and its officers, directors, employees, agents and representatives.
"Taxes" shall mean all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes which are imposed by any Governmental Authority, and shall
include any interest, penalties or additions to tax attributable thereto.
"Tax Return" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with any
Taxes.
"Tax Statute of Limitations Date" shall mean the close of business on
the thirtieth (30th) day after the expiration of the applicable statute of
limitations with respect to Taxes or any Governmental Authority's ability to
assess Taxes, fines or penalties, including any extensions thereof and after
giving effect to any tolling thereof (or if such date is not a Business Day, the
next Business Day).
"Tax Warranty" shall mean a representation or warranty contained in
Section 3.13.
6
"Title Warranty" or "Title Warranties" shall mean representations and
warranties relating to the ownership of tangible and intangible assets contained
in Sections 3.2, 3.3, 3.4, and 3.12.
"Unaudited Financial Statements" shall mean the unaudited financial
statements of Seller as of December 31, 1995 and December 31, 1996 (including
all notes thereto), all of which are included in Schedule 1.1A, consisting of
the balance sheets at such dates and the related consolidated income statements
for the twelve-month periods then ended.
ARTICLE II
SALE, PURCHASE AND OBLIGATIONS
2.1 Transfer of Assets. (a) Subject to the other terms and conditions
of this Agreement, on and as of the Closing Date Seller shall sell, convey,
assign, transfer and deliver to Purchaser and Purchaser shall purchase, acquire
and take assignment and delivery from Seller of the following assets of Seller
(the "Assets") used in the Business:
(i) all inventories and supplies held for use,
consumption or sale in the Business and all Accepted
Inventory on Order, including, without limitation,
the inventory set forth on Schedule 2.1(a)(i) (the
"Inventories");
(ii) all prepaid expenses, all lease, utility and similar
deposits relating to the Business and all payments or
deposits received by the Seller on or before Closing
that relate to products to be shipped or delivered
to, or picked up by, the customer on or after the
Closing Date, as set forth on Schedule 2.1(a)(ii);
(iii) all equipment owned by Seller, including those items
described in Schedule 2.1(a)(iii) (the "Equipment");
(iv) all tradenames, trademarks, servicemarks patents,
co-patents and applications for patents (if any),
trade secrets, inventions, processes, designs,
know-how, proprietary technology, technical
information, formulae and process information used by
Seller in the Business, including, without
limitation, those set forth on Schedule 2.1(a)(iv)
(the "Intellectual Property");
(v) all cash and cash equivalents belonging to the
Sellers;
(vi) all right, title and interest of Seller in and to all
Assumed Contracts listed in Schedule 2.1(a)(vi);
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(vii) all furnishings, fixtures and related items listed
in Schedule 2.1(a)(vii);
(viii) all records, product files, price lists and
information, marketing information, sales history
information, sales lists and customer lists of Seller
and all other assets and supplies used in the
Business (excluding the Excluded Assets and tax
records, however Purchaser may copy all such tax
records at Purchaser's expense), including Seller's
rights in outside telephone numbers, keys and lock
combinations; and
(ix) any and all accounts receivable, trade receivables,
notes receivable and other receivables arising out of
the conduct of the business.
In any event, the Assets shall include, without limitations, the Assets
described on Schedule 2.1 hereto.
(b) Notwithstanding the provisions of Section 2.1(a), the Purchaser
shall not purchase, nor shall it be a successor-in-interest to, the activities
of Seller at the Xxxxxxx Facility, and the acquisition of the Assets by
Purchaser shall not be deemed to be an assumption of any liabilities arising
from Seller's operations at the Xxxxxxx Facility. Moreover, Purchaser shall not
purchase the assets listed in Schedule 2.1(b) ("Excluded Assets").
2.2 Purchase Price. On the Closing Date, in consideration for the
Assets and the covenants and agreements of the Seller contained herein,
Purchaser shall, pursuant to Section 2.3 below, pay to the Seller the Purchase
Price for the Assets of Seller free and clear of all Liens.
2.3 Payment of Purchase Price. The aggregate Purchase Price will
be paid as follows:
(a) On the Closing Date, Purchaser shall pay to Seller Two Million One
Hundred Thousand Dollars ($2,100,000) by wire transfer of immediately available
funds to a bank account designated by Seller; and
(b) Purchaser will deliver to Seller a five-year promissory note in the
amount of Five Hundred Thousand Dollars ($500,000) (this and any substitute note
issued pursuant to Section 2.4 below, hereinafter referred to as the "Note"),
which will be in the form attached hereto as Exhibit 2.3 and will contain the
following terms:
(i) Interest will be payable quarterly, in arrears, at
the rate of nine percent (9%) per annum;
(ii) Principal payments will be made in equal, quarterly
installments commencing three months after the first
anniversary of the Closing and continuing through the
fifth year;
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(iii) The Note will be secured by a security interest in
the Assets, which security interest shall be
subordinated to those liens granted to the Bank to
secure the Loan.
2.4 Adjustments to Purchase Price. Promptly following the Closing,
Purchaser and Seller shall jointly determine the net value of the Assets as at
the Closing Date by subtracting the total cost of all Assumed Obligations (as
defined in Section 2.5) from the total value of the Assets, and the amount of
the Purchase Price to be paid pursuant to Section 2.3(b) above shall be either
(i) reduced on a dollar-for-dollar basis to the extent that the net value of the
Assets on the Closing Date is less than One Million Four Hundred Seventy-Five
Thousand Dollars ($1,475,000), or (ii) increased on a dollar-for-dollar basis to
the extent that the net value of the Assets on the Closing Date is more than One
Million Four Hundred Seventy-Five Thousand Dollars ($1,475,000). For the
purposes of this determination, the parties shall take a physical inventory of
all tangible assets being sold pursuant to this Agreement at or immediately
prior to the Closing. Inventory shall be valued at its cost on the books of the
Seller at the time of the Closing as may be verified by inspection of vendor
invoices. The value of the Accounts Receivable shall be the total amount of said
Accounts Receivable actually collected by Purchaser during the ninety (90) day
period following the Closing. The Assumed Obligations shall be valued as set
forth in the books of account of Seller immediately prior to the Closing. In the
event Purchaser and Seller are unable to mutually agree upon the net value of
the Assets, either party may submit the dispute to final and binding arbitration
under the rules of the American Arbitration Association using a single
arbitrator, with the arbitration taking place in Houston, Texas. If the net
value of the Assets determined pursuant to this paragraph results in an
adjustment to the Purchase Price, Seller shall promptly surrender to Purchaser
the Note provided for in Section 2.3 above and the Purchaser shall
contemporaneously therewith deliver to Seller a substitute Note in an amount
reflecting any post-Closing adjustment required pursuant to this Section 2.4.
2.5 Assumed Obligations; Excluded Obligations. At Closing, Seller shall
assign all of its right, title and interest in and to, and Purchaser shall
assume and agree to perform and discharge Seller's obligations under (i) the
Assumed Contracts, (such assumption to be evidenced by the Purchaser's execution
and delivery of the assumption contemplated by Section 7.7, in each case to the
extent, but only to the extent, such obligations relate to the period on and
after the Closing Date, and (ii) all trade payables incurred in the ordinary
course of business (collectively, the "Assumed Obligations"). Except for the
Assumed Obligations, neither Purchaser nor any of its Affiliates shall assume or
otherwise be liable in respect of, or be deemed to have assumed or otherwise be
liable in respect of, any debt, liability, Claim or other obligation of Seller
or any of its Affiliates (collectively, "Excluded Obligations"), regardless of
whether such Excluded Obligation is matured or unmatured, fixed or contingent,
or known or unknown. Excluded Obligations shall include, without limitation, (a)
any notes payable by Seller; (b) any liability for Taxes of Seller or the
Business or related to the Assets for any period prior to and including the
Closing Date, any Tax liability of Seller for any period on and after the
Closing Date and any Tax liability arising from the sale of the Business and
Assets to Purchaser contemplated herein or any liquidation and dissolution of
Seller; (c) any obligation, claim, commitment or liability against
9
Seller that constitutes or arises from a breach by Seller of any representation,
warranty or covenant contained in this Agreement; (d) any obligation,
commitment, liability or claim arising from Seller's ownership or operation of
the Business or Assets except to the extent expressly assumed herein; (e) any
obligation, commitment or liability of or claim which may arise from events or
conditions existing or occurring prior to the Closing Date that relate to or
affect the Assets or Business; (f) any Employee Claims; and (g) any obligation,
commitment, liability or claim relating to the Xxxxxxx Facility.
2.6 Risk of Loss and Allocation of Purchase Price. Risk of loss or
damage to the Assets transferred hereunder by fire or other casualty prior to
the Closing shall remain with Seller and after the Closing such risk of loss or
damage shall be borne by the Purchaser. Seller and Purchaser agree to allocate
the Purchase Price among the Assets in such a manner as Seller and Purchaser
shall jointly determine; such allocation shall be in accordance with Section
1060 of the Code and the regulations thereunder. Seller and Purchaser shall each
make all required filings under the Code consistent with such allocation, and
shall not take any position inconsistent with such allocation, and shall not
take any position inconsistent with such allocation.
2.7 Deliveries. It is expressly agreed that Purchaser shall not take
delivery of any of the Assets at the Xxxxxxx Facility. At or prior to the
Closing, Seller shall relocate any Assets at the Xxxxxxx Facility to a location
designated by Purchaser. The cost of relocating any such assets shall be borne
by Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER
Except as expressly set forth herein, Seller and Stockholder jointly
and severally make the following representations and warranties to Purchaser (i)
as of the date of this Agreement and (ii) as of the Closing Date (as if such
representations and warranties were made on the Closing Date):
3.1 Due Incorporation; Subsidiaries. Seller is duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and has
all requisite power and authority to carry on its business as currently
conducted. Seller is licensed or qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
business requires such licensing or qualification and where the failure to be
licensed or to so qualify would have a Material Adverse Effect on its business
or assets. Seller has no direct or indirect subsidiaries, either wholly or
partially owned, and Seller does not hold any direct or indirect economic,
voting or management interest in any Person or directly or indirectly own any
security issued by any Person. All action taken by the Board of Directors (and
all committees thereof) and stockholders of Seller with respect to material and
significant corporate transactions pursuant to which Seller will, on the date
hereof or on the Closing Date, have any contractual rights or obligations, is
reflected in such minutes and written consents.
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3.2 Authority; Consents; No Defaults.
(a) (i) Seller and Stockholder have full power and authority to enter
into this Agreement and each of the Related Agreements and to consummate the
transactions contemplated by this Agreement and by the Related Agreements; (ii)
Seller and Stockholder have duly and validly executed and delivered this
Agreement and prior to or at the Closing, will duly and validly execute and
deliver the Related Agreements; (iii) this Agreement constitutes Seller's legal,
valid and binding obligation, and the Related Agreements, upon execution and
delivery by Seller, will constitute Seller's legal, valid and binding
obligations, in each case enforceable against Seller in accordance with its
respective terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies; and (iv) this Agreement
constitutes Stockholder's legal, valid and binding obligation, and the Related
Agreements, upon execution and delivery by Stockholder, will constitute
Stockholder's legal, valid and binding obligations, in each case enforceable
against Stockholder in accordance with its respective terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally and by equitable limitations on the availability of
certain remedies.
(b) No consent, authorization or approval of, filing or registration
with, or cooperation from, any Governmental Authority or any other Person not a
party to this Agreement is necessary in connection with the execution, delivery
and performance by Seller or Stockholder of this Agreement and the execution,
delivery and performance by them of the Related Agreements or the consummation
of the transactions contemplated by this Agreement or by the Related Agreements.
(c) The execution, delivery and performance of this Agreement and the
Related Agreements do not and will not: (i) violate any Law; (ii) violate or
conflict with, result in a breach or termination of, constitute a default or
give any third party any additional right (including a termination right) under,
permit cancellation of, result in the creation of any Lien hereunder on any of
Seller's assets or properties (except for the security interest in favor of
Seller pursuant to Section 2.3(b)(iii), or result in or constitute a
circumstance which, with or without notice or lapse of time or both, would
constitute any of the foregoing under, any Contract to which Seller or
Stockholder is a party or by which Seller or Stockholder or any of Seller's or
Stockholder's assets or properties are bound; or (iii) permit the acceleration
of the maturity of any of Seller's indebtedness or indebtedness secured by its
assets or properties.
3.3 Seller Consents and Approvals.
Except for consents, authorizations, and approvals the failure of which
to obtain would not have a Material Adverse Effect, no consent, authorization or
approval of, filing or registration
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with, or cooperation from any Governmental Authority or any other Person not a
party to this Agreement is necessary in connection with the execution, delivery
and performance by Seller or the Stockholder of any Related Agreements or the
consummation of the transactions contemplated hereby or thereby. Seller
currently holds and will maintain in effect until the Closing Date all Permits
set forth on Schedule 3.9, and no other material permits are necessary for the
lawful operation of the Business. No suspension or cancellation of any Permit
has occurred or is, to each of Seller's and Stockholder's best knowledge
threatened.
3.4 Title; Condition of Assets. Except as set forth on Schedule 3.4,
(i) Seller has good and marketable title to, is the lawful owner of and has the
full right to sell, convey, assign, transfer and deliver the Assets, free and
clear of any Lien; and (ii) all of the Assets comprising tangible property,
whether owned or leased, have been well maintained and are in good operating
condition and repair and are free from defects other than such minor defects as
do not interfere with the continued use thereof in the conduct of normal
operations or adversely affect the resale value thereof. Seller shall transfer
the Assets to Purchaser free and clear of all Liens, and upon such transfer
Purchaser shall own the Assets free and clear of all Liens except for the
security interest in favor of Seller pursuant to Section 2.3(b)(iii).
3.5 Financial Statements; Undisclosed Liabilities; Other Documents.
(a) The Financial Statements have been prepared in accordance with GAAP
consistently applied and present fairly the financial position, assets and
liabilities of Seller as of the dates thereof and the revenues, expenses,
results of operations and cash flows of Seller for the periods covered thereby.
The Financial Statements are in accordance with the books and records of Seller
in all material respects and do not reflect any transactions which are not bona
fide transactions.
(b) Except as set forth in Schedule 3.5 or in the latest Financial
Statements Seller has no other liabilities, debts, claims or obligations,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, other than trade payables, accrued expenses, and additional indebtedness
incurred pursuant to Seller's line of credit existing on the date hereof, and
other normal recurring liabilities.
3.6 No Adverse Effects or Changes. Except for transactions contemplated
by this Agreement or as otherwise set forth in Schedule 3.6, since January 1,
1997, Seller has not:
(a) suffered any Material Adverse Change or Material Adverse Effect
(whether or not covered by insurance) or circumstances which could create a
Material Adverse Effect;
(b) incurred any obligation or entered into any Contract which either
(x) requires a payment by any party in excess of, or a series of payments which
in the aggregate exceed, $5,000 or provides for the delivery of goods or
performance of services, or any combination thereof, having a value in excess of
$5,000, other than obligations and Contracts entered into with
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suppliers and customers in the ordinary course of business, or (y) has a term
of, or requires the performance of any obligations by Seller over a period in
excess of, six months;
(c) taken any action, or entered into or authorized any Contract or
transaction other than in the ordinary course of business and consistent with
past practice;
(d) sold, transferred, conveyed, assigned or otherwise disposed of any
of its assets or properties, including sales of inventory, except in the
ordinary course of business and consistent with past practice;
(e) waived, released, or canceled any claims against third parties,
debts owing to it, or any rights which have any value in excess of $1,000 in the
aggregate;
(f) made any changes in its accounting systems, policies, principles or
practices except as required by GAAP;
(g) entered into, authorized, or permitted any transaction with any
Affiliate of the Seller, other than the payment of normal compensation and
expense reimbursement in the ordinary course of business;
(h) made any borrowings, incurred any debt (other than trade payables,
accrued expenses and additional indebtedness incurred pursuant to Seller's line
of credit existing on the date hereof, all in the ordinary course of business
and consistent with past practice), or assumed, guaranteed, endorsed (except for
the negotiation or collection of negotiable instruments in trans actions in the
ordinary course of business and consistent with past practice) or otherwise
become liable (whether directly, contingently or otherwise) for the obligations
of any other Person, or made any payment or repayment in respect of any
indebtedness (other than trade payables, accrued expenses and additional
indebtedness incurred pursuant to Seller's line of credit existing on the date
hereof, all in the ordinary course of business and consistent with past
practice);
(i) entered into, adopted, amended or terminated any bonus, profit
sharing, compensation, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans, funds
or other arrangements for the benefit or welfare of any director, officer or
employee, or increased in any manner the compensation or fringe benefits of any
director, officer or employee or paid any benefit not required by any existing
plan and arrangement in an aggregate amount in excess of $1,000, or entered into
any contract, agreement, commitment or arrangement to do any of the foregoing;
(j) acquired, leased or encumbered any assets outside the ordinary
course of business or which are material to Seller;
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(k) authorized or made any capital expenditures which individually or
in the aggregate are in excess of $5,000;
(l) made any Tax election or settled or compromised any federal, state,
local or foreign Tax liability, or waived or extended the statute of limitations
in respect of any such Taxes;
(m) paid any amount, performed any obligation or agreed to pay any
amount or perform any obligation, in settlement or compromise of any suits or
claims of liability against Seller or any of its directors, officers, employees
or agents; or
(n) terminated, modified, amended or otherwise altered or changed any
of the terms or provisions of any Contract, except in the normal course of
business and consistent with past practices and not in excess of $1,000 in the
aggregate.
3.7 Accounts Receivable and Advances. Schedule 3.7 contains a true and
accurate aging schedule of all accounts receivable of Seller ("Accounts
Receivable") and all loans and advances to third parties ("Advances") as of the
date of such Schedule. Each such Account Receivable represents a sale made in
the ordinary course of business and represents a valid obligation due to Seller.
Seller has performed all of its obligations to produce the goods or perform the
services to which such Account Receivable relates and no such Account Receivable
or Advance is subject to any claim for reduction, counterclaim, set-off,
recoupment or other claim for credit, allowances or adjustments by the obligor
thereof except to the extent Seller will receive restitution, reimbursement or
repayment from a supplier. Except as reserved against in the Financial
Statements, all such Accounts Receivable and Advances are collectible in full
within ninety (90) days of their origination (except for those Accounts
Receivable relating to freight charges which are collectible within one hundred
eighty (180) days and which do not, in the aggregate, amount to more than Five
Thousand Dollars ($5,000)).
3.8 Contracts. (i) True, correct and complete copies of all of Assumed
Contracts (including all amendments thereto) have been provided to Purchaser and
are listed in Schedule 2.1(a)(iv). Each Assumed Contract is valid and
enforceable by the Seller in accordance with its terms; the Seller has performed
all of, and is not in default with respect to, its material obligations
thereunder, including all payment obligations (and, in that regard all amounts
due and payable by the Seller with respect to such Assumed Contracts on or prior
to the Closing Date will have been paid on or prior to the Closing Date) and to
the knowledge of the Seller and the Stockholder, the other parties thereto have
performed all of, and are not in default with respect to, their material
obligations thereunder including all payment obligations; and, except as
disclosed in Schedule 3.8(i) no Person guarantees or is otherwise obligated to
perform the Seller's obligations under any such agreements; (ii) Schedule 3.8
(ii) lists all the Contracts of the following types to which Seller is a party
or by which Seller is bound, or to which any of its assets or properties is
subject:
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(a) any Contract of any kind with any employee, officer or director of
Seller or any of the respective Affiliates of such individuals, or any Contract
or other arrangement of any kind with any Seller or any Affiliate of any Seller;
(b) any Contract of any nature which involves the payment or receipt of
cash or other property, an unperformed commitment, or goods or services, having
a value in excess of $1,000;
(c) any Contract pursuant to which Seller has made or will make loans
or advances, or has or will have incurred debts or become a guarantor or surety
or pledged its credit on or otherwise become responsible with respect to any
undertaking of another (except for the negotiation or collection of negotiable
instruments in transactions in the ordinary course of business);
(d) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of real or personal property, loan commitment or other
Contract relating to the borrowing of funds, an extension of credit or
financing;
(e) any Contract creating or evidencing a partnership, joint venture or
other similar cooperative undertaking;
(f) any Contract involving any restrictions with respect to the
geographical area of operations or scope or type of business of Seller;
(g) any power of attorney or agency agreement with any Person pursuant
to which such Person is granted the authority to act for or on behalf of Seller
or Seller is granted the authority to act for or on behalf of any Person;
(h) any Contract for which the full performance thereof may extend
beyond sixty (60) days from the date of this Agreement;
(i) any Contract not made in the ordinary course of business which is
to be performed in whole or in part on or after the date of this Agreement;
(j) any Contract with any customer of Seller;
(k) any Contract, whether or not fully performed, relating to any
acquisition or disposition of Seller, or any predecessor in interest of Seller,
or any acquisition or disposition of any subsidiary, division, line of business,
or real property; and
(l) any Contract not specified above that is material to Seller. Seller
has delivered to Purchaser true and complete copies of each document listed on
Schedule 3.8, and a written description of each oral arrangement so listed.
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3.9 Permits. Schedule 2.1(a)(viii) is a true and accurate list of all
licenses, certificates, permits, franchises, rights, and approvals issued or
granted by any Governmental Authority held by Seller. Except for the Permits set
forth on Schedule 3.9, there are no Permits, whether federal, state, local or
foreign, which are necessary for the lawful operation of the business of Seller
as such business has heretofore been conducted, except for Permits the failure
of which to obtain or maintain could not have a Material Adverse Effect. All
Permits are in full force and effect.
Purchaser acknowledges that none of the Permits is transferable.
3.10 Insurance.
(a) Schedule 3.10 contains an accurate and complete list of all
policies of fire, liability (including products liability), worker's
compensation, title and other forms of insurance owned, held by or applicable to
Seller (or its assets or business), and Seller has heretofore delivered to
Purchaser a true and complete copy of all such policies, including all
occurrence-based policies applicable to Seller (or its business) for the
three-year period prior to the Closing Date. All such policies are valid,
enforceable and in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy. Such policies are sufficient for compliance with (i) all requirements of
Law and (ii) all Contracts to which Seller is a party. Except as set forth on
Schedule 3.10 Seller has not been refused any insurance with respect to its
assets or operations, and its coverage has not been limited by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance, during the last three (3) years. Purchaser acknowledges that
Seller's insurance is not assignable by Seller to Purchaser.
(b) Seller has furnished to Purchaser a list of all claims which have
been made by Seller in the last three years under any worker's compensation,
general liability, property or other insurance policy applicable to Seller or
any of its properties. Except as set forth on said list, there are no pending
or, to Seller's knowledge, threatened claims under any insurance policy. Such
claim information includes the following information with respect to each
accident, loss, or other event: (i) the identity of the claimant; (ii) the date
of the occurrence; (iii) the status as of the report date and (iv) the amounts
paid or expected to be paid or recovered.
3.11 Employment and Labor Matters. Schedule 3.11 contains a true,
complete and accurate list of all directors, officers and employees of Seller
and their respective titles, annual compensation and all bonuses and similar
payments made with respect to each such individual for the current and preceding
two (2) calendar years. Seller has and currently is conducting its business in
full compliance with all Laws relating to employment and employment practices,
terms and conditions of employment, wages and hours and nondiscrimination in
employment, except where the failure to comply with such Laws would not have a
Material Adverse Effect. Except as set forth on Schedule 3.11, the relationship
of Seller with its employees is good and there is, and during the past three (3)
years there has been, no labor strike, dispute, slow-down, work
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stoppage or other similar labor difficulty actually pending or, to Seller's
knowledge, threatened against or involving Seller. None of the employees of
Seller are covered by any collective bargaining agreement, no collective
bargaining agreement is currently being negotiated and no attempt is currently
being made or during the past three years has been made to organize any
employees of Seller to form or enter a labor union or similar organization.
3.12 Capital Improvements; Adequacy and Condition of Property.
(a) Schedule 3.12A describes all the capital improvements or
purchases or other capital expenditures which Seller has committed to or
contracted for and which have not been completed prior to the date hereof and
the cost and expense reasonably estimated to complete such work and purchases.
(b) Except as disclosed on Schedule 3.12B, immediately after
the Closing Date, Purchaser will own or have the right to use all the assets,
properties, rights, know-how and processes which are required for or currently
used in connection with the operation of its business as it is presently
conducted. Such assets, properties and rights, except for changes in the
ordinary course of business since December 31, 1996, were sufficient to produce
the consolidated income for the period ended August 31, 1997 as shown on the
income statement for that period.
(c) Seller has no liability that is not directly related to,
and that did not arise directly out of, the business of Seller.
(d) To the best of Seller's knowledge, all computer hardware
and software and related materials used by Seller in its business (herein
collectively referred to as the "Computer System") is in good working order and
condition, and Seller has not experienced any significant defects in design,
workmanship or material, and the Computer System has the performance
capabilities, characteristics and functions necessary to the conduct of the
business and operations of Seller as it is presently being conducted. The use of
the Computer System by Purchaser (including any software modifications) (i) will
not violate or infringe upon the rights of any third parties and (ii) will not
result in the termination of any maintenance, service or support agreement
relating to any part of the Computer System or any reduction in the services
provided, warranties available or rights thereunder. Seller will provide
Purchaser with full and adequate user and service documentation for the Computer
System.
(e) Schedule 3.12E includes a complete and accurate legal
description of all the real estate owned and leased under real property leases,
except for the Xxxxxxx Facility, (all such owned and leased real estate, the
"Real Property"); no other real estate, except for the Xxxxxxx Facility, is held
or used by Seller. Schedule 3.12E contains true and complete copies of all
leases in effect on the date hereof for any such Real Property (the "Real
Property Leases"). The activities carried on in all buildings, plants,
facilities, installations, fixtures and other structures or improvements
included as part of, or located on or at, the Real Property and the buildings,
plants,
17
facilities, installations, fixtures and other structures or improvements
themselves, are not in violation of, or in conflict with, any applicable zoning,
environmental or health regulations or ordinance or any other similar law.
Except as set forth in Schedule 3.12E, no asbestos, asbestos- containing
materials, PCB compounds or other pollutants, contaminants or Hazardous
Substances have been used in the construction or repair of, or any alterations
or additions to, or are otherwise located on, any portion of the Real Property.
No parcel of land included in the Real Property relies on or regularly makes use
of access to the nearest public road or right-of-way over land owned by others,
except where such access is by means of one or more valid recorded easements not
subject to divestiture, the terms of which have been disclosed in writing to
Purchaser prior to the date hereof. All covenants or other restrictions (if any)
to which any of the Real Property is subject are being in all respects properly
performed and observed and, except for covenants contained in the Real Property
Leases, do not provide for forfeiture or reversion of title if violated, and
Seller has not received any notice of violation (or claimed violation) thereof.
Seller has delivered to Purchaser true and complete copies of the most recent
title insurance policies and surveys (if any) for the Real Property in the
possession of Seller or Seller, together with copies of all material reports (if
any) of any engineers, environmental consultants or other consultants in its
possession relating to any of the Real Property. Each separate parcel included
in the Real Property has adequate water supply, storm and sanitary sewer
facilities, access to telephone, gas and electrical connections, fire
protection, drainage and other public utilities, and has adequate parking
facilities that meet all requirements imposed by applicable Laws. None of the
Real Property is subject to any lien, easement, right-of-way, building or use
restriction, exception, variance, reservation or limitation as might in any
material respect interfere with or impair the present and continued use thereof
in the usual and normal conduct of the Business. All rent and other charges due
and payable with respect to the Real Property Leases have been paid through the
date of this Agreement and all rent and other charges due and payable with
respect to the Real Property Leases on or prior to the Closing Date will have
been paid prior to the Closing Date.
3.13 Taxes.
(a) The amounts provided as a liability on the Financial Statements for
all Taxes are adequate to cover all unpaid liabilities for all Taxes, whether or
not disputed, that have accrued with respect to or are applicable to the period
covered by the Financial Statements or to any years and periods prior thereto
and for which Seller may be directly or contingently liable in its own right or
as a transferee of the assets of, or successor to, any Person. Seller has not
incurred any Tax liabilities other than in the ordinary course of business for
any taxable year for which the applicable statute of limitations has not
expired. There are no Tax Liens (other than Liens for current Taxes not yet due
and payable) upon the properties or assets of Seller. Seller has not granted or
been requested to grant any waiver of any statutes of limitations applicable to
any claim for Taxes.
(b) All Federal, state, local and foreign income, corporation and other
Tax Returns, and all other filings in respect of Taxes required to be filed
prior to the Closing Date, have been
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or will be filed before the Closing Date as required by applicable Law. All
Taxes shown as due on or before the Closing Date on all such Tax Returns and
other filings have been or will be paid on or prior to the Closing Date. Each
such Tax Return and filing is true and correct and Seller has not or will not
have any additional liability for Taxes with respect to any Tax Return or other
filing heretofore filed or which was required by Law to be filed prior to the
Closing Date, other than as reflected as liabilities on the Financial
Statements. None of the Tax Returns or other filings that include the operations
of Seller has ever been audited or investigated by any Governmental Authority,
and no facts exist which would constitute grounds for the assessment of any
additional Taxes by any Governmental Authority with respect to the taxable years
covered in such Tax Returns and filings. No material issues have been raised in
any examination by any Governmental Authority with respect to the business and
operations of Seller which, by application of similar principles, reasonably
could be expected to result in a proposed adjustment to the liability for Taxes
for any other period not so examined. All Taxes which Seller is required by Law
to withhold or collect, including without limitation sales and use taxes and
amounts required to be withheld for Taxes of employees and other withholding
taxes, have been duly withheld or collected and, to the extent required, have
been paid over to the proper Governmental Authorities or are held in separate
bank accounts for such purpose. All information returns required to be filed by
Seller prior to the Closing Date have been or will be filed, and all statements
required to be furnished to payees by Seller prior to the Closing Date have been
or will be furnished to such payees, and the information set forth on such
information returns and statements is true, complete and correct in all material
respects.
(c) The Seller is not a "foreign person" as defined in Section
1445(f)(3) of the Code.
(d) Seller is not a party to and is not otherwise subject to any
arrangement having the effect of or giving rise to the recognition of a
deduction or loss in a taxable period ending on or before the Closing Date and a
corresponding recognition of taxable income or gain in a taxable period ending
after the Closing Date, or any other arrangement that would have the effect of
or give rise to the recognition of taxable income or gain in a taxable period
ending after the Closing Date without the receipt of or entitlement to a
corresponding amount of cash.
(e) Seller is not subject to any joint venture, partnership or other
arrangement or contract which is treated as a partnership for Federal income tax
purposes, and is not a party to any tax sharing agreement.
(f) The basis of all depreciable or amortizable assets, and the methods
used in determining allowable depreciation or amortization (including cost
recovery) deductions of Seller are correct and, to Seller's knowledge, in
compliance in all material respects with the Code and the regulations
thereunder.
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3.14 No Defaults or Violations.
(a) Seller has not materially breached any provision of, nor is it in
material default under the terms of, any Contract to which it is a party or
under which it has any rights or by which it is bound and, to the best of
Seller's knowledge, no other party to any such Contract has breached such
Contract or is in default thereunder.
(b) Except as set forth in Schedule 3.14, Seller is in compliance with,
and no violation exists under, and no violation has existed under any and all
Laws applicable to Seller (including, without limitation, Environmental Laws),
the failure to comply with which could have a Material Adverse Effect.
(c) No notice from any Governmental Authority has been received by
Seller claiming any violation of any Law (including any Environmental Law, or
building, zoning or other ordinance), or asserting any Tax, assessment or
penalty, or asserting violation, lapse, or terminating any Permit, which has not
been corrected, cured or otherwise resolved to the satisfaction of the
Governmental Authority.
3.15 Litigation.
(a) There are no actions, suits, arbitrations, regulatory proceedings
or other litigation, proceedings or governmental investigations pending or
threatened against or affecting Seller or any of its officers, directors,
employees, agents or stockholders thereof in their capacity as such, or any of
its properties or business, and to Seller's knowledge there are no facts or
circumstances which may give rise to any of the foregoing. Seller is not subject
to any order, judgment, decree, injunction, stipulation or consent order of or
with any court or other Governmental Authority. Seller has not entered into any
agreement to settle or compromise any proceeding pending or threatened against
it which has involved any obligation.
(b) There are no claims, actions, suits, proceedings or investigations
pending or threatened by or against Seller or Seller with respect to this
Agreement or the Related Agreements, or in connection with the transactions
contemplated by this Agreement or by the Related Agreements, and to Seller's
knowledge there is no valid basis for any such claim, action, suit, proceeding,
or investigation.
3.16 No Conflict of Interest. Except for the transactions contemplated
by this Agreement, neither Stockholder nor, to Stockholder's knowledge, any of
his Affiliates have or claims to have any direct or indirect interest in any
tangible or intangible property used in the business of Seller except as a
holder of Shares.
3.17 Bank Accounts. Schedule 3.17 sets forth the names and locations
of each bank or other financial institution at which Seller has an account
(giving the account numbers) or safe
20
deposit box and the names of all Persons authorized to draw thereon or have
access thereto, and the names of all Persons, if any, now holding powers of
attorney or comparable delegation of authority from Seller and a summary
statement thereof.
3.18 Due Diligence Materials. Seller has provided to Purchaser or its
representatives access to the books and records of Seller and other material
information pertaining to the business, assets, prospects and affairs of Seller
in Stockholder's possession or under Stockholder's control.
3.19 Accuracy of Statements. Neither this Agreement nor any schedule,
statement, list, document, or certificate specifically referred to herein and
furnished or to be furnished by Seller or Stockholder to Purchaser or any
representative or Affiliate of Purchaser pursuant to this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
3.20 Inventories. Schedule 2.1(a)(i) sets forth the quantity, unit
cost, and total cost of each item of inventory, which list and schedule are true
and accurate in all material respects as of the date of such schedule. Except as
set forth on Schedule 3.20, each item of truck accessory inventory owned by
Seller is of merchantable quality, is not obsolete, and is usable and saleable
in the ordinary course of business, and none of such items is held on assignment
or consignment. Inventories are fairly reflected in the inventory accounts on
the balance sheets included in the Financial Statements in accordance with GAAP,
including all appropriate reserves, and are valued on a FIFO basis at the lower
of cost or market.
3.21 Employee Benefit Matters.
(a) General. The only "employee welfare benefit plans" or "employee
pension benefit plans" (as those terms are respectively defined in sections 3(1)
and 3(2) of ERISA), fringe benefit arrangements which do not constitute employee
benefit plans (as defined in section 3(3) of ERISA) or employment agreements
with respect to which Seller has any liability are set forth on Schedule 3.21
(referred to hereinafter as "Employee Benefit Plans"). No Employee Benefit Plan
is subject to Title IV of ERISA, and Seller does not have any liability with
respect to any "multiemployer plan" (as defined in section 3(37) of ERISA) or
for providing any post-retirement medical or life insurance benefits.
(b) Plan Documents and Reports. A true and correct copy of each of the
Employee Benefit Plans and all contracts relating thereto or to the funding
thereof and of the most recent annual report (including attachments), summary
plan description and Internal Revenue Service determination letter with respect
to each Employee Benefit Plan has been supplied to the Purchaser.
(c) Compliance with Laws; Liabilities. As to each Employee Benefit Plan:
21
(i) Each Employee Benefit Plan complies and has been
administered in form and in operation in all
material respects with all applicable
requirements of law, and no event has occurred
which will or could cause any such plan to fail
to comply with such requirements and Seller has
not received any written notice by any
governmental authority questioning or
challenging such compliance.
(ii) None of the assets of any Employee Benefit Plan
is invested in employer securities or employer
real property.
(iii) To Seller's knowledge, there have been no acts
or omissions by Seller or the Seller which have
given rise to or may give rise to fines,
penalties, taxes or related charges under
section 502 of ERISA or Chapters 43, 47, 68 or
100 of the Code for which Seller may be liable.
(iv) None of the payments contemplated by the
Employee Benefit Plans would, in the aggregate,
constitute excess parachute payments (as defined
in section 280G of the Code (without regard to
subsection (b)(4) thereof)).
(v) There are no actions, suits or claims (other
than routine claims for benefits) pending or
threatened involving any Employee Benefit Plan
or the assets thereof and no facts exist which
could give rise to any such actions, suits or
claims (other than routine claims for benefits).
(vi) There has been no act or omission that would
impair the ability of Seller (or any successor
thereto) to unilaterally amend or terminate any
Employee Benefit Plan.
3.22 Environmental Matters. Except as set forth on Schedule 3.22:
(a) the business and operations of Seller are in material compliance
with all Environmental Laws in effect as of the date hereof;
(b) no condition exists or event has occurred on, in, under, or from
any owned or leased property which has been caused by Seller, by the
Stockholder, or by any other Person and which, with or without notice or the
passage of time or both, would constitute a violation of or give rise to any
Lien or liability under any Environmental Law in effect on the date hereof or on
the Closing Date, as the case may be;
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(c) Seller is in possession of all Environmental Permits required for
the conduct or operation of its business (or any part thereof), and is in
material compliance with all of the requirements and limitations included in
such Environmental Permits;
(d) Seller has not used, stored, transported, treated or disposed of
any Hazardous Substances in, on, at, or from any of the properties or facilities
of Seller, except for inventories of substances listed on Schedule 3.22 which
have been used or are to be used in the ordinary course of business (which
inventories have been stored and used in material compliance with all applicable
Environmental Laws and Environmental Permits, including all so-called "Right To
Know Laws");
(e) there are no Hazardous Substances in, on, or at any of the
properties or facilities of Seller, except for inventories of substances listed
on Schedule 3.22;
(f) Seller has not received any notice from any Governmental Authority
or any other Person that any aspect of the business, operations or facilities of
Seller is or may be in violation of any Environmental Law or Environmental
Permit, or that Seller is responsible (or potentially responsible) for the
cleanup or remediation of any substances at any location;
(g) Seller is not the subject of any litigation or proceedings in any
forum, judicial or administrative, involving a demand for damages, injunctive
relief, penalties, or other potential liability with respect to violations of
any Environmental Law;
(h) Seller has timely filed all reports and notifications required to
be filed with respect to all of its properties and facilities and has generated
and maintained all required records and data under all applicable Environmental
Laws;
(i) no condition has existed or event has occurred with respect to (i)
any property that was at any time owned or leased by Seller, by any direct or
indirect subsidiary that was at any time owned or controlled by Seller, or by
any predecessor to Seller or any Person that is or was an Affiliate of Seller,
which property or subsidiary has been sold, transferred or disposed of or for
which any lease has terminated or (ii) any predecessor to Seller that could (in
the case of either of the foregoing clauses (i) or (ii)), with or without
notice, passage of time or both, give rise to any present or future liability of
Seller pursuant to any Environmental Law in effect on the date hereof or on the
Closing Date, as the case may be; and
(j) no asbestos, asbestos-containing materials, PCB compounds or other
pollutants, contaminants or Hazardous Substances have been used in the
construction or repair of, or any alterations or additions to, or are otherwise
located on, any portion of the Real Property.
3.23 Customers and Suppliers.
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(a) Schedule 3.23 sets forth:
(i) a list of the ten largest customers of Seller in
terms of revenue during the fiscal year ended
1996, and the most recent quarter of the current
fiscal year (collectively, the "Major
Customers"), showing the total revenue received
in each such period from each such customer; and
(ii) a list of the ten largest suppliers of Seller in
terms of purchases during the fiscal year ended
1996 and the most recent quarter of the current
fiscal year (collectively, the "Major
Suppliers"), and showing the approximate total
purchases in each such period from each such
supplier.
(b) Except as set forth on Schedule 3.23, no customer represented in
excess of 10% of the total revenue of Seller during the fiscal year ended 1996
and the most recent quarter of the current fiscal year and no supplier
represented in excess of ten percent (10%) of the purchases of Seller during
such period. To Seller's knowledge, except as set forth in Schedule 3.23, since
December 31, 1996, there has been no material adverse change in business
relationship and no material dispute between Seller and any Major Customer or
Major Supplier, and neither Seller nor Stockholder has received any written
notice that any Major Customer or Major Supplier intends to reduce its purchases
from, or sales to Seller.
3.24 Claims Against Officers and Directors. There are no pending or, to
Seller's knowledge, threatened claims against any director, officer, employee or
agent of Seller or any other Person which could give rise to any claim for
indemnification against Seller.
3.25 Brokers. Neither Stockholder nor Seller has used any broker or
finder in connection with the transactions contemplated by this Agreement,
except for The Geneva Companies and neither Purchaser nor any Affiliate of
Purchaser has or shall have any liability or otherwise suffer or incur any Loss
as a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Seller or Seller in connection with any of
the transactions contemplated by this Agreement. The Seller agrees to be solely
liable to pay any amounts due to the Geneva Companies.
3.26 Products Liability. Except as set forth in Schedule 3.26 and
except as otherwise provided for in the Financial Statements, there is no
product liability claim pending or threatened against Seller, whether pursuant
to any warranty or otherwise, and there has been no product recall, rework or
post-sale warning or similar action conducted with respect to any product
manufactured, shipped, sold, delivered or installed by or on behalf of Seller.
3.27 Intellectual Property. Schedule 2.1(iv) sets forth a true and
complete list of all Intellectual Property used by Seller in the Business.
Except as set forth on Schedule 3.27: (i)
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Seller and Stockholder own or possess adequate, perpetual and irrevocable rights
in and to all Intellectual Property necessary to conduct the Business as
presently conducted and are not obligated to pay any royalty, license fee or
other payment to any Person in order to use the Intellectual Property; and (ii)
none of the Intellectual Property is the subject of any pending or, to Seller or
Stockholder's best knowledge, threatened adverse claims or proceedings and there
are no claims or proceedings pending or, to Seller's best knowledge, threatened
against Seller or Stockholder asserting that their use of any of the
Intellectual Property infringes the rights of any third party and, to Seller or
Stockholder's best knowledge, no third party is infringing any of the rights of
Seller's in the Intellectual Property.
3.28 Transactions with Affiliates. Except as set forth on Schedule
3.28: Seller is not a party to any Contract with any of its Affiliates in
connection with the Assets or the Business and does not purchase any supplies
from any of its Affiliates, and no Affiliates of Seller provide credit support
to the Seller (whether in the form of loans, guarantees, collateral or
otherwise).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller, as of the date of this
Agreement and as of the Closing Date (as if such representations and warranties
were made on the Closing Date), as follows:
4.1 Due Incorporation; Financial Condition. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota, with all requisite power and authority to conduct its
current business.
4.2 Due Authorization. Purchaser has full power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance by Purchaser of this
Agreement and the Note, Security Agreement and UCC-1s have been duly and validly
approved by the board of directors of Purchaser and no other actions or
proceedings on the part of Purchaser are necessary to authorize this Agreement,
the Note, Security Agreement and UCC-1s and the transactions contemplated by
this Agreement. Purchaser has duly and validly executed and delivered this
Agreement and the Note and Security Agreement and each such agreement
constitutes the legal, valid and binding obligation of Purchaser, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific remedies.
4.3 Consents and Approvals; Authority Relative to this Agreement.
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(a) No consent, authorization or approval of, filing or registration
with, or cooperation from, any Governmental Authority or any other Person not a
party to this Agreement is necessary in connection with the execution, delivery
and performance by Purchaser of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the Note and
Security Agreement.
(b) The execution, delivery and performance by Purchaser of this
Agreement, the Note and the Security Agreement does not and will not (i) violate
any Law; (ii) violate or conflict with, result in a breach or termination of,
constitute a default or give any third party any additional right (including a
termination right) under, permit cancellation of, result in the creation of any
Lien, other than Liens in favor of the Bank and as permitted under Section
2.3(b)(iii), upon any of the assets or properties of Purchaser under, or result
in or constitute a circumstance which, with or without notice or lapse of time
or both, would constitute any of the foregoing under, any Contract to which
Purchaser is a party or by which Purchaser or any of its assets or properties
are bound; (iii) permit the acceleration of the maturity of any indebtedness of
Purchaser or indebtedness secured by its assets or properties; or (iv) violate
or conflict with any provision of Purchaser's Certificate of Incorporation or
bylaws.
4.4 Litigation. There are no claims, actions, suits, proceedings or
investigations pending or, to Purchaser's knowledge, threatened by or against
Purchaser or its Affiliates with respect to this Agreement or in connection with
the transactions contemplated by this Agreement, and Purchaser has no reason to
believe there is a valid basis for any such claim, action, suit, proceeding, or
investigation.
4.5 Accuracy of Statements. Neither this Agreement nor any exhibit,
statement, list, document, or certificate specifically referred to herein and
furnished or to be furnished by the Purchaser to Seller pursuant to this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
4.6 Brokers. Purchaser has not used any broker or finder in connection
with the transactions contemplated by this Agreement, and neither the Seller nor
Seller has or shall have any liability or otherwise suffer or incur any Loss as
a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Purchaser in connection with any of the
transactions contemplated by this Agreement.
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ARTICLE V
COVENANTS
5.1 Access to Information and Facilities.
(a) In connection with this Agreement, Seller shall give Purchaser and
Purchaser's representatives full and complete access during normal business
hours to all of the facilities, properties, books, Contracts, commitments and
records of Seller and shall make the officers and employees of Seller reasonably
available to Purchaser and its representatives as Purchaser and its
representatives shall from time to time reasonably request. Purchaser and its
representatives will be furnished with any and all information concerning Seller
which Purchaser or its representatives reasonably request.
(b) Purchaser agrees to hold all Confidential Information in confidence
and will not disclose the same, except to person(s) participating in this
Agreement, including attorneys, accountants and potential financing sources;
except that nothing contained herein shall prevent disclosure or use of any
Confidential Information as may be required by law, or any Confidential
Information that otherwise becomes public through no fault of Purchaser.
5.2 [Intentionally Omitted]
5.3 Consents and Approvals. The Seller and Purchaser shall use
reasonable efforts to obtain all consents, approvals, certificates and other
documents required in connection with the respective performances by the Seller
and the Purchaser of this Agreement and the consummation of the transactions
contemplated by this Agreement.
5.4 [Intentionally Omitted]
5.5 Exclusivity. Neither the Stockholder nor Seller nor any of its
directors, officers, employees, representatives, agents or Affiliates
(collectively, Seller's representatives) shall directly or indirectly solicit,
initiate, encourage, respond favorably to, or condone inquiries or proposals
from, provide any Confidential Information to, or participate in any discussions
or negotiations with any Person (other than Purchaser and its affiliates,
directors, officers, employees, representatives and agents) concerning (a) any
merger, acquisition, sale of assets, investment, joint venture or other business
combination in any way relating to or affecting the shares, assets and/or
business of Seller or (b) any purchase or other acquisition by any Person of any
of the Shares, or (c) any sale or issuance by Seller of any shares of its
capital stock.
5.6 Additional Financial Statements. Prior to Closing, the Seller
agrees to provide to Purchaser as soon as practicable after the end of each
calendar month financial statements of Seller, consisting of a balance sheet as
of the end of such month and an income statement and
27
statement of cash flows for that month and for the portion of the year then
ended.
5.7 Stockholder's Actions. Stockholder shall cause the Seller to comply
with all of the Seller's covenants contained in this Agreement.
5.8 Non-Competition. Seller agrees that it will at no time within the
period beginning on the Closing Date and ending five (5) years following the
Closing Date (the "Non-Compete Period"), directly or indirectly, alone or with
others, engage in, or have any ownership interest in, any person, firm,
corporation or business, whether as owner, partner, equity security holder, or
otherwise, that engages in, or participates as an agent, partner, or joint
venturer in, any activity competitive with the business carried on by the Seller
prior to the Closing Date anywhere within the States of Oklahoma, Texas,
Louisiana, Georgia, Florida, Alabama, Mississippi, South Carolina, Tennessee and
Arkansas. Seller agrees that during the Non- Compete Period it will not induce
or attempt to induce any employee of Purchaser or any Affiliate thereof who is
currently an employee of Seller or an Affiliate thereof to leave such
employment, or in any other manner interfere with such employment. In the event
a court of competent jurisdiction determines that the non-competition covenant
herein is unreasonable because of its term or territorial scope, or for any
other reason, Seller and Purchaser agree that such court may reform the
conditions of such covenant so that it is reasonable under the circumstances and
that this covenant, as reformed, shall be enforceable. The parties hereto agree
and acknowledge that the limitations as to time, geographical area, and scope of
activity to be restrained as set forth in this Section 5.8 do not impose any
greater restraint than is necessary to protect the legitimate business interests
of Purchaser and the Assets. The parties further agree and acknowledge that, in
the event of a breach or threatened breach of any of the provisions of this
Section 5.8, Purchaser shall be entitled to immediate and temporary injunctive
relief, as any such breach would cause Purchaser irreparable injury for which it
would have no
28
adequate remedy at law. Nothing herein shall be construed so as to prohibit
Purchaser from pursuing any other remedies available to it for any such breach
or threatened breach.
5.9 Employment Matters. Purchaser (or any Affiliate of the Purchaser)
shall have the right, but not the obligation, to offer employment on such terms
and conditions as Purchaser may determine to any or all of such employees.
Purchaser (or any Affiliate of the Purchaser) shall advise Seller as soon as
practicable which of such employees, if any, it wishes to employ from and after
the Closing Date. Seller shall cooperate in any attempt by Purchaser (or any
Affiliate of the Purchaser) to employ such employees. Nothing in this Section
5.9 shall obligate Purchaser (or any Affiliate of the Purchaser) to offer
employment to an employee in a similar job or with similar responsibilities as
such employee was provided by Seller. Seller is retaining and shall pay all
obligations relating to its employees' accrued salaries, wages, compensation and
employee benefits of any nature whatsoever. Without limiting the foregoing,
Seller shall (i) pay all wages, bonuses, commissions, and other remuneration
payable to or for the benefit of employees with respect to periods prior to the
Closing Date; (ii) pay all vacation pay or pay for other compensated absences
earned or accrued by all of Seller's employees as of the Closing Date, including
any related payroll burden (FICA and other pension or other employee benefit
plan contributions and employment taxes) with respect thereto to the appropriate
Governmental Authority or other Person, whether or not such pay is vested or has
been accrued on the books of Seller as of such date, based upon the remuneration
of such employees normally used in computing such vacation pay or pay for other
compensated absences; (iii) pay all severance payments (if any) due to all of
Seller's employees as a result of the termination of their employment with
Seller; (iv) comply with the insurance continuation requirements under COBRA and
any similar state law applicable to any of Seller's employees as a result of
their termination of employment by Seller; and (v) be responsible for continued
medical and disability coverage liability with respect to any such employee who
is disabled and not hired by Purchaser. Seller shall also pay or be liable for
any worker's compensation claims or amounts payable to such employees in
connection with events occurring prior to the Closing Date and for any liability
or costs associated with the termination of any of their employee benefit plans.
5.10 Taxes on Transfer. Seller shall bear all sales tax, use tax and
other similar taxes incurred as a result of the sale and purchase of the Assets
and the Business hereunder.
5.11 Use of Name. From and after the Closing Date, Seller shall not use
its corporate name, trade name, trademarks or logos; and Seller shall change its
name promptly after Closing to a name that is dissimilar to "Midwest Truck After
Market" or "MTA" and neither Seller nor Stockholder nor any of their Affiliates
shall use after Closing a name that is similar to "Midwest Truck After Market"
or "MTA"; provided, however, that, Seller shall be entitled to use its existing
corporate name and tradename for purposes of filing Tax Returns and for a period
of 270 days after Closing for the purposes of notifying Governmental Authorities
and other Persons of its name change. From and after the Closing Date, Seller
and Stockholder shall cooperate with the Purchaser and take such reasonable
steps requested by Purchaser to notify customers and suppliers of the change of
ownership of the Business.
29
5.12 Benefit of Contracts. To the extent that any Contract that is
intended to be assigned at the Closing by Seller to the Purchaser cannot be
assigned to the Purchaser on the Closing Date (whether as a result of a failure
to obtain a necessary consent or otherwise), and the Purchaser elects or is
required by the terms hereof to consummate the transactions contemplated hereby,
the Seller shall use its best efforts to take such actions as may be reasonably
requested by the Purchaser (e.g., to act as sublessor, distributor or agent) to
enable the Purchaser to realize the practical economic benefits of, and have the
rights under, such Contract and the Purchaser shall use its best efforts to take
such actions as may be reasonably requested by the Seller to impose on the
Purchaser (or to reimburse the Seller for its performance of) the practical
economic burden of, and the obligations under, such Contract for which the
Purchaser would have been responsible had such Contract been assigned at the
Closing Date.
5.13 Accounts Receivable.
(i) On and after Closing, Purchaser shall have the right to
endorse and negotiate all checks and other instruments received from customers
that are payable to the Seller.
(ii) Seller and Stockholder shall cooperate with and provide
reasonable assistance to the Purchaser to facilitate Purchaser's securing
satisfactory arrangements with the Seller's suppliers prior to Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser under Article II of this Agreement are
subject to the satisfaction or waiver by Purchaser of the following conditions
precedent on or before the Closing Date:
6.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Seller and Stockholder contained herein shall
have been accurate, true and correct in all material respects on the date of
this Agreement, and on the Closing Date with the same force and effect as though
made by Seller and Stockholder on the Closing Date.
6.2 Compliance with Agreements and Covenants. Seller and Stockholder
shall have performed and complied in all material respects with all of their
covenants, obligations and agreements contained in this Agreement to be
performed and complied with by him on or prior to the Closing Date.
6.3 Consents and Approvals. Purchaser shall have received written
evidence reasonably satisfactory to Purchaser that all consents and approvals
required for the
30
consummation of the transactions contemplated by this Agreement or the ownership
and operation by Purchaser of Business have been obtained, and all required
filings have been made.
6.4 Non-Competition Agreement. Stockholder shall have entered into a
non-competition agreement with a five (5) year term with Purchaser in exchange
for payments to Stockholder by Purchaser in the amount of $100,000 per year
payable in equal quarterly installments, which non-competition agreement shall
be in substantially the form of Exhibit 6.4 (the "Non-Competition Agreement").
6.5 Facility Lease. Stockholder shall have entered into a five-year,
triple net lease with Purchaser for the facility located at 000 Xxxxx 000 Xxxx
Xxxxxx, Xxxxx, Xxxxxxxx 00000 (the "Facility Lease"). The Facility Lease shall
be in form and substance similar to the agreement attached as Exhibit 6.5 and
shall provide for annual rent of $132,000 payable in equal monthly installments,
in advance.
6.6 Documents. Purchaser shall have received all of the agreements,
documents and items specified in Section 8.2 in form and substance reasonably
acceptable to the Purchaser.
6.7 Due Diligence Review. Purchaser shall be satisfied with the results
of its investigation and review of the business, operations, assets,
liabilities, results of operations, cash flows, condition (financial and
otherwise) and prospects of, and other matters relating to, Seller, provided
that its determination that it is satisfied with such results shall not be
unreasonably withheld, delayed or conditioned.
6.8 No Material Adverse Change. No Material Adverse Change since the
date hereof shall have occurred and no event shall have occurred which, in the
reasonable judgment of Purchaser, may have a Material Adverse Effect.
6.9 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which (a)
might have a Material Adverse Effect, or (b) could enjoin, restrain or prohibit,
or could result in substantial damages in respect of, any provision of this
Agreement or the consummation of the transactions contemplated by this
Agreement.
6.10 Financing. Purchaser shall have obtained financing in amounts
sufficient to pay the cash portion of the Purchase Price and provide working
capital, all in amounts and on terms satisfactory to Purchaser in its sole
discretion.
6.11 Other Agreements. The Stockholder shall have entered into the
Consulting Agreement provided for in Section 7.5 below.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are
subject to the satisfaction or waiver by Seller of the following conditions
precedent on or before the Closing Date:
7.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Purchaser contained herein shall have been
accurate, true and correct in all material respects on and as of the date of
this Agreement and as of the Closing Date with the same force and effect as
though made by Purchaser on the Closing Date.
7.2 Compliance with Agreements and Covenants. Purchaser shall have
performed and complied with all of its covenants, obligations and agreements
contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date.
7.3 Documents. Seller shall have received all of the agreements,
documents and items specified in Section 8.3 in form and substance reasonably
acceptable to Seller.
7.4 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which could
enjoin, restrain or prohibit, or could result in substantial damages in respect
of, any provision of this Agreement or the consummation of the transactions
contemplated by this Agreement.
7.5 Consulting Agreement. Purchaser shall have entered into a six (6)
month consulting agreement with Stockholder, which will provide for an aggregate
payment of $40,000, payable in equal bi-monthly installments and which will be
in substantially the form of Exhibit 7.5.
7.6 Other Agreements. Purchaser shall have entered into the Non-
Competition Agreement and the Facility Lease.
7.7 Assumed Obligations. Purchaser shall have agreed to assume the
Assumed Obligations.
7.8 Note, Security Agreement and Financing Statements. Purchaser shall
have executed and delivered the Note, Security agreement and appropriate UCC-1
financing statements to Seller.
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ARTICLE VIII
CLOSING
8.1 Closing. The Closing shall take place at the offices of Xxxxx,
Xxxxx & Xxxxx, at 10:00 A.M. on the earlier of: (i) October 31, 1997, or (ii)
five (5) business days after the satisfaction or waiver of the conditions
precedent set forth in Article VI and Article VII. The Closing, and all
transactions to occur at the Closing, shall be deemed to have taken place at,
and shall be effective as of, the close of business on the Closing Date.
8.2 Deliveries by Seller. At the Closing, in addition to any other
documents or agreements required under this Agreement, Seller shall deliver to
Purchaser the following:
(a) Evidence in form satisfactory to Purchaser that all consents and
approvals referred to in Section 5.3 have been obtained;
(b) A written statement from each Person holding a Lien upon any of the
assets of Seller, confirming the repayment of the indebtedness secured thereby
and the release as of the Closing Date of (i) such Lien and (ii) all obligations
under any and all Contracts relating thereto;
(c) A certificate dated the Closing Date executed by Seller certifying
as to the compliance by Seller with Section 6.2;
(d) The Certificate of Incorporation or similar instrument of Seller
certified by the Secretary of State or equivalent Person of the jurisdiction of
its incorporation, and Bylaws or similar instruments of Seller certified by the
Secretary of Seller;
(e) Certificates of Good Standing for Seller from the States of
Oklahoma and Texas .
(f) A xxxx of sale, conveying to Purchaser the Assets and other
instruments of transfer as may be reasonably required by Purchaser; and
(g) Original copies of the Non-Competition Agreement, Consulting
Agreement and Facility Lease duly executed by the Stockholder.
8.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver to
Seller and Stockholder the following:
(a) The cash amount payable to Seller at the Closing and the Note, a
security agreement and appropriate executed UCC financing statements granting a
subordinated security interest as described in Section 2.3.
33
(b) A certificate, dated the Closing Date, of an executive officer of
Purchaser, certifying as to compliance by Purchaser with Section 7.2; and
(c) A certificate of Purchaser's secretary certifying resolutions of
the board of directors of Purchaser approving this Agreement and the Related
Agreements and the transactions contemplated by this Agreement and by the
Related Agreements (together with an incumbency and signature certificate
regarding the officer(s) signing on behalf of Purchaser).
(d) Original copies of the Non-Competition Agreement, Consulting
Agreement and Facility Lease, duly executed by Purchaser.
(e) Evidence in form satisfactory to Seller that all consents and
approvals referred to in Section 5.3 have been obtained.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time on or
prior to the Closing Date:
(a) With the written mutual consent of Seller and Purchaser;
(b) By Seller or Purchaser if the Closing shall not have taken place on
or before November 15, 1997; provided, however, that the right to terminate this
Agreement under this Section 9.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such date;
(c) By Purchaser if there shall have been a material breach of any
covenant, representation or warranty of Seller hereunder and such breach shall
not have been remedied within ten (10) Business Days after receipt by Seller of
a notice in writing from Purchaser specifying the breach and requesting such be
remedied; or
(d) By Seller if there shall have been a material breach of any
covenant, representation or warranty of Purchaser hereunder and such breach
shall not have been remedied within ten (10) Business Days after receipt by
Purchaser of notice in writing from Seller specifying the breach and requesting
such be remedied.
9.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 9.1, all obligations of the parties hereunder shall terminate, however,
no such termination shall relieve any party from liability for any prior willful
breach of this Agreement.
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ARTICLE X
INDEMNIFICATION
10.1 Survival. The representations and warranties of Purchaser and
Seller contained herein shall survive the Closing for a period of two years,
except that Tax Warranties shall survive until the Tax Statute of Limitations
Date, Environmental Warranties shall survive until the Environmental Statute of
Limitations Date, and Title Warranties shall survive without any limitations.
10.2 Indemnification by Seller. Seller agrees to indemnify the
Purchaser Indemnified Parties against, and agrees to hold them harmless from,
any and all Losses incurred or suffered by them relating to or arising out of or
in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or warranty
made by Seller in this Agreement, provided such claim is made prior to the
expiration of the survival period of the relevant warranty on which the claim is
based as set forth in Section 10.1;
(b) any breach of or failure by Seller to perform any covenant or
obligation of Seller set out or contemplated in this Agreement;
(c) any claims made against Purchaser by creditors of Seller for the
payment or satisfaction of any obligation constituting an Excluded Obligation;
and
(d) all demands, assessments, judgments, costs and reasonable legal and
other expenses arising from, or in connection with, any Claim (as defined in
Section 10.4 below) incident to any of the foregoing.
10.3 Indemnification by Purchaser. Purchaser agrees to indemnify the
Seller Indemnified Parties against, and agrees to hold each of them harmless
from, any and all Losses incurred or suffered by them relating to or arising out
of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or warranty
made by Purchaser in this Agreement; and
(b) any breach of or failure by Purchaser to perform any covenant or
obligation of Purchaser set out or contemplated in this Agreement; and
(c) all demands, assessments, judgments, costs and reasonable legal and
other expenses arising from, or in connection with, any Claim (as defined in
Section 10.4 below) incident to any of the foregoing.
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10.4 Notice of Claim. Promptly after receipt by an Indemnified Person
of notice of any demand, claim, or circumstances giving rise to a claim, or
commencement of any action, suit, proceeding, or investigation that may result
or has resulted in a Loss for which indemnification is provided hereunder (a
"Claim"), the Indemnified Person shall give notice of the Claim to the
Indemnifying Person, which notice shall describe the nature of the Claim in
reasonable detail and the amount or estimated amount thereof. Failure to give
such notice shall not affect an Indemnified Person's right to indemnification
hereunder unless the Indemnified Party shall be prejudiced as a result of such
failure to give notice.
10.5 Indemnifying Person's Opportunity to Defend. Within ten (10) days
of receipt of notice of a Claim, the Indemnifying Person may elect to compromise
or defend the Claim, provided that the Indemnifying Person delivers a written
acknowledgment of its obligation to indemnify the Indemnified Person for any and
all Losses that ultimately result from the Claim, and provided further that the
Indemnifying Person undertakes to compromise or defend the Claim at its own
expense and with its own counsel, the selection of which counsel shall be
subject to the Indemnified Person's approval which approval shall not be
unreasonably withheld, conditioned or delayed. The Indemnified Person shall, and
shall have the right to, cooperate in the compromise or defense of the Claim at
the Indemnifying Person's expense, and shall make available to the Indemnifying
Persons all books, records, documents, and other information in the Indemnified
Person's possession or control that are necessary or appropriate for the
investigation or defense of the Claim.
10.6 Indemnifying Person's Failure to Act. In the event that the
Indemnifying Person elects not to compromise or defend the Claim, fails to
notify the Indemnified Person of its election to do so, or contests its
obligation to indemnify the Indemnified Person for the Claim, the Indemnified
Person may, subject to Section 10.7, pay the Claim in full, or compromise or
defend the Claim with counsel of its own choice, provided that such payment,
compromise or defense shall not be construed as a waiver of the Indemnified
Person's rights to indemnification hereunder, and the Indemnified Person may
assert those rights in a subsequent suit or third party action as it deems
appropriate, and provided further that in the event the Indemnifying Person is
found to have improperly denied its obligation to provide indemnification for
the Claim, it shall be liable to the Indemnified Person for all Losses incurred
in paying, settling or compromising the Claim, as well as costs (including
attorneys fees and expenses) of enforcing these indemnification provisions,
subject to Section 10.7.
10.7 Settlement or Compromise. If either the Indemnifying Person or the
Indemnified Person proposes to enter into a settlement or compromise of any
Claim, such Person shall promptly notify the other Person and such other Person
shall have fifteen (15) days from the receipt of such notice within which to
either consent or object to said settlement or compromise. A Person failing
within such fifteen (15) day period to notify the other in writing of his
acceptance of or objection to the settlement or compromise shall be deemed to
have consented thereto. Any settlement or compromise of any Claim which has been
consented to by both the Indemnifying Person and the Indemnified Person shall be
binding on both such Persons (but only inter se) as if a final judgment or
decree had been entered by a court of competent jurisdiction
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in the amount of such settlement or compromise; provided, however, that any
consent given or deemed to have been given by an Indemnifying Person to a
settlement or compromise which an Indemnified Person proposes to enter into
shall not be deemed an admission that the Claim was covered by any
indemnification obligation under this Article X or otherwise affect the
Indemnifying Person's right to assert a defense that the Claim was not subject
to any such indemnification obligation. Except as provided herein, in no event
shall an Indemnifying Person settle or compromise any Claim without the written
consent of the Indemnified Person. If the Indemnified Person objects to any
settlement or compromise to which the Indemnifying Person has consented, the
Indemnified Person shall immediately assume (or continue, as the case may be)
and control the entire defense of the Claim and the Indemnifying Person's
obligation to indemnify the Indemnified Person shall be limited to the amount
that it would have been obligated to pay pursuant to the settlement or
compromise to which it had consented. If the Indemnifying Person objects to any
settlement or compromise of any Claim to which the Indemnified Party has
consented, the Indemnified Person may enter into such settlement or compromise
of the Claim notwithstanding the objection of the Indemnifying Person. In such
event, the Indemnifying Person's obligation to indemnify the Indemnified Person
for any such Claim shall be determined in the same manner as any other dispute
between the parties hereto under this Agreement.
10.8 Right of Set-Off. In the event a Purchaser Indemnified Party is
entitled to receive any amount from Stockholder under this Agreement, including
without limitation any indemnification payment under this Agreement, without
limiting Purchaser's rights to seek any recovery against Stockholder directly,
Purchaser may elect to retain any amounts owed to Stockholder under the
Consulting Agreement and the Non-Competition Agreement; provided, however, that
if the Stockholder disputes any such claim, Purchaser shall place the amount
subject to offset in escrow until the dispute is resolved through mutual
agreement or by a decision of the court having jurisdiction over the subject
matter of the claim.
10.9 Limitations on Liability. Notwithstanding the foregoing, a claim
by any of the parties pursuant to Sections 10.2, 10.3 and 10.4 against the other
shall not be asserted unless and until the aggregate and cumulative totals of
all such claims by all Purchaser Indemnified Parties or Seller Indemnified
Parties, as the case may be, shall have exceeded Ten Thousand ($10,000) Dollars
(the "Threshold"), whereupon the Indemnified Person shall be entitled to
indemnification for all Losses without regard to, or reduction by, the
Threshold. Purchaser will not be entitled to indemnification hereunder in excess
of the purchase price paid for the Shares pursuant to Section 2 hereof;
provided, however, that the foregoing limitation will not apply to
indemnification for breach of the Tax Warranty or the Environmental Warranty.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Each party hereto shall bear its own expenses with
respect to the transactions contemplated hereby.
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11.2 Amendment. This Agreement may be amended, modified or supplemented
only in writing signed by Purchaser and Seller.
11.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service that obtains receipts, (b) one business day after the day of
transmission if sent by telex, facsimile or other wire transmission or
recognized overnight courier (c) three Business Days after being deposited in
the U.S. mail, certified or registered mail, postage prepaid:
(a) If to Stockholder, addressed as follows:
Xxxxxxx X. Xxxxx, Xx. and Xxxxx X. Xxxxx
X.X. Xxx 0000
Xxxxxxx Xxxxx, Xxxxxxx 00000
with a copy to:
Carson, Messinger, et al
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxx
Facsimile No.: (000) 000-0000
(b) If to Seller, addressed as follows:
Midwest Truck After Market, Inc.
X.X. Xxx 0000
Xxxxxxx Xxxxx, Xxxxxxx 00000
with a copy to:
Carson, Messinger, et al
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxx
Facsimile No.: (000) 000-0000
(c) If to Purchaser, addressed as follows:
Radco Industries, Inc.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.4 Effect of Investigation. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities by, Seller made or undertaken pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Purchaser.
11.5 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
to enforce the same at a later time. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
11.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
11.7 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Exhibits and Exhibits
attached to this Agreement are for convenience only and shall not be deemed part
of this Agreement or be given any effect in interpreting this Agreement. The use
of the masculine, feminine or neuter gender herein shall not limit any provision
of this Agreement. The use of the terms "including" or "include" shall in all
cases herein mean "including, without limitation" or "include, without
limitation," respectively. Underscored references to Articles, Sections,
Subsections or Exhibits shall refer to those portions of this Agreement.
Consummation of the transactions contemplated herein shall not be deemed a
waiver of a breach of or inaccuracy in any representation, warranty or covenant
or of any party's rights and remedies with regard thereto. No specific
representation, warranty or covenant contained herein shall limit the generality
or applicability of a more general representation, warranty or covenant
contained herein. A breach of or inaccuracy in any representation, warranty or
covenant shall not be affected by the fact that any more general or less general
representation, warranty or covenant was not also breached or inaccurate.
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11.8 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Texas without
giving effect to the principles of conflicts of law thereof. The parties, on
behalf of themselves and their respective Affiliates, submit themselves to the
jurisdiction of the Federal and State courts located in Houston, Texas and agree
to commence any lawsuit arising under or relating to this Agreement or the
Related Agreements in such courts.
11.9 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that prior to the Closing Date no assignment of any rights or
obligations shall be made by Seller or Stockholder without the written consent
of Purchaser or by Purchaser without the written consent of Seller, except that
Purchaser may assign its rights hereunder without such consent to any Affiliate
of Purchaser; provided that (i) such Affiliate of Purchaser assumes Purchaser's
obligations under this Agreement and (ii) Purchaser remains liable for all
obligations under this Agreement in the event of a default by assignee.
11.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and, to the extent provided herein, their
respective Affiliates, directors, officers, employees, agents and
representatives, and no provision of this Agreement shall be deemed to confer
upon other third parties any remedy, claim, liability, reimbursement, cause of
action or other right.
11.11 Publicity. Prior to the Closing Date, except as required by Law
or the rules of any stock exchange, no public announcement or other publicity
regarding the transactions referred to herein shall be made by either party
hereto or any of their respective Affiliates, officers, directors, employees,
representatives or agents, without the prior written agreement of the other
party, in any case, as to form, content, timing and manner of distribution or
publication; provided, however, that nothing in this Section shall prevent such
parties from discussing such transactions with those Persons whose approval,
agreement or opinion, as the case may be, is required for consummation of such
particular transaction or transactions.
11.12 Further Assurances. Each of the parties hereto will, upon the
reasonable request of the other party, on and after the Closing Date execute and
deliver such other documents, releases, assignments and other instruments as may
be required to effectuate completely the transactions contemplated herein and to
otherwise carry out the purposes of this Agreement.
11.13 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
11.14 Remedies Cumulative. Except as otherwise provided herein, the
remedies provided in this Agreement shall be cumulative and shall not preclude
the assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
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11.15 Entire Understanding. This Agreement and the Related Agreements
set forth the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings among
the parties. No representation, warranty, promise, inducement, or statement of
intention has been made or relied upon by a party hereto that is not set forth
in this Agreement or the Related Agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
PURCHASER
RADCO INDUSTRIES, INC.
By:
Name: Xxxxxxx X. Xxxxx
Title: President
SELLER
MIDWEST TRUCK AFTER MARKET, INC.
By:
Name:
Title:
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STOCKHOLDER
XXXXXXX X. XXXXX, XX.
XXXXX X. XXXXX
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