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Exhibit 10.9
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AGREEMENT AND PLAN OF MERGER
AMONG
THE J.H. HEAFNER
COMPANY, INC.
ITCO MERGER CORPORATION
ITCO LOGISTICS CORPORATION
AND
THE STOCKHOLDERS OF
ITCO LOGISTICS CORPORATION
DATED: MARCH 10, 1998
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TABLE OF CONTENTS
INTRODUCTION.................................................................1
ARTICLE I
THE MERGER
SECTION 1.1. The Merger......................................................1
SECTION 1.2. Effective Time..................................................2
SECTION 1.3. Closing.........................................................2
SECTION 1.4. Effects of the Merger...........................................2
SECTION 1.5. Certificate of Incorporation and By-laws........................2
SECTION 1.6. Directors and Officers of Surviving Corporation.................2
SECTION 1.7. Conversion of Capital Stock.....................................2
(a) Acquisition Common Stock............................................2
(b) Cancellation of Treasury Stock and Company-Owned Stock..............2
(c) Exchange of Shares; Payment of Cash Consideration...................3
(d) Effect on Company Stock.............................................3
(e) Escrow Amount.......................................................3
SECTION 1.8. Tax Treatment...................................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the Company and the
Company Stockholders as a Group.........................................4
(a) Organization, Standing and Power....................................4
(b) Authority; Binding Agreements.......................................4
(c) Capitalization; Subsidiaries........................................5
(d) Conflicts; Consents.................................................6
(e) Financial Information...............................................6
(f) Absence of Changes..................................................7
(g) Assets, Property and Related Matters; Real Property.................9
(h) Intellectual Property..............................................11
(i) Insurance..........................................................12
(j) Agreements.........................................................12
(k) Litigation.........................................................13
(l) Compliance; Governmental Authorizations............................13
(m) Labor Relations; Employees.........................................14
(n) Related Party Transactions.........................................17
(o) Taxes..............................................................17
(p) Disclosure.........................................................19
(q) Bank Accounts; Powers-of-Attorney..................................19
(r) Inventory..........................................................19
(s) Brokers............................................................19
(t) Investment Company.................................................19
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SECTION 2.2. Representations and Warranties of the Company
Stockholders Individually..............................................19
(a) Authority; Binding Agreements; Title to Shares.....................19
(b) Conflicts; Consents................................................20
(c) Brokers............................................................21
(d) Pending Challenges.................................................21
(e) Investment Company.................................................21
SECTION 2.3. Representations and Warranties of Heafner.....................21
(a) Organization, Standing and Power...................................21
(b) Authority; Binding Agreements......................................21
(c) Capitalization; Subsidiaries.......................................22
(d) Conflicts; Consents................................................23
(e) Financial Information..............................................24
(f) Absence of Changes.................................................25
(g) Litigation.........................................................26
(h) No Default or Breach...............................................26
(i) Title to Properties................................................27
(j) Investment Company.................................................27
(k) Full Disclosure....................................................27
(l) Compliance; Governmental Authorizations............................27
(m) Labor Relations; Employees.........................................28
(n) Taxes..............................................................30
(o) Patents, Trademarks, Etc...........................................32
(p) Potential Conflicts of Interest....................................32
(q) Trade Relations....................................................32
(r) Material Contracts.................................................33
(s) Insurance..........................................................33
(t) Inventory..........................................................33
(u) Brokers............................................................33
(v) Financing..........................................................34
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.1. Transaction Costs..............................................34
SECTION 3.2. Conduct of Business............................................34
SECTION 3.3. HSR Act Filings; Reasonable Efforts; Further Assurances........35
SECTION 3.4. No Shopping....................................................37
SECTION 3.5. Access and Information.........................................37
SECTION 3.6. Releases; Prior Compensation...................................38
SECTION 3.7. Public Announcements...........................................39
SECTION 3.8. Tax Matters....................................................39
(a) Transfer Taxes.....................................................39
(b) Responsibility for Company Taxes...................................39
(c) Tax Treatment......................................................40
(d) Filing of Returns..................................................40
(e) Cooperation in Tax Matters.........................................40
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(f) Tax Audits and Assessments.........................................41
(g) Activities between Signing and Closing.............................41
SECTION 3.9. Other Documents...............................................41
SECTION 3.10. Officers and Directors........................................41
SECTION 3.11. Pending Heafner Acquisitions..................................41
SECTION 3.12. Company Confidential Information; Non-Competition.............42
(a) Confidential Information...........................................42
(b) Covenant Not To Compete............................................42
(c) Enforceability.....................................................44
(d) Remedies...........................................................44
(e) Acknowledgment.....................................................44
SECTION 3.13. Indemnification...............................................45
SECTION 3.14. Financing Arrangement.........................................45
SECTION 3.15. Confidentiality...............................................46
SECTION 3.16. Disclosure Supplements........................................49
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Obligations of Heafner and Acquisition...........50
(a) Representations, Warranties and Covenants..........................50
(b) Certificates.......................................................50
(c) Opinion of Counsel.................................................51
(d) HSR Act............................................................51
(e) No Legal Bar.......................................................51
(f) Consents, Amendments and Terminations..............................51
(g) Due Diligence......................................................51
(h) Escrow, Stockholder and Registration Rights Agreements;
Investment Letter..................................................51
(i) Share Certificates and Corporate Records...........................51
(j) Financial Statements...............................................52
(k) Financing..........................................................52
(l) Additional Documents...............................................52
SECTION 4.2. Conditions of Obligations of the Company Stockholders..........52
(a) Representations, Warranties and Covenants..........................52
(b) Certificate........................................................53
(c) Opinion of Counsel.................................................53
(d) HSR Act............................................................53
(e) No Legal Bar.......................................................53
(f) Consents...........................................................53
(g) Escrow, Stockholder and Registration Rights Agreements.............53
(h) Filing of Amended and Restated Articles............................53
(i) Financing..........................................................53
(j) Due Diligence......................................................54
(k) Financial Statements...............................................54
(l) Additional Documents...............................................54
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ARTICLE V
INDEMNITY
SECTION 5.1. Indemnification................................................54
(a) Indemnification by Company Stockholders as a Group.................54
(b) Indemnification by Company Stockholders Individually...............55
(c) Indemnification by Heafner.........................................55
(d) Indemnification Procedures.........................................55
(e) Treatment of Payments..............................................56
SECTION 5.2. Limitations....................................................56
(a) Expiration Date....................................................56
(b) Cap................................................................56
(c) Deductible.........................................................57
(d) Form of Payment....................................................57
(e) Tax Benefits.......................................................58
(f) Insurance Proceeds.................................................58
(g) Sole Remedy........................................................58
SECTION 5.3. No Election....................................................59
SECTION 5.4. Company Stockholders' Representative...........................59
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement...............................................59
SECTION 6.2. Termination....................................................59
SECTION 6.3. Descriptive Headings; Certain Interpretations..................60
SECTION 6.4. Notices........................................................61
SECTION 6.5. Counterparts...................................................62
SECTION 6.6. Survival.......................................................62
SECTION 6.7. Benefits of Agreement..........................................62
SECTION 6.8. Amendments and Waivers.........................................62
SECTION 6.9. Assignment.....................................................63
SECTION 6.10. Enforceability.................................................63
SECTION 6.11. Governing Law..................................................63
SECTION 6.12. Dispute Resolution; Consent To Jurisdiction....................63
SCHEDULES
Company Disclosure Schedule
Heafner Disclosure Schedule
ANNEXES
A Company Stockholders; Ownership of Shares
B Dispute Resolution Procedure
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EXHIBITS
A Form of Class B Stockholder Agreement
B Form of Class B Registration Rights Agreement
C Form of Investment Letter
D Form of Second Amended and Restated Articles
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AGREEMENT AND PLAN OF MERGER, dated as of March 10, 1998 (the
"Agreement"), among The J.H. Heafner Company, Inc., a North Carolina
corporation ("Heafner"), ITCO Merger Corporation, a Delaware
corporation ("Acquisition"), ITCO Logistics Corporation, a Delaware
corporation (the "Company"), and each of the stockholders of the
Company (each, a "Company Stockholder" and, collectively, the
"Company Stockholders")
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INTRODUCTION
The Company, together with its Subsidiaries (as defined below in
Section 2.1(c)), owns and operates a wholesale tire business with its principal
executive offices located in Wilson, North Carolina.
The Company Stockholders and the Boards of Directors of each of
Heafner, Acquisition and the Company have unanimously approved the merger of
Acquisition with and into the Company (the "Merger") on the terms and subject to
the conditions set forth in this Agreement. As a result of the Merger, each
issued and outstanding share of common stock, $0.01 par value, of the Company
(the "Company Common Stock") and each issued and outstanding share of preferred
stock, $0.01 par value, of the Company (the "Company Preferred Stock" and,
together with the Company Common Stock, the "Company Capital Stock") not owned
directly or indirectly by Heafner or the Company will be converted into the
right to receive the consideration provided in this Agreement.
The parties to this Agreement desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
As further inducement for the parties to enter into this Agreement,
Heafner and the Company Stockholders desire to enter into an Escrow Agreement in
the form described in Section 4.1(h)) (the "Escrow Agreement"), a Class B
Stockholder Agreement in the form attached hereto as Exhibit A (the "Class B
Stockholder Agreement") and a Class B Registration Rights Agreement in the form
attached hereto as Exhibit B (the "Class B Registration Rights Agreement").
The parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL"), at the Effective Time (as defined below),
Acquisition shall be merged with and into the Company.
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Following the Merger, the separate corporate existence of Acquisition shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Acquisition in accordance with the DGCL.
SECTION 1.2. Effective Time. At the Closing (as defined below), upon
the satisfaction of all conditions and taking of all actions set forth in
Article IV, the parties hereto shall cause a copy of a certificate of merger
(executed in accordance with the relevant provisions of the DGCL) in customary
form and other appropriate documents to be filed in the office of the Delaware
Secretary of State (the "Certificate of Merger"), and the parties shall make all
other filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Delaware Secretary of State (the time the Merger becomes effective, the
"Effective Time").
SECTION 1.3. Closing. The closing (the "Closing") for the consummation
of the transactions contemplated by this Agreement shall take place at the
offices of Howard, Darby & Levin, 1330 Avenue of the Americas, New York, New
York 10019, or such other place or places as the Company Stockholders and
Heafner shall agree, at 10:00 a.m. (New York time) on the later of April 29,
1998 and two business days following the date on which all conditions set forth
in Article IV shall have been satisfied or waived, or such other date and time
agreed to by the Company Stockholders and Heafner (such date, the "Closing
Date").
SECTION 1.4. Effects of the Merger. The Merger shall have the effects
set forth in the DGCL.
SECTION 1.5. Certificate of Incorporation and By-laws. The Certificate
of Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
until amended. The By-laws of the Company as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until amended.
SECTION 1.6. Directors and Officers of Surviving Corporation. The
directors and officers of Acquisition at the Effective Time shall be the
directors and officers, respectively, of the Surviving Corporation, until the
earlier of their resignation or removal or until their successors are duly
elected and qualified.
SECTION 1.7. Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Capital Stock or any shares of common stock, $.01 par value
("Acquisition Common Stock"), of Acquisition:
(a) Acquisition Common Stock. Each issued and outstanding share of
Acquisition Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Company-Owned Stock. Each share
of Company Capital Stock that is held by the Company as treasury stock or owned
by the Company
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or any subsidiary of the Company, in each case immediately prior to the
Effective Time, shall be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Exchange of Shares; Payment of Cash Consideration. All of the
issued and outstanding shares of Company Capital Stock (all of which are and,
immediately prior to the Effective Time, will be owned by the Company
Stockholders) shall be converted into and become the right to receive (i)
$18,000,000 (the "Cash Consideration"), to be allocated to holders of shares of
Company Preferred Stock and holders of shares of Company Common Stock in
accordance with a schedule to be delivered by the Company at the Closing, and
(ii) 1,400,667 shares of Class B Common Stock, $.01 par value, of Heafner (which
shares shall represent, at the Closing, 22% of the outstanding shares of Heafner
common stock on a fully diluted basis) (the "Class B Stock Consideration" and,
together with the Cash Consideration, the "Merger Consideration"). Each Company
Stockholder shall be entitled to receive that portion of the aggregate Merger
Consideration set forth opposite such Company Stockholder's name on Annex A to
this Agreement in exchange for such Company Stockholder's shares of Company
Capital Stock. At the Closing, Heafner shall make, or shall cause Acquisition to
make, payment of the Cash Consideration by wire transfer of immediately
available funds to accounts designated by the Company Stockholders no later than
two business days prior to the Closing Date.
(d) Effect on Company Stock. Upon receipt by the Company Stockholders
of the Merger Consideration (other than the Escrow Amount (as defined below)
which shall be delivered to the Escrow Agent (as defined below) at Closing), the
Company Stockholders shall deliver to Heafner the certificates formerly
representing all of the issued and outstanding shares of Company Capital Stock.
From and after the Effective Time, (i) all shares of Company Capital Stock shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, (ii) each holder of a certificate representing any shares
of Company Capital Stock shall cease to have any rights with respect thereto
(except the right to receive the Merger Consideration allocable to the shares of
Company Capital Stock formerly represented by such certificate) and (iii) the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of the shares of Company Capital Stock.
(e) Escrow Amount. At the Closing, Heafner shall deliver, or shall
cause Acquisition to deliver, all of the Class B Stock Consideration to the
Escrow Agent (the "Escrow Agent") named in the Escrow Agreement (such Class B
Stock Consideration being delivered to the Escrow Agent at the Closing are
together referred to in this Agreement as the "Escrow Amount"). The Escrow
Amount consists of a portion of the Merger Consideration that, subject to the
terms of Article V and the Escrow Agreement, would otherwise be payable to the
holders of Company Capital Stock in accordance with Section 1.7(c). Prior to the
Closing, Heafner shall select a bank or trust company to act as the Escrow
Agent, which bank or trust company shall be reasonably acceptable to the Company
Stockholders.
SECTION 1.8. Tax Treatment. The parties to this Agreement agree and
acknowledge that the Merger will be treated as a taxable purchase of the
outstanding shares of Company Capital Stock (and not as a "reorganization"
within the meaning of Section 368 of the
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Internal Revenue Code of 1986, as amended (the "Code")), for United States
federal, state and local tax purposes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the Company and the
Company Stockholders as a Group. Each of the Company and the Company
Stockholders, severally and not jointly, represent and warrant to Heafner as
follows:
(a) Organization, Standing and Power. Each of the Company and each of
its Subsidiaries (i) is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated and
(ii) has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Each of the
Company and each of its Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which such qualification is necessary
because of the property owned, leased or operated by it or because of the nature
of its business as now being conducted, other than in such jurisdictions where
the failure to be so qualified or in good standing would not, individually or in
the aggregate, have a material adverse effect on the business, assets, condition
(financial or otherwise), liabilities or operations of the Company and its
Subsidiaries taken as a whole or on the Company's ability to consummate the
Merger or perform its obligations under this Agreement (a "Company Material
Adverse Effect"). Each such jurisdiction in which the Company or any of its
Subsidiaries is so qualified is listed in Section 2.1(a) of the disclosure
schedule being delivered by the Company simultaneously with the execution of
this Agreement (the "Company Disclosure Schedule"). The Company has delivered to
Heafner complete and correct copies of its articles of incorporation and by-laws
and the certificate of incorporation and by-laws of each of its Subsidiaries, in
each case as amended to the date of this Agreement, and has made available to
Heafner its and each of its Subsidiaries' minute books and stock records.
Section 2.1(a) of the Company Disclosure Schedule contains a true and correct
list of the directors and officers of the Company and each of its Subsidiaries
as of the date of this Agreement and at all times since the last action of the
board of directors and the stockholders of the Company and of each of its
Subsidiaries, as the case may be.
(b) Authority; Binding Agreements. The Company has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company has been duly authorized by all necessary action on the
part of the Company and the Company Stockholders. This Agreement has been duly
executed and delivered by the Company, and, assuming the due execution and
delivery of this Agreement by Heafner and Acquisition, constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
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(c) Capitalization; Subsidiaries. (i) The authorized capital stock of
the Company consists of 250,000 shares of Company Common Stock and 50,000 shares
of Company Preferred Stock. At the time of execution of this Agreement, 93,000
shares of Company Common Stock were issued and outstanding and 8,100 shares of
Company Preferred Stock were issued and outstanding. The Company Stockholders
own of record and beneficially all of the outstanding capital stock of the
Company. Except as set forth above, at the time of execution of this Agreement,
no shares of capital stock or other voting securities of the Company are issued,
reserved for issuance or outstanding. Except as set forth in Section 2.1(c) of
the Company Disclosure Schedule, all outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no bonds, debentures, notes or other
indebtedness or securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote. There are no
securities, options, warrants, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party or by which the Company
is bound obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or obligating the Company to issue, grant, extend or
enter into any such security, option, warrant, right, commitment, agreement,
arrangement or undertaking. There are no outstanding rights, commitments,
agreements, arrangements or undertakings of any kind obligating the Company to
repurchase, redeem or otherwise acquire any shares of capital stock or other
voting securities of the Company or any securities of the type described in the
two immediately preceding sentences. The Company is not subject to any liability
for any claim that the Company violated any applicable Federal or state
securities laws in connection with the issuance of capital stock. For purposes
of this Agreement, a "Subsidiary" of any person means another person under the
control of such person (where "control" means the direct or indirect possession
of the power to elect at least a majority of the Board of Directors or other
governing body of a person through the ownership of voting securities, ownership
or partnership interests, by contract or otherwise, or if no such governing body
exists, the direct or indirect ownership of 50% or more of the equity interests
of a person); and a "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity (governmental or private).
(ii) Section 2.1(c) of the Company Disclosure Schedule sets forth a
complete list of all of the Company's Subsidiaries as of the date of this
Agreement, together with their respective jurisdictions of incorporation,
authorized capital stock, number of shares issued and outstanding and record
ownership of such shares. Except as set forth in Section 2.1(c) of the Company
Disclosure Schedule, the Company does not have any Subsidiaries or own or hold
any equity or other security interest in any other entity. All issued and
outstanding shares of capital stock of the Company's Subsidiaries have been duly
authorized, were validly issued, are fully paid and non-assessable and subject
to no preemptive rights and, except as set forth in Section 2.1(c) of the
Company Disclosure Schedule, are directly or indirectly owned beneficially and
of record by the Company, free and clear of all security interests, liens,
pledges, charges, escrows, options, rights of first refusal, mortgages,
indentures, security agreements or other claims, encumbrances, agreements,
arrangements or commitments of any kind or character, whether written or oral
and whether or not relating in any way to credit or the borrowing of money
(collectively, "Claims"),
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and free of any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of such capital stock). None of the
Company's Subsidiaries is subject to any liability for any claim that it
violated any applicable Federal or state securities laws in connection with the
issuance of capital stock.
(d) Conflicts; Consents. The execution and delivery by the Company of
this Agreement, the consummation of the transactions contemplated hereby and
compliance by the Company with any of the provisions hereof does not and will
not (i) conflict with or result in a breach of the articles of incorporation,
by-laws or other constitutive documents of the Company or any of its
Subsidiaries, (ii) except as set forth in Section 2.1(d) of the Company
Disclosure Schedule, conflict with or result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the provisions
of any note, bond, lease, mortgage, indenture, or any license, franchise,
permit, agreement or other instrument or obligation to which the Company or any
of its Subsidiaries is a party, or by which any properties or assets of the
Company or any of its Subsidiaries may be bound or affected, except for (1) such
conflicts, breaches or defaults that are, individually and in the aggregate,
immaterial and (2) such conflicts, breaches or defaults as to which requisite
waivers or consents have been obtained or will be obtained before the Closing at
no material cost to the Company and without giving to any person any material
additional rights, (iii) violate any law, statute, rule or regulation or order,
writ, injunction or decree applicable to the Company or any of its Subsidiaries
or any of their respective properties or assets (except for such violations that
are, individually and in the aggregate, immaterial) or (iv) result in the
creation or imposition of any Claim upon any shares of Company Capital Stock or
capital stock of any of the Company's Subsidiaries or any property or assets
used or held by the Company or any of its Subsidiaries. No consent or approval
by, or notification of or filing with, any governmental authority or agency is
required in connection with the execution, delivery and performance by the
Company of this Agreement, or the consummation of the transactions contemplated
hereby except for (x) the filing of a premerger notification and report form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act"), and the
expiration or early termination of the applicable waiting period under the HSR
Act, (y) the filing of the Certificate of Merger with the Delaware Secretary of
State and (z) such other consents, approvals or notifications that are,
individually and in the aggregate, immaterial.
(e) Financial Information. (i) The following financial statements
are contained in Section 2.1(e) of the Company Disclosure Schedule:
(A) the consolidated balance sheets of the Company at
September 30, 1996 and 1997 and the related consolidated statements of
income and retained earnings and cash flows for the fiscal years then
ended together with the opinion of Ernst & Young LLP thereon;
(B) the consolidated balance sheets of the Company at
September 30, 1995 and the related consolidated statements of income and
retained earnings and cash flows for the fiscal years then ended together
with the opinion of Deloitte & Touche, L.L.P. thereon; and
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(C) the unaudited, internally prepared monthly consolidated
balance sheets of the Company as of the end of each calendar month
commencing October 31, 1997 through the most recent month end that is at
least 20 days prior to the date of this Agreement and the related
consolidated statements of income and retained earnings and cash flows for
each such calendar month.
Except as set forth in Section 2.1(e) of the Company Disclosure Schedule, all
such financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a basis consistent with prior
periods and fairly present in all material respects the consolidated financial
condition, results of operations and cash flows of the Company and its
Subsidiaries (except, in the case of unaudited financial statements, subject to
normal, recurring year-end audit adjustments). The consolidated balance sheets
of the Company as at the dates set forth fairly present in all material respects
the consolidated financial position of the Company and its Subsidiaries as at
the dates thereof, and the related consolidated statements of income and
retained earnings and cash flows of the Company for each of the respective
specified periods then ended fairly present in all material respects the
consolidated results of operations of the Company and its Subsidiaries for each
of the respective periods then ended (except, in the case of unaudited financial
statements, subject to normal, recurring year-end audit adjustments). For the
purposes of this Agreement, all financial statements referred to in this
paragraph shall include any notes and schedules to such financial statements.
(ii) Except as set forth in Section 2.1(e)(ii) of the Company
Disclosure Schedule, each of the Company and each of its Subsidiaries does not
have, and as a result of the transactions contemplated herein, will not have,
any liabilities or obligations (whether absolute, accrued, contingent or
otherwise, and whether due or to become due), except for liabilities and
obligations (A) reflected on the balance sheets of the Company referred to in
Section 2.1(e)(i) or (B) incurred in the ordinary course of business consistent
with past practice since February 20, 1998, and which, individually, do not
exceed $250,000. All reserves established by the Company are reflected on the
balance sheets of the Company or in the footnotes to the financial statements of
the Company and are reasonable based upon facts and circumstances known by the
Company on the date hereof and there are no loss contingencies that are required
to be accrued by Statement of Financial Accounting Standard No. 5 of the
Financial Accounting Standards Board which are not provided for on such balance
sheets.
(f) Absence of Changes. Except as set forth in Section 2.1(f) of the
Company Disclosure Schedule, since September 30, 1997, the Company and its
Subsidiaries have been operated in the ordinary course consistent with past
practice and there has not been:
(i) any event, violation or other matter that could,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect;
(ii) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by the
Company or any of its Subsidiaries, other than obligations under customer
contracts, current obligations and liabilities incurred in the ordinary
course of business and consistent with past practice;
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(iii) any payment, discharge, satisfaction or settlement of
any claim or obligation of the Company or any of its Subsidiaries, except
in the ordinary course of business and consistent with past practice;
(iv) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company or any of its Subsidiaries or any direct or indirect redemption,
purchase or other acquisition of any such shares;
(v) any issuance or sale, or any contract entered into for the
issuance or sale, of any shares of capital stock or securities convertible
into or exercisable for shares of capital stock of the Company or any of
its Subsidiaries;
(vi) any sale, assignment, pledge, encumbrance, transfer or
other disposition of any tangible asset of the Company or any of its
Subsidiaries (other than sales of inventory to customers in the ordinary
course of business consistent with past practice), or any sale,
assignment, transfer or other disposition of any patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, know-how or
any other intangible assets of the Company or any of its Subsidiaries;
(vii) any creation of any Claim on any property of the Company
or any of its Subsidiaries, except in the ordinary course of business
consistent with past practice or such Claims which, individually or in the
aggregate, could not reasonably be expected to have a Company Material
Adverse Effect;
(viii) any write-down of the value of any asset of the Company
or any of its Subsidiaries or any write-off as uncollectible of any
accounts or notes receivable or any portion thereof, other than
write-downs or write-offs which, in the aggregate, equal approximately
$112,000 as of the date of this Agreement and which, individually, do not
exceed $10,000;
(ix) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Company or any of its
Subsidiaries;
(x) any capital expenditure or commitment or addition to
property, plant or equipment of the Company or any of its Subsidiaries,
other than capital expenditures or commitments or additions to property,
plant or equipment of the Company or any of its Subsidiaries which, in the
aggregate, equal approximately $383,000 as of the date of this Agreement
and which, individually, do not exceed $10,000;
(xi) any general increase in the compensation of employees of
the Company or any of its Subsidiaries (including any increase pursuant to
any written bonus, pension, profit-sharing or other benefit or
compensation plan, policy or arrangement or commitment), or any increase
in any such compensation or bonus payable to any officer, stockholder,
director, consultant or agent of the Company or any of its Subsidiaries
having an annual salary or remuneration in excess of $75,000;
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(xii) any damage, destruction or loss (whether or not covered
by insurance) affecting any asset or property of the Company or any of its
Subsidiaries resulting in liability or loss in excess of $50,000;
(xiii) any change in the independent public accountants of the
Company and its Subsidiaries or any material change in the accounting
methods or accounting practices followed by the Company or any material
change in depreciation or amortization policies or rates; or
(xiv) any agreement, whether in writing or otherwise, to take
any of the actions specified in the foregoing items (i) through (xiii),
subject to any dollar thresholds set forth in items (i) through (xiii)
above.
(g) Assets, Property and Related Matters; Real Property. (i) The
Company and its Subsidiaries have good title to, or a valid leasehold interest
in, as applicable, all of the assets reflected on the financial statements
contained in Section 2.1(e) of the Company Disclosure Schedule, free and clear
of all Claims, except as set forth in Section 2.1(g)(i) of the Company
Disclosure Schedule. Such assets (A) are in good operating condition and repair,
subject to ordinary wear and tear, and (B) constitute all of the properties,
interests, assets and rights held for use or used in connection with the
business and operations of the Company and its Subsidiaries and constitute all
those necessary to continue to operate the business of the Company and its
Subsidiaries consistent with current and historical practice. All items of
personal property owned by the Company and its Subsidiaries with current value
or book value in excess of $5,000 are listed in Section 2.1(g)(i) of the Company
Disclosure Schedule.
(ii) Section 2.1(g)(ii) of the Company Disclosure Schedule
sets forth a list of all real property owned or leased by the Company or its
Subsidiaries (each a "Company Property"). The Company or one of its
Subsidiaries, as the case may be, is the sole owner or holder of, and has, good
and marketable fee title to, or a good, valid and existing leasehold estate in,
each Company Property, free and clear of all liens, encumbrances, restrictions
and other matters affecting title to, or the use and occupancy of, such Company
Property, except as disclosed in Section 2.1(g)(ii) of the Company Disclosure
Schedule (such items, together with the related items set forth in Section
2.1(g)(i) of the Company Disclosure Schedule, being collectively referred to
herein as the "Permitted Encumbrances"). No Company Property violates in any
material respect the terms or conditions of any Permitted Encumbrance.
(iii) With respect to each Company Property leased by the
Company or one of its Subsidiaries, (A) the Company or one of its Subsidiaries,
as the case may be, is the owner and holder of all the leasehold interests and
estates purported to be granted by such leases, (B) all leases to which the
Company or one of its Subsidiaries is a party are in writing and in full force
and effect and constitute valid and binding obligations of the Company or such
Subsidiary and, to the knowledge of the Company or any Company Stockholder, of
the other parties thereto, enforceable in accordance with their terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought, and (C) the
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Company has delivered to Heafner true and complete copies of all such leases.
There exists no default, or any event which upon notice or the passage of time,
or both, would give rise to any default, in the performance by the Company or
one of its Subsidiaries, as the case may be, or by any lessor under any lease
(except for such defaults that are, individually and in the aggregate,
immaterial). Except as set forth in Section 2.1(g)(ii) of the Company Disclosure
Schedule, the Company has not, and to the knowledge of the Company or any
Company Stockholder, no other person has, granted any oral or written right to
anyone other than the Company and its Subsidiaries to lease, sublease or
otherwise occupy any of the properties described in Section 2.1(g)(ii) of the
Company Disclosure Schedule through the end of the applicable lease periods.
(iv) Each Company Property and all appurtenances and
improvements, as used, constructed or maintained by the Company or any of its
Subsidiaries at any time, conform in all material respects to applicable
Federal, state, local and foreign laws, rules, regulations and orders ("Legal
Requirements"), and, except as otherwise disclosed on Section 2.1(g)(iv) of the
Company Disclosure Schedule, no notices of violation of any Legal Requirements
have been received by the Company or any of its Subsidiaries or, to the
knowledge of the Company and the Company Stockholders, issued by any
governmental authority, in each case with respect to any Company Property,
including all building, fire, health, zoning, setback, subdivision and
environmental laws, regulations or ordinances (except for notices with respect
to possible violations that are, individually and in the aggregate, immaterial).
Without limiting the foregoing, each Company Property is in good operating
condition and repair, ordinary wear and tear excepted, and no condition exists
which would interfere in any material respect with the Company's and its
Subsidiaries' customary use and operation thereof. The use of the buildings and
structures located on each Company Property or any appurtenances or equipment
does not violate in any material respect any restrictive covenants or encroach
on any property owned by others. No condemnation proceeding is pending or, to
the knowledge of the Company or any Company Stockholder, threatened which would
preclude or impair in any material respect the use of any Company Property by
the Company or any of its Subsidiaries for the uses for which they are intended.
(v) Section 2.1(g)(v) of the Company Disclosure Schedule lists
each permit necessary or appropriate for the Company and its Subsidiaries to
own, lease or use any Company Property (except for permits that are,
individually or in the aggregate, immaterial). Each such permit was duly issued
and obtained, currently is in full force and effect, and has the term set forth
therefor on Section 2.1(g)(v) of the Company Disclosure Schedule. No default or
violation, or event which with the passage of time or giving of notice or both
would become a default or violation, has occurred in the due observance of any
permit (except for such defaults or violations that are, individually or in the
aggregate, immaterial). The Company has delivered to Heafner true and complete
copies of all such permits.
(vi) Except as set forth in Section 2.1(g)(vi) of the Company
Disclosure Schedule, no part of any Company Property is subject to any building
or use restrictions that would restrict in any material respect or prevent the
present use and operation of such Company Property, and each Company Property is
properly and duly zoned for its current use, and such current use is in all
material respects a conforming use. Neither the Company nor any of its
Subsidiaries has received a notice or order from a governmental authority having
jurisdiction over
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any Company Property that adversely affects in any material respect the use or
operation of any Company Property, or requires, as of the date hereof or a
specified date in the future, any repairs, alterations, additions or
improvements thereto, or the payment or dedication of any money, fee, exaction
or property and, to the knowledge of the Company and the Company Stockholders no
such governmental authority has issued, or threatened to issue, any such notice
or order. The Company Stockholders have no knowledge of any actual or pending
imposition of any assessments for public improvements with respect to any
Company Property and, to the knowledge of the Company or any Company
Stockholder, no such improvements have been constructed or planned that would be
paid for by means of assessments upon any Company Property.
(vii) Each Company Property is located on public roads and
streets with adequate ingress and egress available between such streets and the
Company Property, and, to the knowledge of the Company or any Company
Stockholder, all utility systems required in connection with the use, occupancy
and operation of each Company Property are sufficient for their present
purposes, are fully operational and in working order, and are benefited by
customary utility easements providing for the continued use and maintenance of
such systems. Each Company Property consists of sufficient land, parking areas,
sidewalks, driveways and other improvements to permit the continued use of such
Company Property in the manner and for the purposes to which it is presently
devoted.
(viii) Except as set forth in Section 2.1(g)(viii) of the
Company Disclosure Schedule, no portion of any Company Property is located in
any flood zone area designated as Zone A or Zone Z (or any Zone having the
prefix A or Z) (or any successor designation) pursuant to applicable regulations
of the Federal Emergency Management Agency, or any successor thereto.
(ix) None of the Company Stockholders is a "foreign person" as
defined in Section 1445 of the Code.
(x) Except as set forth in Section 2.1(d) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated by this Agreement will create
a breach of, or constitute a default under, any lease of real property held by
the Company or any of its Subsidiaries. No consent from the lessor or any other
person under any such lease is required in connection with the execution or
delivery of this Agreement or the consummation of the transactions contemplated
by this Agreement, except for those obtained prior to the Closing and listed in
Section 2.1(d) of the Company Disclosure Schedule.
(h) Intellectual Property. The Company and its Subsidiaries own or
validly license all patents, trademarks, service marks, trade names and
copyrights, in each case registered or unregistered, inventions, software
(including documentation and object and source code listings), know-how, trade
secrets and other intellectual property rights (collectively, the "Intellectual
Property") used in their respective businesses as presently conducted. Section
2.1(h) of the Company Disclosure Schedule contains a list of all patents,
registered trademarks and registered copyrights and applications therefor owned
and used by the Company and its Subsidiaries and any
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Intellectual Property which is expressly licensed for use by others. As used in
the business of the Company and its Subsidiaries, to the knowledge of the
Company and the Company Stockholders, no Intellectual Property infringes any
rights owned or held by any other person. There is no pending or, to the
knowledge of the Company and the Company Stockholders, threatened claim or
litigation against the Company or any of its Subsidiaries contesting its right
to use any Intellectual Property. To the knowledge of the Company and the
Company Stockholders, no person is infringing the rights of the Company or any
of its Subsidiaries in any Intellectual Property. To the knowledge of the
Company and the Company Stockholders, no product or service sold by the Company
or any of its Subsidiaries violates or infringes any intellectual property right
owned or held by any other person. In the case of commercially available
"shrink-wrap" software programs, to the knowledge of the Company and the Company
Stockholders, neither the Company nor any of its Subsidiaries nor any of their
respective employees has made or is using any unauthorized copies of any such
software programs.
(i) Insurance. Section 2.1(i) of the Company Disclosure Schedule
contains a true and complete list of all policies of casualty, liability, theft,
fidelity, life and other forms of insurance currently held by the Company or any
of its Subsidiaries. True and complete copies of such policies have been
delivered to Heafner. All insurance policies currently outstanding are in the
name of the Company and its Subsidiaries and are in full force and effect, all
premiums with respect to such policies are currently paid and such policies will
not be affected by, or terminated or lapse by reason of, the transactions
contemplated by this Agreement. None of the Company or any of its Subsidiaries
has received notice of cancellation or termination of any such policy, nor has
any such person been denied or had revoked or rescinded any policy of insurance,
nor borrowed against any such policies. No significant claim under any such
policy is pending.
(j) Agreements. Section 2.1(j) of the Company Disclosure Schedule
contains a true and complete list of all contracts, agreements and other
instruments to which the Company or any of its Subsidiaries is a party (A)
relating to indebtedness for money borrowed or capital leases, (B) of duration
of six months or more from the date hereof, not cancelable without penalty on 30
days or less notice and relating to commitments, individually, in excess of
$100,000, (C) relating to commitments, individually, in excess of $200,000
(other than purchases of inventory in the ordinary course of business consistent
with past practice), (D) relating to the employment or compensation of any
stockholder, director, officer, employee, consultant or other agent of the
Company or any of its Subsidiaries, (E) relating to the sale or other
disposition of any assets, properties or rights (other than in the ordinary
course of business consistent with past practice), (F) relating to the lease of
(or similar arrangement with respect to) any machinery, equipment, motor
vehicles, furniture, fixture or similar property and with an annual commitment,
individually, in excess of $50,000, (G) between the Company and any Company
Stockholder or affiliate of any Company Stockholder, (H) that restricts (other
than in immaterial respects) the operation of the Company or any of its
Subsidiaries anywhere in the world or (I) that is otherwise material to the
Company and its Subsidiaries (taken as a whole). None of the Company or any of
its Subsidiaries is in default under any such agreement or instrument where such
default, singly or in the aggregate with defaults under other agreements or
instruments, could reasonably be expected to have a Company Material Adverse
Effect and, to the knowledge of the Company or any Company Stockholder, all such
agreements or instruments are in full force and effect. Except as set forth in
Section 2.1(j) of the Company Disclosure Schedule, neither the execution and
delivery of this
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Agreement nor the consummation of the transactions contemplated by this
Agreement will create a breach of, or constitute a default under, any agreement
required to be listed in Section 2.1(j) of the Company Disclosure Schedule
(except for such breaches that are, individually or in the aggregate,
immaterial). The Company has delivered to Heafner true and complete copies of
all documents described in Section 2.1(j) of the Company Disclosure Schedule.
(k) Litigation. Except as set forth in Section 2.1(k) of the Company
Disclosure Schedule, there have not been for the past two years (other than
routine matters occurring in the ordinary course of business of the Company and
its Subsidiaries), nor are there, any suits, actions, claims, investigations or
legal or administrative or arbitration proceedings in respect of the Company or
any of its Subsidiaries, pending or, to the knowledge of the Company or any
Company Stockholder, threatened, whether at law or in equity, or before or by
any Federal, foreign, state or municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Except as set forth in
Section 2.1(k) of the Company Disclosure Schedule, there have not been for the
past two years (other than routine matters occurring in the ordinary course of
business of the Company and its Subsidiaries), nor are there, any judgments,
decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against the Company or any of
its Subsidiaries or any of their respective assets or properties.
(l) Compliance; Governmental Authorizations. (i) Each of the Company
and each of its Subsidiaries has complied and is in compliance in all material
respects with all Federal, state, local and foreign laws, ordinances, rules,
regulations and orders (including those relating to disposal of materials,
environmental protection and occupational safety and health) applicable to the
Company, any of its Subsidiaries or their respective businesses, and there are
no present or past conditions relating to the Company or any of its
Subsidiaries, or relating to any Company Property or any appurtenances thereto
or improvements thereon, that could reasonably be expected to lead to any
material liability against the Company or any of its Subsidiaries, or reasonably
be expected to have a Company Material Adverse Effect, for violation of any
health or safety laws. Each of the Company and each of its Subsidiaries has all
Federal, state, local and foreign governmental licenses and permits that are
material to the conduct of their respective businesses as presently being
conducted, which licenses and permits (and any exceptions thereto) are set forth
in Section 2.1(l) of the Company Disclosure Schedule. Such licenses and permits
are in full force and effect, no material violations are or have been recorded
in respect of any thereof, no proceeding is pending or, to the knowledge of the
Company or any Company Stockholder, threatened, to revoke or limit any thereof,
and the Company Stockholders do not know of any basis for any such proceeding
and the consummation of the transactions contemplated in this Agreement will not
result in the non-renewal, revocation or termination of any such license or
permit.
(ii) The Company and each of its Subsidiaries validly hold all
permits required under all applicable Federal, state, county or local laws,
ordinances, regulations and orders relating to disposal of materials or the
discharge of chemicals, gases or other substances or Hazardous Materials
(defined below) into the environment or to the safety or protection of the
environment (the "Environmental Laws") that are material to the conduct of their
respective businesses as presently being conducted. None of the Company or any
of its Subsidiaries has
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violated, nor is the Company or any of its Subsidiaries in violation of, in any
material respect, any requirements of any Environmental Laws in connection with
the conduct of its business or in connection with the use, maintenance or
operation of any Company Property. There are no present or past conditions
relating to the Company or any of its Subsidiaries or relating to any Company
Property, or, to the knowledge of the Company and the Company Stockholders,
relating to any real property previously owned, leased or operated by the
Company or any of its Subsidiaries or any of their respective present or past
affiliates, that in any such case could reasonably be expected to lead to any
material liability of the Company or any of its Subsidiaries under any
Environmental Law. Except as set forth on Section 2.1(l)(ii) of the Company
Disclosure Schedule, each of the Company and each of its Subsidiaries has
operated each Company Property and has received, handled, used, stored, treated,
shipped and disposed of all hazardous or toxic materials, substances and wastes
(whether or not on its properties or properties owned or operated by others) in
compliance in all material respects with all applicable Environmental Laws. None
of the Company or any of its Subsidiaries has engaged in or permitted the sale
or dispensation (to customers, employees or other persons), handling,
transportation, discharge, emission, treatment, storage or disposal of gasoline
or other motor vehicle fuels at or under any Company Property or, to the
knowledge of the Company and the Company Stockholders, any property or facility
previously owned, leased or operated by the Company or any of its Subsidiaries
or one of their respective past or present affiliates. "Hazardous Materials"
means (A) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; (B)
any "hazardous waste" or "petroleum," as defined by the Resource Conservation
and Recovery Act, as amended; (C) any petroleum product; (D) any pollutant or
contaminant or hazardous, dangerous or toxic chemical, material or substance
within the meaning of any other Environmental Law, as amended or hereafter
amended; or (E) any radioactive material, including any source, special nuclear
or by-product material as defined at 42 U.S.C. ss. 2011 et seq., as amended or
hereafter amended.
(m) Labor Relations; Employees. (i) (A) There is no labor strike,
dispute, slowdown, stoppage or lockout pending, affecting, or, to the knowledge
of the Company or any Company Stockholder, threatened against the Company or any
of its Subsidiaries, and during the last five years there has not been any such
action; (B) there are no union claims to represent the employees of the Company
or any of its Subsidiaries nor have there been any such claims within the last
five years; (C) there is no written or oral contract, commitment, agreement,
understanding or other arrangement with any labor organization, nor work rules
or practices agreed to with any labor organization or employee association,
applicable to employees of the Company or any of its Subsidiaries, nor is the
Company or any of its Subsidiaries a party to or bound by any collective
bargaining or similar agreement; (D) there is, and within the last two years
there has been, no representation of the employees of the Company or any of its
Subsidiaries by any labor organization and, to the knowledge of the Company or
any Company Stockholder, there are no union organizing activities among the
employees of the Company or any of its Subsidiaries, nor does any question
concerning representation exist concerning such employees; (E) Section 2.1(m)(i)
of the Company Disclosure Schedule sets forth all personnel policies, rules or
procedures (whether written or oral) applicable to employees of the Company or
any of its Subsidiaries, and the Company has delivered to Heafner complete and
accurate copies of all such
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written policies, rules or procedures plus summaries of all oral policies, rules
or procedures; (F) none of the Company or any of its Subsidiaries has engaged in
any act or practice which could reasonably be expected to constitute an unfair
labor practice as defined in the National Labor Relations Act or other
applicable law, ordinance, regulation, interpretation or order and each of the
Company and each of its Subsidiaries is, and has for the past five years been,
in compliance in all material respects with all applicable laws, ordinances,
regulations, interpretations or orders respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health; (G) there is no unfair labor practice charge or
complaint against the Company or any of its Subsidiaries (or against any Company
Stockholder with respect to the Company or any of its Subsidiaries) pending or,
to the knowledge of the Company or any Company Stockholder, threatened before
the National Labor Relations Board or any similar state or foreign agency and,
to the knowledge of the Company or any Company Stockholder, there are no
existing or prior facts, circumstances or conditions that could reasonably be
expected to form the basis therefor; (H) there is no grievance pending or, to
the knowledge of the Company or any Company Stockholder, threatened against the
Company or any of its Subsidiaries arising out of any collective bargaining
agreement or other grievance procedure; (I) except as set forth in Section
2.1(m)(i)(I) of the Company Disclosure Schedule, there are no charges with
respect to or relating to the Company or any of its Subsidiaries pending or, to
the knowledge of the Company or any Company Stockholder, threatened before the
Equal Employment Opportunity Commission or any other governmental entity
responsible for the prevention of unlawful employment practices; (J) neither the
Company nor any of its Subsidiaries nor any Company Stockholder has received
notice of the intent of any governmental entity responsible for the enforcement
of labor or employment laws to conduct an investigation with respect to or
relating to the Company or any of its Subsidiaries and no such investigation is
in progress; and (K) no complaints, lawsuits or other proceedings are pending
or, to the knowledge of the Company or any Company Stockholder, threatened in
any forum by or on behalf of any present or former employee of the Company or
any of its Subsidiaries, any applicant for employment or classes of the
foregoing alleging breach of any express or implied contract, commitment,
agreement, understanding or other arrangement for employment, any law governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with any employment relationship.
(ii) Section 2.1(m)(ii) of the Company Disclosure Schedule
contains a list of each pension, retirement, savings, deferred compensation, and
profit-sharing plan and each stock option, stock appreciation, stock purchase,
performance share, bonus or other incentive plan, severance plan, health, group
insurance or other welfare plan, or other similar plan and any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), under which the Company or any of its
Subsidiaries has any current or future obligation or liability (including any
potential, contingent or secondary liability under Title IV of ERISA) or under
which any employee or former employee (or beneficiary of any employee or former
employee) of the Company or any of its Subsidiaries has or may have any current
or future right to benefits (the term "plan" shall include any contract,
agreement, policy or understanding, each such plan being hereinafter referred to
individually as a "Plan"). The Company has delivered to Heafner true and
complete copies of (A) each Plan, (B) the summary plan description for each
Plan, (C) the latest annual report, if any, which has been filed with the
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IRS for each Plan, (D) the most recent IRS determination letter for each Plan
that is a pension plan (as defined in ERISA) intended to be qualified under Code
Section 401(a) and (E) copies of any existing reports for the three most recent
Plan years showing compliance with discrimination rules under those of Code
Sections 401(a), 401(k), 401(m), 419, 419A, 505. 501(c)(9), 105(h), 125 or 129
applicable to such Plan. Except as set forth in Section 2.1(m)(ii) of the
Company Disclosure Schedule, each Plan intended to be tax qualified under
Sections 401(a) and 501(a) of the Code is and has been determined by the IRS to
be tax qualified under Sections 401(a) and 501(a) of the Code and, since such
determination, no amendment to or failure to amend any such Plan and, to the
knowledge of the Company and the Company Stockholders, no other event or
circumstance has occurred that could reasonably be expected to adversely affect
its tax qualified status. There has been no prohibited transaction within the
meaning of Section 4975 of the Code and Section 406 of Title I of ERISA with
respect to any Plan.
(iii) Except as set forth in Section 2.1(m)(iii) of the
Company Disclosure Schedule, no Plan is subject to the provisions of Section 412
of the Code or Part 3 of Subtitle B of Title I of ERISA. Except as set forth in
Section 2.1(m)(iii) of the Company Disclosure Schedule, no Plan is subject to
Title IV of ERISA. Except as set forth in Section 2.1(m)(iii) of the Company
Disclosure Schedule, during the past five years, neither the Company or any of
its Subsidiaries nor any business or entity then controlling, controlled by, or
under common control with the Company or any of its Subsidiaries contributed to
or was obliged to contribute to an employee pension plan that was subject to
Title IV of ERISA.
(iv) Except as set forth in Section 2.1(m)(iv) of the Company
Disclosure Schedule, there are no actions, claims, lawsuits or arbitrations
(other than routine claims for benefits) pending, or, to the knowledge of the
Company or any Company Stockholder, threatened, with respect to any Plan or the
assets of any Plan, and no Company Stockholder has knowledge of any facts which
could give rise to any such actions, claims, lawsuits or arbitrations (other
than routine claims for benefits). Each Plan has been administered in all
material respects in accordance with its terms and with all applicable laws
(including, without limitation, ERISA). The Company and each of its Subsidiaries
have satisfied all funding, compliance and reporting requirements for all Plans.
With respect to each Plan, the Company and each of its Subsidiaries have paid
all contributions (including employee salary reduction contributions) and all
insurance premiums that have become due and any such expense accrued but not yet
due has been properly reflected in the financial information in Section 2.1(e)
of the Company Disclosure Schedule.
(v) Except as set forth in Section 2.1(m)(v) of the Company
Disclosure Schedule, no Plan provides or is required to provide, now or in the
future, health, medical, dental, accident, disability, death or survivor
benefits to or in respect of any person beyond termination of employment, except
to the extent required under any state insurance law or under Part 6 of Subtitle
B of Title I of ERISA and under Section 4980(B) of the Code. Except as set forth
in Section 2.1(m)(v) of the Company Disclosure Schedule, no Plan covers any
individual other than employees of the Company or any of its Subsidiaries, other
than spouses and dependents of employees under health and child care policies
listed in Section 2.1(m)(ii) of the Company Disclosure Schedule, true and
complete copies of which have been delivered to Heafner.
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(vi) Except as set forth in Section 2.1(m)(vi) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (A) entitle any employee of the Company or any of its
Subsidiaries to severance pay or termination benefits, (B) accelerate the time
of payment or vesting, or increase the amount of compensation due to any such
employee or former employee or (C) obligate Heafner or the Company or any of its
Subsidiaries or any of their respective affiliates, to pay or otherwise be
liable for any compensation, vacation days, pension contribution or other
benefits to any employee, consultant or agent of the Company or any of its
Subsidiaries for periods before the Closing Date or for personnel whom Heafner
does not employ.
(n) Related Party Transactions. Except as set forth in Section
2.1(n) of the Company Disclosure Schedule, no current or former partner,
director, officer or stockholder of the Company or any of its Subsidiaries or
any associate or affiliate (as defined in the rules promulgated under the
Securities Exchange Act of 1934) thereof, or any relative with a relationship of
not more remote than first cousin of any of the foregoing, is presently, or
during the 12-month period ending on the date hereof has been, (i) a party to
any transaction with the Company or any of its Subsidiaries (including any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
payments to, any such director, officer or stockholder or such associate) or
(ii) to the knowledge of the Company or any Company Stockholder, the direct or
indirect owner of an interest in any corporation, firm, association or business
organization which is a competitor, supplier or customer of the Company or any
of its Subsidiaries, nor does any such person receive income from any source
other than the Company or any of its Subsidiaries which relates to the Company'
or such Subsidiaries' businesses or should properly accrue to the Company or its
Subsidiaries.
(o) Taxes. (i) All Federal, state, local and foreign tax returns and
tax reports required to be filed on or prior to the Closing Date by the Company
or any of its Subsidiaries have been or will be filed or a valid request for
extension has been or will be filed with respect thereto, on a timely basis
(including any extensions) with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed. All
such returns and reports were or will be prepared in the manner required by
applicable law, and reflect or will reflect the liability for taxes of the
Company and its Subsidiaries in all material respects. All Federal, state, local
and foreign income, profits, franchise, sales, use, occupation, property,
excise, employment and other taxes (including interest, penalties and
withholdings of tax) due from and payable by the Company or any of its
Subsidiaries on or prior to the Closing Date have been or will be fully paid on
a timely basis or will be adequately reserved for on the Closing Date Financial
Statement (as defined in Section 4.1(k)). Except as set forth in Section 2.1(o)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is currently the beneficiary of any extension of time within which
to file any tax return. There are no liens for taxes upon the assets of the
Company or any of its Subsidiaries except for statutory liens for current taxes
not yet due.
(ii) No claim has ever been made by an authority in a
jurisdiction where the Company or any Subsidiary of the Company does not file
tax returns that it is or may be subject
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to taxation by that jurisdiction, and neither the Company or any such Subsidiary
has received any notice, or request for information from any such authority.
(iii) No issues have been raised with the Company or any of
its Subsidiaries by the Internal Revenue Service (the "IRS") or any other taxing
authority in connection with any tax return or report filed by the Company or
any of its Subsidiaries where such issue is unresolved and there are no issues
that have been raised by a taxing authority which, either individually or in the
aggregate, could result in any liability for tax obligations of the Company or
any of its Subsidiaries relating to periods ending on or before September 30,
1997 in excess of the accrued liability for taxes shown on the combined
financial statements contained in Section 2.1(e)(i) of the Company Disclosure
Schedule. No waivers of statutes of limitations have been given or requested
with respect to the Company or any of its Subsidiaries.
(iv) No material differences exist between the amounts of the
book basis and the tax basis of assets that are not accounted for by an accrual
on the books of the Company or any of its Subsidiaries for Federal income tax
purposes. Except as set forth in Section 2.1(o)(iv) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is required to include
in income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by the Company or any of its
Subsidiaries, and the IRS has proposed no adjustment or change in accounting
method.
(v) All transactions or methods of accounting that could give
rise to an understatement of Federal income tax (within the meaning of Section
6661 of the Code for tax returns filed on or before December 31, 1990, and
within the meaning of Section 6662 of the Code for tax returns filed after
December 31, 1990) have been adequately disclosed on the tax returns in
accordance with Section 6661(b)(2)(B) of the Code for tax returns filed on or
prior to December 31, 1990, and in accordance with Section 6662(d)(2)(B) of the
Code for tax returns filed after December 31, 1990.
(vi) Neither the Company nor any of its Subsidiaries is or has
been a United States real property holding company (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code.
(vii) The Company and each of its Subsidiaries has complied
(and until the Closing will comply) in all material respects with all applicable
laws relating to the payment and withholding of taxes (including withholding and
reporting requirements under Section 1441 through 1464, 3401 through 3406, 6041
and 6049 of the Code and similar provisions under any other laws) and, within
the time and in the manner prescribed by law, has withheld from wages, fees and
other payments and paid over to the proper governmental or regulatory
authorities all amounts required.
(viii) Neither the Company nor any of its Subsidiaries is a
party to any tax-sharing or tax indemnity agreement or any other agreement of a
similar nature that remains in effect.
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(p) Disclosure. No representation or warranty of the Company
Stockholders contained in this Agreement, and (except for forward-looking
projections or information relating to future performance) no statement
contained in any certificate, schedule, annex, list or other writing furnished
to Heafner, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statement contained herein or therein, in
light of the circumstances under which they were made, not misleading. None of
the written information supplied or to be supplied by the Company specifically
for inclusion or incorporation by reference in the preliminary or the final
confidential offering memorandum to be prepared and distributed to potential
purchasers and purchasers of the High Yield Notes (as defined below in Section
3.14) will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(q) Bank Accounts; Powers-of-Attorney. Section 2.1(q) of the Company
Disclosure Schedule contains a true and complete list of (A) all bank accounts
and safe deposit boxes of the Company and its Subsidiaries and all persons who
are signatories thereunder or who have access thereto and (B) the names of all
persons holding general or special powers-of-attorney from the Company or any of
its Subsidiaries and a summary of the terms thereof.
(r) Inventory. The inventory included in the financial statements
contained in Section 2.1(e) of the Company Disclosure Schedule is the only
inventory used or held for use in the Company's and its Subsidiaries' business,
is valued for financial statement purposes at the lower of cost or market value,
and is useable and salable in the ordinary course of business, except for
obsolete items and items of below standard quality, all of which have been
written off, written down or reserved on the accounting records of the Company
as of the date hereof.
(s) Brokers. No agent, broker, investment banker, person or firm
acting on behalf of the Company or any of its Subsidiaries or under the
authority of the Company or any of its Subsidiaries is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
(t) Investment Company. Neither the Company nor any person
controlling the Company is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 2.2. Representations and Warranties of the Company
Stockholders Individually. Each Company Stockholder, severally and not jointly,
represents and warrants to Heafner as follows:
(a) Authority; Binding Agreements; Title to Shares. (i) Such Company
Stockholder has the requisite power, capacity and authority to enter into this
Agreement, the Escrow Agreement, the Class B Stockholder Agreement and the Class
B Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement, the Escrow
Agreement, the Class B Stockholder Agreement and the Class B Registration Rights
Agreement by such Company Stockholder have been duly authorized
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26
by all necessary action on the part of such Company Stockholder. This Agreement
has been duly executed and delivered by such Company Stockholder, and, assuming
the due execution and delivery of this Agreement by Heafner and Acquisition,
constitutes the valid and binding obligation of such Company Stockholder,
enforceable against such Company Stockholder in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought. Each of the Escrow Agreement, the Class B Stockholder Agreement and
the Class B Registration Rights Agreement, when executed and delivered by such
Company Stockholder at the Closing, will, assuming the due authorization,
execution and delivery of such agreements by Heafner, constitute the valid and
binding obligation of such Company Stockholder, enforceable against such Company
Stockholder in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
(ii) Such Company Stockholder is the lawful owner of record
and beneficially of the number of shares of Company Capital Stock set forth
opposite such Company Stockholder's name on Annex A, and such Company
Stockholder has, and will transfer to Acquisition at the Closing, good title to
such number of shares, free and clear of all Claims, and with no restriction on
the voting rights or other incidents of record and beneficial ownership
attaching to such shares.
(b) Conflicts; Consents. The execution and delivery by such Company
Stockholder of this Agreement, the Escrow Agreement, the Class B Stockholder
Agreement and the Class B Registration Rights Agreement, the consummation of the
transactions contemplated hereby or thereby and compliance by such Company
Stockholder with any of the provisions hereof or thereof does not and will not
(i) conflict with or result in a breach of the articles of incorporation,
by-laws or other constitutive documents, if any, of the Company, any of its
Subsidiaries or such Company Stockholder, (ii) conflict with or result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the provisions of any note, bond, lease, mortgage, indenture, or
any license, franchise, permit, agreement or other instrument or obligation to
which the Company, any of its Subsidiaries or such Company Stockholder is a
party, or by which any properties or assets of the Company, any of its
Subsidiaries or such Company Stockholder may be bound or affected, except for
(1) such conflicts, breaches or defaults that are, individually and in the
aggregate, immaterial and (2) such conflicts, breaches or defaults as to which
requisite waivers or consents have been obtained or will be obtained before the
Closing at no cost to the Company and without giving to any person any
additional rights (which waivers or consents are set forth in Section 2.2(b) of
the Company Disclosure Schedule), (iii) violate any law, statute, rule or
regulation or order, writ, injunction or decree applicable to the Company, any
of its Subsidiaries or such Company Stockholder or any of their respective
properties or assets (except for such violations that are, individually and in
the aggregate, immaterial) or (iv) result in the creation or imposition of any
Claim upon any shares of Company Capital Stock or capital stock of any of the
Company's Subsidiaries or any property or assets used or held by the Company or
any of its Subsidiaries. No consent or approval by, or notification of or filing
with, any governmental authority or agency is required in connection with the
execution, delivery and
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27
performance by such Company Stockholder of this Agreement, the Escrow Agreement,
the Class B Stockholder Agreement or the Class B Registration Rights Agreement
or the consummation of the transactions contemplated hereby or thereby except
for (x) the filing of a premerger notification and report form under the HSR
Act, and the expiration or early termination of the applicable waiting period
under the HSR Act, (y) the filing of the Certificate of Merger with the Delaware
Secretary of State and (z) such other consents, approvals or notifications that
are, individually and in the aggregate, immaterial.
(c) Brokers. No agent, broker, investment banker, person or firm
acting on behalf of such Company Stockholder or under the authority of such
Company Stockholder is or will be entitled to a broker's or finder's fee or any
other commission or similar fee directly or indirectly from any of the parties
hereto in connection with any of the transactions contemplated thereby.
(d) Pending Challenges. There is no legal or regulatory proceeding
pending or, to the knowledge of such Company Stockholder, threatened that could
reasonably be expected to have a material adverse effect on such Company
Stockholder's ability to consummate the transactions contemplated by this
Agreement, the Escrow Agreement, the Class B Stockholder Agreement or the Class
B Registration Rights Agreement.
(e) Investment Company. Neither such Company Stockholder nor any
person controlling such Company Stockholder is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
SECTION 2.3. Representations and Warranties of Heafner. Heafner
represents and warrants to the Company Stockholders as follows:
(a) Organization, Standing and Power. Each of Heafner and each of
its Subsidiaries (i) is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated and
(ii) has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Each of
Heafner and each of its Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which such qualification is necessary
because of the property owned, leased or operated by it or because of the nature
of its business as now being conducted, other than in such jurisdictions where
the failure to be so qualified or in good standing would not, individually or in
the aggregate, have a material adverse effect on the business, assets, condition
(financial or otherwise), liabilities or operations of Heafner and its
Subsidiaries taken as a whole or on Heafner's or Acquisition's ability to
consummate the Merger or perform their respective obligations under this
Agreement (a "Heafner Material Adverse Effect"). Each such jurisdiction in which
Heafner or any of its Subsidiaries is so qualified is listed in Section 2.3(a)
of the disclosure schedule being delivered by Heafner simultaneously with the
execution of this Agreement (the "Heafner Disclosure Schedule"). Heafner has
delivered to the Company complete and correct copies of its articles of
incorporation and by-laws and the certificate of incorporation and by-laws of
each of its Subsidiaries, in each case as amended to the date of this Agreement,
and has made available to the Company its and each of its Subsidiaries' minute
books and stock records. Section 2.3(a) of the Heafner Disclosure Schedule
contains a true and correct list of the directors and officers of Heafner and
each of its Subsidiaries as of the date of this
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28
Agreement and at all times since the last action of the board of directors and
the stockholders of Heafner and of each of its Subsidiaries, as the case may be.
(b) Authority; Binding Agreements. Each of Heafner and Acquisition
(to the extent Acquisition is a party) has the requisite corporate power and
authority to enter into this Agreement, the Escrow Agreement, the Class B
Registration Rights Agreement and the Class B Stockholder Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Escrow Agreement, the Class B Registration
Rights Agreement and the Class B Stockholder Agreement by Heafner and
Acquisition (to the extent Acquisition is a party) have been duly authorized by
all necessary action on the part of Heafner and Acquisition (to the extent
Acquisition is a party). This Agreement has been duly executed and delivered by
Heafner and Acquisition, and, assuming the due execution and delivery of this
Agreement by the Company and the Company Stockholders, constitutes the valid and
binding obligation of Heafner and Acquisition, enforceable against Heafner and
Acquisition in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought. At the Closing, each
of the Escrow Agreement, the Class B Registration Rights Agreement and the Class
B Stockholder Agreement will be duly executed and delivered by Heafner and
Acquisition, and, assuming the due execution and delivery thereof by the Company
Stockholders, will constitute the valid and binding obligation of Heafner,
enforceable against Heafner in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought.
(c) Capitalization; Subsidiaries. (i) The authorized capital stock
of Heafner consists of 10,000,000 shares of common stock, par value $.01, 7,000
shares of Series A Cumulative Redeemable Preferred Stock, $.01 par value (the
"Series A Preferred Stock"), and 4,500 shares of Series B Cumulative Redeemable
Preferred Stock, $.01 par value (the "Series B Preferred Stock"), and all of
such securities are issued and outstanding except for 6,319,000 shares of
Heafner common stock. After giving effect to the filing of the Second Amended
and Restated Articles (as defined in Section 4.1(h)) and to the Merger, the
authorized capital stock of Heafner will consist of 10,000,000 shares of Class A
Common Stock, $.01 par value ("Class A Common Stock"), 20,000,000 shares of
Class B Common Stock, $.01 par value ("Class B Common Stock"), 7,000 shares of
Series A Preferred Stock and 4,500 shares of Series B Preferred Stock, and all
of such securities will be issued and outstanding except for 6,319,000 shares of
Class A Common Stock and 18,599,333 shares of Class B Common Stock. The
authorized capital stock of Acquisition consists of 1,000 shares of common
stock, $.01 par value, all of which are issued and outstanding. Except as set
forth above and in Section 2.3(c) of the Heafner Disclosure Schedule, at the
time of execution of this Agreement, no shares of capital stock or other voting
securities of Heafner are issued, reserved for issuance or outstanding. Except
as set forth in Section 2.3(c) of Heafner Disclosure Schedule, all outstanding
shares of capital stock of Heafner are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. At and upon the
Closing, the shares of Class B Common Stock to be issued to the
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29
Company Stockholders will be validly issued, fully paid, non-assessable and not
subject to preemptive rights. Except as set forth in Section 2.3(c) of the
Heafner Disclosure Schedule, there are no bonds, debentures, notes or other
indebtedness or securities of Heafner having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of Heafner may vote. Except as set forth in Section 2.3(c)
of the Heafner Disclosure Schedule, there are no securities, options, warrants,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Heafner is a party or by which Heafner is bound obligating Heafner to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of Heafner or obligating
Heafner to issue, grant, extend or enter into any such security, option,
warrant, right, commitment, agreement, arrangement or undertaking. Except as set
forth in Section 2.3(c) of the Heafner Disclosure Schedule, there are no
outstanding rights, commitments, agreements, arrangements or undertakings of any
kind obligating Heafner to repurchase, redeem or otherwise acquire any shares of
capital stock or other voting securities of Heafner or any securities of the
type described in the two immediately preceding sentences. Heafner is not
subject to any liability for any claim that Heafner violated any applicable
Federal or state securities laws in connection with the issuance of capital
stock.
(ii) Section 2.3(c) of the Heafner Disclosure Schedule sets forth a
complete list of all of Heafner's Subsidiaries as of the date of this Agreement,
together with their respective jurisdictions of incorporation, authorized
capital stock, number of shares issued and outstanding and record ownership of
such shares. Except as set forth on Section 2.3(c) of the Heafner Disclosure
Schedule, Heafner does not have any Subsidiaries or own or hold any equity or
other security interest in any other entity. All issued and outstanding shares
of capital stock of Heafner's Subsidiaries have been duly authorized, were
validly issued, are fully paid and non-assessable and subject to no preemptive
rights and are directly or indirectly owned beneficially and of record by
Heafner, free and clear of all Claims, and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock). None of Heafner's Subsidiaries is subject to any
liability for any claim that it violated any applicable Federal or state
securities laws in connection with the issuance of capital stock.
(d) Conflicts; Consents. The execution and delivery by Heafner and
Acquisition (to the extent Acquisition is a party) of this Agreement, the Escrow
Agreement, the Class B Stockholder Agreement and the Class B Registration Rights
Agreement, the consummation of the transactions contemplated hereby and thereby
and compliance by Heafner and Acquisition (to the extent Acquisition is a party)
with any of the provisions hereof and thereof does not and will not (i) conflict
with or result in a breach of the articles of incorporation, by-laws or other
constitutive documents of Heafner or any of its Subsidiaries, (ii) except as set
forth in Section 2.3(d) of the Heafner Disclosure Schedule, conflict with or
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, or any license, franchise, permit, agreement or other instrument or
obligation to which Heafner or any of its Subsidiaries is a party, or by which
any properties or assets of Heafner or any of its Subsidiaries may be bound or
affected, except for (1) such conflicts, breaches or defaults that are,
individually and in the aggregate, immaterial and (2) such conflicts, breaches
or defaults as to which requisite waivers or consents have been obtained or will
be obtained before the Closing at no material cost to Heafner and without giving
to any person any
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material additional rights, (iii) violate any law, statute, rule or regulation
or order, writ, injunction or decree applicable to Heafner or any of its
Subsidiaries or any of their respective properties or assets (except for such
violations that are, individually and in the aggregate, immaterial) or (iv)
result in the creation or imposition of any Claim upon any shares of capital
stock of Heafner or capital stock of any of Heafner's Subsidiaries or any
property or assets used or held by Heafner or any of its Subsidiaries. No
consent or approval by, or notification of or filing with, any governmental
authority or agency is required in connection with the execution, delivery and
performance by Heafner and Acquisition of this Agreement or the consummation of
the transactions contemplated hereby except for (x) the filing of a premerger
notification and report form under the HSR Act, and the expiration or early
termination of the applicable waiting period under the HSR Act, (y) the filing
of the Certificate of Merger with the Delaware Secretary of State and (z) such
other consents, approvals or notifications that are, individually and in the
aggregate, immaterial.
(e) Financial Information. (i) The following financial statements
are contained in Section 2.3(e) of the Heafner Disclosure Schedule:
(A) the unaudited, internally prepared consolidated balance
sheet of Heafner at December 31, 1997 and the related consolidated
statement of income and retained earnings and cash flows for the fiscal
year then ended; and
(B) the balance sheets of Heafner at December 31, 1996 and
1995 and the related consolidated statements of income and retained
earnings and cash flows for the fiscal years then ended together with the
opinion of Arthur Andersen LLP thereon.
Except as set forth in Section 2.3(e) of the Heafner Disclosure Schedule, all
such financial statements have been prepared in conformity with GAAP applied on
a basis consistent with prior periods and fairly present in all material
respects the consolidated financial condition, results of operations and cash
flows of Heafner and its Subsidiaries (except, in the case of unaudited
financial statements, subject to normal, recurring year-end audit adjustments).
The consolidated balance sheets of Heafner as at the dates set forth fairly
present in all material respects the consolidated financial position of Heafner
and its Subsidiaries as at the dates thereof, and the related consolidated
statements of income and retained earnings and cash flows of Heafner for each of
the respective specified periods then ended fairly present in all material
respects the consolidated results of operations of Heafner and its Subsidiaries
for each of the respective periods then ended (except, in the case of unaudited
financial statements, subject to normal, recurring year-end audit adjustments).
For the purposes of this Agreement, all financial statements referred to in this
paragraph shall include any notes and schedules to such financial statements.
(ii) Except as set forth in Section 2.3(e)(ii) of the Heafner
Disclosure Schedule, each of Heafner and each of its Subsidiaries does not have,
and as a result of the transactions contemplated herein, will not have, any
liabilities or obligations (whether absolute, accrued, contingent or otherwise,
and whether due or to become due), except for liabilities and obligations (A)
reflected on the balance sheets of Heafner referred to in Section 2.3(e)(i) or
(B) incurred in the ordinary course of business consistent with past practice
since December 31, 1997, and which,
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individually, do not exceed $250,000. All reserves established by Heafner are
reflected on the balance sheets of Heafner or in the footnotes to the financial
statements of Heafner and are reasonable based upon facts and circumstances
known by Heafner on the date hereof and there are no loss contingencies that are
required to be accrued by Statement of Financial Accounting Standard No. 5 of
the Financial Accounting Standards Board which are not provided for on such
balance sheets.
(f) Absence of Changes. Except as set forth in Section 2.3(f) of the
Heafner Disclosure Schedule, since December 31, 1997, Heafner and its
Subsidiaries have been operated in the ordinary course consistent with past
practice and there has not been:
(i) any event, violation or other matter that could,
individually or in the aggregate, reasonably be expected to have a Heafner
Material Adverse Effect;
(ii) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by
Heafner or any of its Subsidiaries, other than obligations under customer
contracts, current obligations and liabilities incurred in the ordinary
course of business and consistent with past practice;
(iii) any payment, discharge, satisfaction or settlement of
any claim or obligation of Heafner or any of its Subsidiaries, except in
the ordinary course of business and consistent with past practice;
(iv) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of
Heafner or any of its Subsidiaries or any direct or indirect redemption,
purchase or other acquisition of any such shares;
(v) any issuance or sale, or any contract entered into for the
issuance or sale, of any shares of capital stock or securities convertible
into or exercisable for shares of capital stock of Heafner or any of its
Subsidiaries;
(vi) any sale, assignment, pledge, encumbrance, transfer or
other disposition of any tangible asset of Heafner or any of its
Subsidiaries (other than sales of inventory to customers in the ordinary
course of business consistent with past practice), or any sale,
assignment, transfer or other disposition of any patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, know-how or
any other intangible assets of Heafner or any of its Subsidiaries;
(vii) any creation of any Claim on any property of Heafner or
any of its Subsidiaries, except in the ordinary course of business
consistent with past practice or such Claims which, individually or in the
aggregate, could not reasonably be expected to have a Heafner Material
Adverse Effect;
(viii) any write-down of the value of any asset of Heafner or
any of its Subsidiaries or any write-off as uncollectible of any accounts
or notes receivable or any portion thereof, other than write-downs or
write-offs which, in the aggregate, equal
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32
approximately $56,913.20 as of the date of this Agreement and which,
individually, do not exceed $10,000;
(ix) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to Heafner or any of its
Subsidiaries;
(x) any capital expenditure or commitment or addition to
property, plant or equipment of Heafner or any of its Subsidiaries, other
than capital expenditures or commitments or additions to property, plant
or equipment of Heafner or any of its Subsidiaries which, in the
aggregate, equal approximately $55,564.80 as of the date of this Agreement
and which, individually, do not exceed $10,000;
(xi) any general increase in the compensation of employees of
Heafner or any of its Subsidiaries (including any increase pursuant to any
written bonus, pension, profit-sharing or other benefit or compensation
plan, policy or arrangement or commitment), or any increase in any such
compensation or bonus payable to any officer, stockholder, director,
consultant or agent of Heafner or any of its Subsidiaries having an annual
salary or remuneration in excess of $75,000;
(xii) any damage, destruction or loss (whether or not covered
by insurance) affecting any asset or property of Heafner or any of its
Subsidiaries resulting in liability or loss in excess of $50,000;
(xiii) any change in the independent public accountants of
Heafner and its Subsidiaries or any material change in the accounting
methods or accounting practices followed by Heafner or any material change
in depreciation or amortization policies or rates; or
(xiv) any agreement, whether in writing or otherwise, to take
any of the actions specified in the foregoing items (i) through (xiv),
subject to any dollar thresholds set forth in items (i) through (xiii)
above.
(g) Litigation. Except as set forth in Section 2.3(g) of the Heafner
Disclosure Schedule, there are no actions, suits, proceedings, claims or
disputes pending, or to the knowledge of Heafner threatened, at law, in equity,
in arbitration or before any governmental entity against Heafner or any of its
Subsidiaries (i) with respect to this Agreement, the Escrow Agreement, the Class
B Stockholder Agreement or the Class B Registration Rights Agreement or any of
the transactions contemplated hereby or thereby; or (ii) which could reasonably
be expected to, if adversely determined, have a Heafner Material Adverse Effect.
No injunction, writ, temporary restraining order, decree or any order of any
nature has been issued by any court or other governmental authority purporting
to enjoin or restrain the execution, delivery and performance by Heafner or
Acquisition (to the extent Acquisition is a party) of this Agreement, the Escrow
Agreement, the Class B Stockholder Agreement or the Class B Registration Rights
Agreement.
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(h) No Default or Breach. Neither Heafner nor any of its
Subsidiaries is in default under or with respect to any of such person's
Contractual Obligations in any respect, other than any such defaults that,
individually or in the aggregate, could not reasonably be expected to have a
Heafner Material Adverse Effect. "Contractual Obligations" means as to any
person, any provision of any security issued by such person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such person is a party or by which it or any of its property is bound.
(i) Title to Properties. Heafner and each of its Subsidiaries has
good record and marketable title to, or hold leases in full force and effect in,
all their real property, except for such defects in title as could not,
individually or in the aggregate, have a Heafner Material Adverse Effect.
(j) Investment Company. Neither Heafner nor any person controlling
Heafner is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(k) Full Disclosure. No representation or warranty of Heafner
contained in this Agreement, and (except for forward-looking projections or
information relating to future performance) no statement contained in any other
certificate, schedule, annex, list or other writing furnished by Heafner to the
Company or the Company Stockholders, contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements made, in
light of the circumstances in which made, not misleading. None of the
information supplied or to be supplied by Heafner for inclusion or incorporation
by reference in the preliminary or final confidential offering memorandum to be
prepared and distributed to potential purchasers and purchasers of the High
Yield Notes (as defined below in Section 3.14) will contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(l) Compliance; Governmental Authorizations. (i) Each of Heafner and
each of its Subsidiaries has complied and is in compliance in all material
respects with all Federal, state, local and foreign laws, ordinances, rules,
regulations and orders (including those relating to disposal of materials,
environmental protection and occupational safety and health) applicable to
Heafner, any of its Subsidiaries or their respective businesses, and there are
no present or past conditions relating to Heafner or any of its Subsidiaries, or
relating to any real property owned or leased by Heafner or its Subsidiaries
(each, a "Heafner Property") or any appurtenances thereto or improvements
thereon, that could reasonably be expected to lead to any material liability
against Heafner or any of its Subsidiaries, or reasonably be expected to have a
Heafner Material Adverse Effect, for violation of any health or safety laws.
Each of Heafner and each of its Subsidiaries has all Federal, state, local and
foreign governmental licenses and permits that are material to the conduct of
their respective businesses as presently being conducted, which licenses and
permits (and any exceptions thereto) are set forth in Section 2.3(l) of the
Heafner Disclosure Schedule. Such licenses and permits are in full force and
effect, no material violations are or have been recorded in respect of any
thereof, no proceeding is pending or, to the knowledge of Heafner, threatened,
to revoke or limit any thereof, and Heafner does not know of any basis for any
such
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proceeding and the consummation of the transactions contemplated in this
Agreement will not result in the non-renewal, revocation or termination of any
such license or permit.
(ii) Heafner and each of its Subsidiaries validly hold all permits
required under all applicable Environmental Laws that are material to the
conduct of their respective businesses as presently being conducted. None of
Heafner or any of its Subsidiaries has violated, nor is Heafner or any of its
Subsidiaries in violation of, in any material respect, any requirements of any
Environmental Laws in connection with the conduct of its business or in
connection with the use, maintenance or operation of any Heafner Property. There
are no present or past conditions relating to Heafner or any of its Subsidiaries
or relating to any Heafner Property, or, to the knowledge of Heafner, relating
to any real property previously owned, leased or operated by Heafner or any of
its Subsidiaries or any of their respective present or past affiliates, that in
any such case could reasonably be expected to lead to any material liability of
Heafner or any of its Subsidiaries under any Environmental Law. Except as set
forth on Section 2.3(l)(ii) of the Heafner Disclosure Schedule, each of Heafner
and each of its Subsidiaries has operated each Heafner Property and has
received, handled, used, stored, treated, shipped and disposed of all hazardous
or toxic materials, substances and wastes (whether or not on its properties or
properties owned or operated by others) in compliance in all material respects
with all applicable Environmental Laws. Except as set forth in Section
2.3(l)(ii) of the Heafner Disclosure Schedule, none of Heafner or any of its
Subsidiaries has engaged in or permitted the sale or dispensation (to customers,
employees or other persons), handling, transportation, discharge, emission,
treatment, storage or disposal of gasoline or other motor vehicle fuels at or
under any Heafner Property or, to the knowledge of Heafner, any property or
facility previously owned, leased or operated by Heafner or any of its
Subsidiaries or one of their respective past or present affiliates.
(m) Labor Relations; Employees. (i) (A) There is no labor strike,
dispute, slowdown, stoppage or lockout pending, affecting, or, to the knowledge
of Heafner, threatened against Heafner or any of its Subsidiaries, and during
the last five years there has not been any such action; (B) there are no union
claims to represent the employees of Heafner or any of its Subsidiaries nor have
there been any such claims within the last five years; (C) there is no written
or oral contract, commitment, agreement, understanding or other arrangement with
any labor organization, nor work rules or practices agreed to with any labor
organization or employee association, applicable to employees of Heafner or any
of its Subsidiaries, nor is Heafner or any of its Subsidiaries a party to or
bound by any collective bargaining or similar agreement; (D) there is, and
within the last two years there has been, no representation of the employees of
Heafner or any of its Subsidiaries by any labor organization and, to the
knowledge of Heafner, there are no union organizing activities among the
employees of Heafner or any of its Subsidiaries, nor does any question
concerning representation exist concerning such employees; (E) Section 2.3(m)(i)
of the Heafner Disclosure Schedule sets forth all personnel policies, rules or
procedures (whether written or oral) applicable to employees of Heafner or any
of its Subsidiaries, and Heafner has delivered to the Company complete and
accurate copies of all such written policies, rules or procedures plus summaries
of all oral policies, rules or procedures; (F) none of Heafner or any of its
Subsidiaries has engaged in any act or practice which could reasonably be
expected to constitute an unfair labor practice as defined in the National Labor
Relations Act or other applicable law, ordinance, regulation, interpretation or
order and each of Heafner and each of its Subsidiaries is, and has for the past
five years been, in compliance in all material respects with all
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applicable laws, ordinances, regulations, interpretations or orders respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health; (G) there is no unfair labor
practice charge or complaint against Heafner or any of its Subsidiaries pending
or, to the knowledge of Heafner, threatened before the National Labor Relations
Board or any similar state or foreign agency and, to the knowledge of Heafner,
there are no existing or prior facts, circumstances or conditions that could
reasonably be expected to form the basis therefor; (H) there is no grievance
pending or, to the knowledge of Heafner, threatened against Heafner or any of
its Subsidiaries arising out of any collective bargaining agreement or other
grievance procedure; (I) there are no charges with respect to or relating to
Heafner or any of its Subsidiaries pending or, to the knowledge of Heafner,
threatened before the Equal Employment Opportunity Commission or any other
governmental entity responsible for the prevention of unlawful employment
practices; (J) neither Heafner nor any of its Subsidiaries has received notice
of the intent of any governmental entity responsible for the enforcement of
labor or employment laws to conduct an investigation with respect to or relating
to Heafner or any of its Subsidiaries and no such investigation is in progress;
and (K) no complaints, lawsuits or other proceedings are pending or, to the
knowledge of Heafner, threatened in any forum by or on behalf of any present or
former employee of Heafner or any of its Subsidiaries, any applicant for
employment or classes of the foregoing alleging breach of any express or implied
contract, commitment, agreement, understanding or other arrangement for
employment, any law governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with any employment
relationship.
(ii) Section 2.3(m)(ii) of the Heafner Disclosure Schedule
contains a list of each pension, retirement, savings, deferred compensation, and
profit-sharing plan and each stock option, stock appreciation, stock purchase,
performance share, bonus or other incentive plan, severance plan, health, group
insurance or other welfare plan, or other similar plan and any "employee benefit
plan" within the meaning of Section 3(3) of ERISA, under which Heafner or any of
its Subsidiaries has any current or future obligation or liability (including
any potential, contingent or secondary liability under Title IV of ERISA) or
under which any employee or former employee (or beneficiary of any employee or
former employee) of Heafner or any of its Subsidiaries has or may have any
current or future right to benefits (the term "plan" shall include any contract,
agreement, policy or understanding, each such plan being hereinafter referred to
in this Section 2.3(m) individually as a "Plan"). Heafner has delivered to the
Company true and complete copies of (A) each Plan, (B) the summary plan
description for each Plan, (C) the latest annual report, if any, which has been
filed with the IRS for each Plan, (D) the most recent IRS determination letter
for each Plan that is a pension plan (as defined in ERISA) intended to be
qualified under Code Section 401(a) and (E) copies of any existing reports for
the three most recent Plan years showing compliance with discrimination rules
under those of Code Sections 401(a), 401(k), 401(m), 419, 419A, 505. 501(c)(9),
105(h), 125 or 129 applicable to such Plan. Except as set forth in Section
2.3(m)(ii) of the Heafner Disclosure Schedule, each Plan intended to be tax
qualified under Sections 401(a) and 501(a) of the Code is and has been
determined by the IRS to be tax qualified under Sections 401(a) and 501(a) of
the Code and, since such determination, no amendment to or failure to amend any
such Plan and, to the knowledge of Heafner, no other event or circumstance has
occurred that could reasonably be expected to adversely affect its tax qualified
status. There has been no prohibited transaction within the
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meaning of Section 4975 of the Code and Section 406 of Title I of ERISA with
respect to any Plan.
(iii) Except as set forth in Section 2.3(m)(iii) of the
Heafner Disclosure Schedule, no Plan is subject to the provisions of Section 412
of the Code or Part 3 of Subtitle B of Title I of ERISA. Except as set forth in
Section 2.3(m)(iii) of the Heafner Disclosure Schedule, no Plan is subject to
Title IV of ERISA. Except as set forth in Section 2.3(m)(iii) of the Heafner
Disclosure Schedule, during the past five years, neither Heafner or any of its
Subsidiaries nor any business or entity then controlling, controlled by, or
under common control with Heafner or any of its Subsidiaries contributed to or
was obliged to contribute to an employee pension plan that was subject to Title
IV of ERISA.
(iv) There are no actions, claims, lawsuits or arbitrations
(other than routine claims for benefits) pending, or, to the knowledge of
Heafner, threatened, with respect to any Plan or the assets of any Plan, and
Heafner has no knowledge of any facts which could give rise to any such actions,
claims, lawsuits or arbitrations (other than routine claims for benefits). Each
Plan has been administered in all material respects in accordance with its terms
and with all applicable laws (including, without limitation, ERISA). Heafner and
each of its Subsidiaries have satisfied all funding, compliance and reporting
requirements for all Plans. With respect to each Plan, Heafner and each of its
Subsidiaries have paid all contributions (including employee salary reduction
contributions) and all insurance premiums that have become due and any such
expense accrued but not yet due has been properly reflected in the financial
information in Section 2.3(e) of the Heafner Disclosure Schedule.
(v) Except as set forth in Section 2.3(m)(v) of the Heafner
Disclosure Schedule, no Plan provides or is required to provide, now or in the
future, health, medical, dental, accident, disability, death or survivor
benefits to or in respect of any person beyond termination of employment, except
to the extent required under any state insurance law or under Part 6 of Subtitle
B of Title I of ERISA and under Section 4980(B) of the Code. Except as set forth
in Section 2.3(m)(v) of the Heafner Disclosure Schedule, no Plan covers any
individual other than employees of Heafner or any of its Subsidiaries, other
than spouses and dependents of employees under health and child care policies
listed in Section 2.3(m)(ii) of the Heafner Disclosure Schedule, true and
complete copies of which have been delivered to the Company.
(vi) Except as set forth in Section 2.3(m)(vi) of the Heafner
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (A) entitle any employee of Heafner or any of its
Subsidiaries to severance pay or termination benefits, (B) accelerate the time
of payment or vesting, or increase the amount of compensation due to any such
employee or former employee or (C) obligate Heafner or Heafner or any of its
Subsidiaries or any of their respective affiliates, to pay or otherwise be
liable for any compensation, vacation days, pension contribution or other
benefits to any employee, consultant or agent of Heafner or any of its
Subsidiaries for periods before the Closing Date or for personnel whom Heafner
does not employ.
(n) Taxes. (i) All Federal, state, local and foreign tax returns and
tax reports required to be filed on or prior to the Closing Date by Heafner or
any of its Subsidiaries have been
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or will be filed or a valid request for extension has been or will be filed with
respect thereto, on a timely basis (including any extensions) with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed. All such returns and reports were or will be
prepared in the manner required by applicable law, and reflect or will reflect
the liability for taxes of Heafner and its Subsidiaries in all material
respects. All Federal, state, local and foreign income, profits, franchise,
sales, use, occupation, property, excise, employment and other taxes (including
interest, penalties and withholdings of tax) due from and payable by Heafner or
any of its Subsidiaries on or prior to the Closing Date have been or will be
fully paid on a timely basis or will be adequately reserved for on Heafner's
financial statements. Except as set forth in Section 2.3(n) of the Heafner
Disclosure Schedule, neither Heafner nor any of its Subsidiaries is currently
the beneficiary of any extension of time within which to file any tax return.
There are no liens for taxes upon the assets of Heafner or any of its
Subsidiaries except for statutory liens for current taxes not yet due.
(ii) No claim has ever been made by an authority in a
jurisdiction where Heafner or any Subsidiary of Heafner does not file tax
returns that it is or may be subject to taxation by that jurisdiction, and
neither Heafner or any such Subsidiary has received any notice, or request for
information from any such authority.
(iii) No issues have been raised with Heafner or any of its
Subsidiaries by the IRS or any other taxing authority in connection with any tax
return or report filed by Heafner or any of its Subsidiaries where such issue is
unresolved and there are no issues that have been raised by a taxing authority
which, either individually or in the aggregate, could result in any liability
for tax obligations of Heafner or any of its Subsidiaries relating to periods
ending on or before December 31, 1997 in excess of the accrued liability for
taxes shown on the combined financial statements contained in Section 2.3(e)(i)
of the Heafner Disclosure Schedule. No waivers of statutes of limitations have
been given or requested with respect to Heafner or any of its Subsidiaries.
(iv) No material differences exist between the amounts of the
book basis and the tax basis of assets that are not accounted for by an accrual
on the books of Heafner or any of its Subsidiaries for Federal income tax
purposes. Neither Heafner nor any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by Heafner or any of its
Subsidiaries, and the IRS has proposed no adjustment or change in accounting
method.
(v) All transactions or methods of accounting that could give
rise to an understatement of Federal income tax (within the meaning of Section
6661 of the Code for tax returns filed on or before December 31, 1990, and
within the meaning of Section 6662 of the Code for tax returns filed after
December 31, 1990) have been adequately disclosed on the tax returns in
accordance with Section 6661(b)(2)(B) of the Code for tax returns filed on or
prior to December 31, 1990, and in accordance with Section 6662(d)(2)(B) of the
Code for tax returns filed after December 31, 1990.
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(vi) Neither Heafner nor any of its Subsidiaries is or has
been a United States real property holding company (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code.
(vii) Heafner and each of its Subsidiaries has complied (and
until the Closing will comply) in all material respects with all applicable laws
relating to the payment and withholding of taxes (including withholding and
reporting requirements under Section 1441 through 1464, 3401 through 3406, 6041
and 6049 of the Code and similar provisions under any other laws) and, within
the time and in the manner prescribed by law, has withheld from wages, fees and
other payments and paid over to the proper governmental or regulatory
authorities all amounts required.
(viii) Neither Heafner nor any of its Subsidiaries is a party
to any tax-sharing or tax indemnity agreement or any other agreement of a
similar nature that remains in effect.
(o) Patents, Trademarks, Etc.
(i) Heafner and each of its Subsidiaries owns or has licensed
or otherwise has the right to use all patents, trademarks, service marks, trade
names, copyrights, licenses, franchises, computer software (including the source
codes thereto) and other intellectual property rights that are material to the
operation of their businesses as presently conducted or proposed to be
conducted.
(ii) Heafner uses and has used its best efforts to secure and
maintain its intellectual property rights in any and all computer software it
owns. Duplicates of all such computer software, including the source codes
thereto, are at a secure off-site location.
(iii) To the best knowledge of Heafner, no product, process,
method, substance or other material presently owned, sold, licensed or employed
by Heafner or any of its Subsidiaries, or which Heafner or any of its
Subsidiaries contemplates owning, selling, licensing or employing, (1) infringes
upon the patents, trademarks, service marks, copyrights or licenses that are
owned by others or (2) is being infringed upon by any other person. No
litigation is pending and no claim has been made against Heafner or any of its
Subsidiaries or, to the best knowledge of Heafner, is threatened, contesting the
right of Heafner or any of its Subsidiaries to own, sell, license or use any
product, process, method, substance or other material presently owned, sold,
licensed or employed by Heafner or any of its Subsidiaries or which Heafner or
any of its Subsidiaries intends to acquire an ownership interest in, sell,
license or employ.
(p) Potential Conflicts of Interest. To the best knowledge of
Heafner, except as set forth in Section 2.3(p) of the Heafner Disclosure
Schedule, no executive officer, director or affiliate of Heafner or any of its
Subsidiaries, and no relative or spouse of any such officer, director or
affiliate: (i) owns, directly or indirectly, any interest in (excepting less
than 1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant of,
any person which is, or is engaged in business as, a competitor, lessor, lessee,
supplier, distributor, sales agent or customer of, or lender to or borrower
from, Heafner or any of its Subsidiaries; (ii) owns, directly or indirectly, in
whole or in
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part, any tangible or intangible property that Heafner or any of its
Subsidiaries uses in the conduct of its business; or (iii) has any cause of
action or other claim whatsoever against, or owes any amount to, Heafner or any
of its Subsidiaries, except for claims in the ordinary course of business such
as for accrued vacation pay, accrued benefits under employee benefit plans, and
similar matters and agreements arising in the ordinary course of business.
(q) Trade Relations. Except as set forth in Section 2.3(q) of the
Heafner Disclosure Schedule, to the knowledge of Heafner, there exists no actual
or threatened termination, cancellation or material limitation of, or any
material adverse modification or change in, the business relationship or
business of Heafner and its Subsidiaries taken as a whole, or their business
with, any customer or any group of customers whose use of their services are
individually or in the aggregate material to the business of Heafner and its
Subsidiaries taken as a whole, or with any material supplier, and to the
knowledge of Heafner there exists no condition or state of facts or
circumstances with respect thereto that could reasonably be expected to result
in a Heafner Material Adverse Effect.
(r) Material Contracts. Section 2.3(r) of the Heafner Disclosure
Schedule lists as of the date of this Agreement each contract (other than
purchase orders and standard sales contracts in the ordinary course of
business), agreement, arrangement, commitment and lease of Heafner and its
Subsidiaries currently in effect which by its terms (1) is not terminable at
will within six months and requires future expenditures or receipts or other
performance with respect to goods or services having a value per annum in excess
of $200,000, (2) was not entered into in the ordinary course of business, or (3)
is material to the assets, business, properties, operations or financial or
other condition of Heafner and its Subsidiaries, taken as a whole. Copies of all
such documents have previously been made available to the Company. All of such
contracts, agreements, arrangements, commitments and leases are in full force
and effect and binding upon the parties thereto in accordance with their terms.
Neither Heafner nor any of its Subsidiaries, nor to the knowledge of Heafner,
any other party to such contracts, agreements, arrangements, commitments and
leases is in default of any material obligation thereunder or has given notice
of default to any other party thereunder and, to the knowledge of Heafner, no
condition exists that with notice or lapse of time would constitute a material
default thereunder. Heafner has no knowledge of any proposed, pending, or likely
cancellation or termination of any such contract, agreement, arrangement,
commitment or lease (other than any expiration pursuant to the terms thereof).
(s) Insurance. Section 2.3(s) of the Heafner Disclosure Schedule
sets forth all policies of fire, liability, workman's compensation, vehicular,
life or other insurance held by or on behalf of Heafner and its Subsidiaries
(specifying the insurer, the coverage amounts and describing each pending claim
thereunder of more than $100,000). Such policies and binders are in full force
and effect. Neither Heafner nor any of its Subsidiaries is in default in any
material respect with respect to any provision contained in any such policy or
binder and, to the knowledge of Heafner, has not failed to give any notice or
present any claim under such policy or binder in due and timely fashion.
(t) Inventory. The inventory included in the financial statements
contained in Section 2.3(e)(i) of the Heafner Disclosure Schedule is the only
inventory used or held for use in
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Heafner's and its Subsidiaries' business, is valued for financial statement
purposes at the lower of cost or market value, and is useable and salable in the
ordinary course of business, except for obsolete items and items of below
standard quality, all of which have been written off, written down or reserved
on the accounting records of Heafner as of the date hereof.
(u) Brokers. Except for T & Co., no agent, broker, investment
banker, person or firm acting on behalf of Heafner or any of its Subsidiaries or
under the authority of Heafner or any of its Subsidiaries is or will be entitled
to any broker's or finder's fee or any other commission or similar fee directly
or indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
(v) Financing. As of the date hereof, Heafner is highly confident
that it can obtain the financing contemplated by Section 3.14, regardless of
whether or not the Pending Acquisition (as defined below in Section 3.11) is
consummated.
ARTICLE III
Additional Agreements
SECTION 3.1. Transaction Costs. Any fees, costs and expenses in
connection with the transactions contemplated by this Agreement and the
negotiation and preparation of the Escrow Agreement, Class B Stockholder
Agreement, Class B Registration Rights Agreement, Certificate of Merger and
Second Amended and Restated Articles, including fees and expenses of counsel,
financial advisors and accountants and filing fees in connection with compliance
with the HSR Act (collectively, "Transaction Costs"), that are incurred by
Heafner and Acquisition shall be paid or reimbursed by Heafner. Any Transaction
Costs that are incurred by the Company, any of its Subsidiaries or any Company
Stockholder (collectively, "Company Transaction Costs") shall be paid or
reimbursed by the Company; provided that if the aggregate amount of such Company
Transaction Costs exceeds $500,000, the amount of such excess shall be paid or
reimbursed by the Company Stockholders. For purposes of this Section 3.1,
"Company Transaction Costs" shall not include any severance payments under any
existing employment agreements with employees of the Company or any of its
Subsidiaries, which agreements are listed in Section 3.1 of the Company
Disclosure Schedule, or up to $1,500,000 in the aggregate payable at Closing
under any and all stock appreciation rights agreements with employees of the
Company or any of its Subsidiaries, which agreements are listed in Section 3.1
of the Company Disclosure Schedule; provided that any amounts paid in excess of
$1,500,000 at Closing under such stock appreciation rights agreements shall be
deemed to be Company Transaction Costs.
SECTION 3.2. Conduct of Business. From the date of this Agreement
until the Closing Date, except as otherwise consented to by Heafner in writing,
the Company shall, and shall cause its Subsidiaries to, operate their respective
businesses only in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, use all commercially reasonable efforts
to (i) preserve intact the present organization of the Company and its
Subsidiaries; (ii) keep available the services of the present officers and
employees of the Company and its Subsidiaries; (iii) preserve the Company's
goodwill and relationships with customers, suppliers, licensors, licensees,
contractors, distributors, lenders and other persons having
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significant business dealings with the Company and its Subsidiaries; (iv)
continue all current sales, marketing and other promotional policies, programs
and activities; (v) maintain the assets of the Company and its Subsidiaries in
good repair, order and condition; and (vi) maintain the insurance policies and
risk management programs of the Company and each of its Subsidiaries and in the
event of casualty, loss or damage to any assets of the Company and its
Subsidiaries, repair or replace such assets with assets of reasonably comparable
quality, as the case may be. Without limiting the generality of the foregoing,
the Company shall not, without the prior written consent of Heafner, directly or
indirectly (i) causing or permitting any state of affairs, action or omission
described in clauses (i) through (xiv) of Section 2.1(f) or (ii) taking, or
agreeing in writing or otherwise to take, any action which would make any
representation or warranty of the Company or any Company Stockholder contained
in this Agreement untrue or incorrect in any material respect as of the date
when made or as of any future date or which could reasonably be expected to
prevent the satisfaction of any condition to Closing set forth in Article IV.
SECTION 3.3. HSR Act Filings; Reasonable Efforts; Further
Assurances. (a) Each of Heafner and the Company shall (i) promptly make or cause
to be made the filings required of such party (including the ultimate parent
entity of such party) or any of its subsidiaries under the HSR Act with respect
to the transactions contemplated by this Agreement, (ii) comply at the earliest
practicable date with any request under the HSR Act for additional information,
documents, or other material received by such party (including the ultimate
parent entity of such party) or any of its subsidiaries from the Federal Trade
Commission or the Department of Justice or any other governmental entity in
respect of such filings or such transactions, and (iii) cooperate with the other
party in connection with any such filing and in connection with resolving any
investigation or other inquiry of any such agency or other governmental entity
under any Antitrust Laws (as defined below) with respect to any such filing or
any such transaction. Each party shall promptly inform the other party of any
communication with, and any proposed understanding, undertaking, or agreement
with, any governmental entity regarding any such filings or any such
transaction. Neither party shall participate in any meeting with any
governmental entity in respect of any such filings, investigation, or other
inquiry without giving the other party notice of the meeting and, to the extent
permitted by such governmental entity, the opportunity to attend and
participate.
(b) Each of Heafner and the Company shall use all commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
governmental entity with respect to the transactions contemplated by this
Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, and if by
mutual agreement Heafner and the Company decide that litigation is in their best
interests, each of Heafner and the Company shall cooperate and use all
commercially reasonable efforts vigorously to contest and resist any such action
or proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or permanent
(each an "Order"), that is in effect and that prohibits, prevents, or restricts
consummation of any such
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transaction. Each of Heafner and the Company shall use all commercially
reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under the HSR Act or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement.
(c) Heafner, the Company and the Company Stockholders each agree to
use all commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
practicable and to ensure that the conditions set forth in Article IV are
satisfied, insofar as such matters are within the control of any of them. In
case at any time after the Closing Date, any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties to
this Agreement shall take or cause to be taken all such necessary action,
including the execution and delivery of such further instruments and documents,
as may be reasonably requested by any party for such purposes or otherwise to
complete or perfect the transactions contemplated by this Agreement.
(d) Notwithstanding anything to the contrary in Section 3.3(a), (b)
or (c), (i) neither Heafner nor any of its Subsidiaries shall be required to
divest any of their respective businesses, product lines or assets, (ii) neither
Heafner nor any of its Subsidiaries shall be required to take or agree to take
any other action or agree to any limitation that could reasonably be expected to
have a material adverse effect on the business, assets, financial condition,
results of operations or prospects of Heafner and its Subsidiaries or of Heafner
combined with the Surviving Corporation after the Effective Time, (iii) neither
the Company nor its Subsidiaries shall be required to divest any of their
respective businesses, product lines or assets, or to take or agree to take any
other action or agree to any limitation that could reasonably be expected to
have a Company Material Adverse Effect, (iv) no party shall be required to agree
to the imposition of, or to comply with, any condition, obligation or
restriction on Heafner or any of its Subsidiaries or on the Surviving
Corporation or any of its Subsidiaries restraining or prohibiting Heafner's or
Acquisition's ownership or operation (or that of their respective Subsidiaries
or affiliates) of all or any portion of the business or assets of the Company
and its Subsidiaries, taken as a whole, or of Heafner and its Subsidiaries or
compelling Heafner or any of its Subsidiaries or affiliates to hold separate all
or any portion of the business or assets of the Company and its Subsidiaries,
taken as a whole, or of Heafner and its Subsidiaries, taken as a whole, and (v)
neither Heafner nor Acquisition shall be required to waive any of the conditions
set forth in Article IV.
(e) Each party shall give prompt notice to the other parties upon
learning of (i) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any respect or (ii) the failure by it
to comply with or satisfy in any respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(f) The Company and the Company Stockholders shall give prompt
notice to Heafner, and Heafner shall give prompt notice to the Company, of:
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(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
entity in connection with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of their knowledge, threatened against,
relating to or involving or otherwise affecting any such person or any of its
Subsidiaries (x) which if pending on the date of this Agreement would have been
required to have been disclosed pursuant to Section 2.1 or Section 2.2 with
respect to the Company and the Company Stockholders and Section 2.3 with respect
to Heafner or (y) which relate to the consummation of the transactions
contemplated by this Agreement.
SECTION 3.4. No Shopping. From the date of this Agreement until the
earlier of (i) the Closing Date and (ii) the date this Agreement is terminated
in accordance with Section 6.2, the Company and each Company Stockholder shall
not, and shall not permit any partner, director, officer or agent of the Company
or any of its Subsidiaries to, directly or indirectly, solicit or initiate,
enter into or conduct, discussions concerning, or exchange information
(including by way of furnishing information concerning the Company, any of its
Subsidiaries or any of their respective businesses) or enter into any
negotiations concerning, or favorably respond to any inquiries or solicit,
entertain or agree to any proposals for, the acquisition of the assets of, or
any substantial part thereof, or a merger involving, the Company or any of its
Subsidiaries or the transfer of all or a substantial part of the capital stock
of the Company or any of its Subsidiaries to any person other than Heafner or
one of its affiliates or the formation of any joint venture or strategic
alliance involving the Company or any of its Subsidiaries. In addition, during
such time period, neither the Company nor any Company Stockholder shall
authorize, direct or knowingly permit any employee or agent of the Company or
any of its Subsidiaries to do any of the foregoing and the Company Stockholders
shall notify Heafner of the identity of any person who approaches any Company
Stockholder or the Company with respect to any of the foregoing.
SECTION 3.5. Access and Information. (a) From the date of this
Agreement until the first to occur (i) of the Closing Date and (ii) the
termination of this Agreement in accordance with Section 6.2, the Company and
its Subsidiaries shall permit Heafner, its financing parties and their
respective representatives to make such investigation of the business,
operations and properties of the Company and its Subsidiaries as Heafner or such
financing parties deem reasonably necessary in connection with the transactions
contemplated by this Agreement and the financing thereof. Such investigation
shall include reasonable access to the respective directors, officers,
employees, agents and representatives (including legal counsel and independent
accountants) of the Company and its Subsidiaries and the properties, books,
records and commitments of the Company and its Subsidiaries. The Company shall
furnish Heafner and its representatives with such financial, operating and other
data and information, and copies of documents with respect to the Company and
its Subsidiaries or any of the transactions contemplated by this Agreement, as
Heafner or such financing parties shall from time to time reasonably request.
Such access and investigation shall be made upon reasonable notice and at
reasonable places and times, and shall not unreasonably disrupt the personnel
and operations of
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the Company and its Subsidiaries. All requests for such access shall be made
only to such representatives of the Company as are listed in Section 3.5 of the
Company Disclosure Schedule, which representatives shall be solely responsible
for coordinating all such requests and all such access. Such access and
information shall not in any way affect or diminish any of the representations
or warranties hereunder. Without limiting the foregoing, during such period, the
Company shall keep Heafner reasonably informed as to the business and operations
of the Company and its Subsidiaries and shall consult with Heafner as
appropriate. Heafner and the Company each agree to consult and coordinate with
each other in good faith with respect to the timing and substance of any
discussions prior to the Closing with suppliers, vendors and employees of the
Company and its Subsidiaries regarding the transactions contemplated by this
Agreement; provided that no such discussions may take place without the prior
written consent of the Company, which consent shall not be unreasonably
withheld.
(b) From the date of this Agreement until the first to occur (i) of
the Closing Date and (ii) the termination of this Agreement in accordance with
Section 6.2, Heafner shall permit the Company and its representatives to make
such investigation of the business, operations and properties of the Heafner and
its Subsidiaries as the Company deems reasonably necessary in connection with
the transactions contemplated by this Agreement. Such investigation shall
include reasonable access to the respective directors, officers, employees,
agents and representatives (including legal counsel and independent accountants)
of Heafner and its Subsidiaries and the properties, books, records and
commitments of Heafner and its Subsidiaries. Heafner shall furnish the Company
and its representatives with such financial, operating and other data and
information, and copies of documents with respect to Heafner and its
Subsidiaries or any of the transactions contemplated by this Agreement, as the
Company shall from time to time reasonably request. Such access and
investigation shall be made upon reasonable notice and at reasonable places and
times and shall not unreasonably disrupt the personnel and operations of Heafner
and its Subsidiaries. All requests for such access shall be made only to such
representatives of Heafner as are listed in Section 3.5 of the Heafner
Disclosure Schedule, which representatives shall be solely responsible for
coordinating all such requests and all such access. Such access and information
shall not in any way affect or diminish any of the representations or warranties
hereunder. Without limiting the foregoing, during such period, Heafner shall
keep the Company reasonably informed as to the business and operations of
Heafner and its Subsidiaries and shall consult with the Company as appropriate.
Heafner and the Company each agree to consult and coordinate with each other in
good faith with respect to the timing and substance of any discussions prior to
the Closing with suppliers, vendors and employees of Heafner and its
Subsidiaries regarding the transactions contemplated by this Agreement; provided
that no such discussions may take place without the prior written consent of
Heafner, which consent shall not be unreasonably withheld.
SECTION 3.6. Releases; Prior Compensation. Except as set forth in
Section 3.6 of the Company Disclosure Schedule, each Company Stockholder agrees
and acknowledges that such Company Stockholder has been paid in full for all
services rendered to the Company or any of its Subsidiaries and has no
outstanding claims against the Company, any of its Subsidiaries or Heafner for
any amounts arising because of such employment or otherwise. Except as set forth
in Section 3.6 of the Company Disclosure Schedule, each Company Stockholder
hereby releases effective as of the Closing Date the Company and each of its
Subsidiaries and their respective
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successors and affiliates from all rights such Company Stockholder may have to
acquire any securities of the Company or any of its Subsidiaries and all
actions, suits, debts, promises, agreements, damages, demands or claims of any
kind whatsoever arising from any event or action prior to the Closing Date that
any Company Stockholder had, has or may in the future have against the Company
or any of its Subsidiaries, except for the matters arising under this Agreement,
the Class B Stockholder Agreement, the Class B Registration Rights Agreement or
the Second Amended and Restated Articles or related to the transactions
contemplated hereby and thereby.
SECTION 3.7. Public Announcements. Heafner and Acquisition, on the
one hand, and the Company and the Company Stockholders, on the other hand, will
mutually agree in writing with each other before issuing, and provide each other
the opportunity to review and comment upon, any press release or other public
statements with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation.
SECTION 3.8. Tax Matters.
(a) Transfer Taxes. The Company Stockholders shall be responsible
for all transfer, excise, stamp, sales, use, recording or similar taxes or fees
arising out of the sale, transfer, conveyance or assignment of the shares of
Company Capital Stock by the Company Stockholders pursuant to this transaction
and the transactions contemplated hereby.
(b) Responsibility for Company Taxes.
(i) Notwithstanding any other provision of this Agreement or the
Class B Stockholder Agreement, the Class B Registration Rights Agreement or the
Second Amended and Restated Articles, but subject to all of the limitations and
other provisions set forth in Section 5.2, in the event that the Closing occurs,
the Company Stockholders shall be liable for and shall indemnify Heafner and the
Surviving Corporation for taxes of the Company or any of its Subsidiaries for
any taxable years or periods that end on or before the Closing Date and, with
respect to any taxable years or periods beginning before and ending after the
Closing, the portion of such taxable years ending on and including the Closing
Date but only to the extent such taxes exceed the aggregate amount accrued (to
the extent such accruals are consistent with past practice) for taxes on the
Closing Date Financial Statement.
(ii) Notwithstanding any other provision of this Agreement or the
Class B Stockholder Agreement, the Class B Registration Rights Agreement or the
Second Amended and Restated Articles, but subject to all of the limitations and
other provisions set forth in Section 5.2, in the event that the Closing occurs,
Heafner and the Surviving Corporation shall be liable for and shall indemnify
the Company Stockholders for taxes of the Surviving Corporation or any
Subsidiaries of the Company for any taxable years or periods that begins after
the Closing Date and, with respect to any taxable years or periods beginning
before and ending after the Closing, the portion of the taxable years beginning
on the day after the Closing Date.
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(iii) For purposes of subparagraphs (b)(i) and (b)(ii) above,
whenever it is necessary to determine the liability for taxes of the Surviving
Corporation for a portion of a taxable year or period that begins before and
ends after the Closing Date, the determination of such taxes for the portion of
the year or period ending on, and the portion of the year or period beginning
after, the Closing Date, shall be determined by assuming that the Surviving
Corporation had a taxable year or period which ended at the close of business on
the Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for depreciation, shall be
apportioned based on the number of days in the year elapsed to and including the
Closing Date.
(c) Tax Treatment. Any payment by Heafner or any Company Stockholder
under this Section 3.8 will be treated for tax purposes as an adjustment (an
increase or a reduction) to the Merger Consideration.
(d) Filing of Returns. All tax returns with respect to the Company
(i) shall, to the extent required to be filed on or before the Closing Date
(taking into account any valid extensions), be caused by the Company
Stockholders to be filed by the Company and its Subsidiaries when due in
accordance with all applicable laws and (ii) shall, as of the time of filing,
correctly reflect in all material respects the facts regarding the income,
business, assets, operations, activities and status of the Company and any other
information required to be shown therein.
(e) Cooperation in Tax Matters.
After the Closing Date, Heafner and each Company Stockholder shall:
(i) assist in all reasonable respects (and cause their
respective affiliates to assist) the other party in preparing any tax
returns or reports which such other party is responsible for preparing and
filing in accordance with this Section 3.8;
(ii) cooperate in all reasonable respects in preparing for any
audits of, or disputes with taxing authorities regarding, and tax returns
of the Company or any of its Subsidiaries and the Surviving Corporation;
(iii) make available to the other and to any taxing authority
as reasonably requested all information, records and documents relating to
taxes of the Company or any of its Subsidiaries and the Surviving
Corporation;
(iv) provide timely notice to the other in writing of any
pending or threatened tax audit or assessments of the Company or any of
its Subsidiaries and the Surviving Corporation for taxable periods for
which the other may have a liability under this Section 3.8; and
(v) furnish the other with copies of all correspondence
received from any taxing authority in connection with any tax audit or
information request with respect to any such taxable period.
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(f) Tax Audits and Assessments.
(i) Heafner shall notify the Company Stockholders in writing upon
receipt by Heafner or the Surviving Corporation of notice of any pending or
threatened Federal, state, local or foreign tax audits or assessments which may
affect the tax liabilities of the Surviving Corporation for which the Company
Stockholders would be required to indemnify Heafner and the Surviving
Corporation. The Company Stockholders shall have the right to full and active
participation in all aspects of, and consent (which consent shall not be
unreasonably withheld taking into consideration all facts and circumstances that
affect any party with respect to such tax matter or any other tax matter) to,
the resolution of any such tax audit or assessment.
(ii) The Company Stockholders shall notify Heafner in writing upon
receipt by any of the Company Stockholders of notice of any pending or
threatened federal, state, local or foreign tax audits or assessments which may
affect the tax liabilities of the Company or any of its Subsidiaries for which
Heafner and the Surviving Corporation would be required to indemnify the Company
Stockholders. Heafner shall have the right to full and active participation in
all aspects of, and consent (which consent shall not be unreasonably withheld
taking into consideration all facts and circumstances that affect any party with
respect to such tax matter or any other tax matter) to, the resolution of any
such tax audit or assessment.
(g) Activities between Signing and Closing. From the date hereof
until the Closing, without the prior written consent of Heafner, the Company
Stockholders shall cause the Company and each of its Subsidiaries not to make or
change any tax election, change any annual tax accounting period, adopt or
change any method of tax accounting, file any amended tax return, enter into any
closing agreement, settle any tax claim or assessment, surrender any right to
claim a tax refund, consent to any extension or waiver of the limitations period
applicable to any tax claim or assessment or take or omit to take any other
action, if any such other action or omission would have the effect of materially
increasing the tax liability of the Company or any of its Subsidiaries.
SECTION 3.9. Other Documents. At the Closing, Heafner and the
Company Stockholders will execute and deliver the Escrow Agreement, the Class B
Stockholder Agreement and the Class B Registration Rights Agreement.
SECTION 3.10. Officers and Directors. The Company Stockholders will
cause all of the directors and corporate officers of the Company and its
Subsidiaries to relinquish (effective no later than immediately prior to the
Effective Time) such titles but such actions shall not affect their employment
contracts or their employment capacities as employees of the Company.
SECTION 3.11. Pending Heafner Acquisition. Within two days after the
date of this Agreement, Heafner will make available to the Company Stockholders
documents and financial information concerning a pending acquisition by Heafner
of another business (the "Pending Acquisition Company") (with respect to which
there is a letter of intent dated December 5, 1997 (the "Pending Acquisition"))
that Heafner deems relevant to, or that the Company Stockholders may reasonably
request in connection with, the determination referred to in Section 6.2(a)(v).
Following the execution of this Agreement but prior to the Closing, the Company
shall have the right to inquire of Heafner as to the status of the Pending
Acquisition and, upon any such inquiry,
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Heafner shall promptly disclose on a confidential basis such status to the
Company and shall provide any details with respect to any anticipated delays in
the consummation of the Pending Acquisition that would affect the transactions
contemplated hereby or the financing contemplated by Section 3.14.
SECTION 3.12. Company Confidential Information; Non-Competition.
(a) Confidential Information. Each Company Stockholder recognizes
and hereby acknowledges that, as a stockholder and/or senior executive of the
Company, such Company Stockholder knows of, and has been exposed to,
confidential business information concerning the Company's and its Subsidiaries'
information, ideas, know how, trade secrets, processes, computer software,
methods, practices, techniques, technical plans, customer lists, pricing
techniques and information, marketing plans, financial information, and all
other compilations of information that relate to the Company's and its
Subsidiaries' businesses and their current and prospective customers ("Company
Confidential Information"). Each Company Stockholder recognizes and hereby
acknowledges that such Company Confidential Information is a valuable asset of
the Company and its Subsidiaries. Each Company Stockholder agrees to safeguard
such Company Confidential Information for the exclusive benefit of the Company
and its affiliates and agrees that, after the Closing, such Company Stockholder
will not disclose, distribute or publish such Company Confidential Information
to any person, company, business or corporation (other than to the Company and
its affiliates); provided that the term "Company Confidential Information" does
not include information which (i) is or becomes generally available to the
public other than as a result of a disclosure by such Company Stockholder in
violation of this Agreement, (ii) was within the possession of such Company
Stockholder prior to its being furnished to such Company Stockholder by or on
behalf of the Company, provided that the source of such information was not
known by such Company Stockholder to be bound by an agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information, or (iii) becomes available to
such Company Stockholder on a non-confidential basis from a source other than
the Company, provided that such source was not known by such Company
Stockholder, after reasonable inquiry, to be bound by an agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information.
(b) Covenant Not To Compete. (i) Each Company Stockholder (other
than the Management Stockholders (as defined below in Section 3.12(b)(ii))
acknowledges and recognizes such Company Stockholder's possession of
Confidential Information and acknowledges and recognizes the highly competitive
nature of the business of the Company, its Subsidiaries, Heafner and their
respective affiliates. Accordingly, in consideration of Heafner entering into
this Agreement, the transactions contemplated by this Agreement and the premises
contained herein, such Company Stockholder agrees that, during the four-year
period commencing on the Closing Date and ending on the fourth anniversary of
the Closing Date, such Company Stockholder will not, for any reason whatsoever,
either individually or as an officer, director, stockholder, partner, agent or
principal or another business or firm, and will cause such Company Stockholder's
directors, officers, stockholders, partners, employees, agents and
representatives not to, directly or indirectly (1) engage in any manner in the
United States in the businesses of wholesale distribution of tires, custom
wheels or tire dealer supplies or in the retail businesses of tire sales,
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tire installations or automotive services, (2) divert, take away or solicit, or
attempt to divert, take away or solicit any businesses or individuals that were
customers of the Company, the Surviving Corporation, Heafner or their respective
affiliates, (3) contact or communicate with any employee of the Company, the
Surviving Corporation, Heafner or their respective affiliates for the purpose of
inducing or otherwise encouraging such employee to terminate his or her
employment with such person, or (4) assist others in engaging in any of the
foregoing actions described in clauses (1), (2) or (3) above.
(ii) Each Management Stockholder agrees, for so long as such
Management Stockholder is employed by the Company and during the Non-Competition
Period (as defined below) applicable to such Management Stockholder, in
consideration of the transactions contemplated by this Agreement, not to:
(A) directly or indirectly, engage or invest in, own, manage,
operate, control or participate in the ownership, management, operation or
control of, be employed by, associated or in any manner connected with, or
render services or advice to, any Competing Business (as defined below);
provided, however, that such Management Stockholder may invest in the
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if (x) such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended, and (y)
such Management Stockholder does not beneficially own (as defined in Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended)
in excess of 1% of the outstanding capital stock of such enterprise;
(B) directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor
(whether paid or unpaid), stockholder, partner or in any other individual
or representative capacity whatsoever, either for his own benefit or for
the benefit of any other person or entity, solicit, divert or take away
any suppliers or customers of the Company or any of its Subsidiaries; or
(C) directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor
(whether paid or unpaid), stockholder, partner or in any other individual
or representative capacity whatsoever, either for his own benefit or for
the benefit of any other person or entity, either (i) hire, attempt to
hire, contact or solicit with respect to hiring, any employee of the
Company or any of its Subsidiaries, (ii) induce or otherwise counsel,
advise or encourage any employee of the Company or any of its Subsidiaries
to leave the employment of the Company or any of its Subsidiaries, or
(iii) induce any representative or agent of the Company or any of its
Subsidiaries to terminate or modify its relationship with the Company or
any such Subsidiary; unless, in the case of clause (A), (B) or (C) above,
prior written approval has been granted by Heafner's Board of Directors.
For purposes of this Section 3.12(b)(ii), "Non-Competition Period" shall mean,
with respect to a Management Stockholder, (i) if such Management Stockholder is
terminated for Cause (as
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defined in such Management Stockholder's employment agreement as of the date
hereof with the Company) or voluntarily terminates his employment under the
employment agreement between such Management Stockholder and the Company, a
period of two years immediately following the date of termination of employment
(unless such period is extended, as provided elsewhere in such employment
agreement), and (ii) if such Management Stockholder is terminated without Cause,
a period of one year immediately following the date of termination employment
(unless such period is extended, as provided elsewhere in such employment
agreement). For purposes of this Section 3.12(b)(ii), "Management Stockholder"
shall mean each of Armistead Burwell, Jr., William E. Berry, Leon R. Ellin and
Richard P. Johnson. For purposes of this Section 3.12(b)(ii), "Competing
Business" with respect to any Management Stockholder shall mean any individual,
business, firm, company, partnership, joint venture, organization, or other
entity engaged in the wholesale distribution of name brand or private label
automobile tires, custom automobile wheels, or tire dealer supplies in the
states of Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee,
Alabama, and Virginia, or in any other market (domestic or international) in
which the Company or any of its Subsidiaries does business at any time during
such Management Stockholder's employment with the Company.
(c) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Section 3.12 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Company
Stockholders and Heafner consider the restrictions contained in this Section
3.12 to be reasonable for the purposes of preserving the Company's goodwill and
proprietary rights, if any particular provision of this Section 3.12 shall be
adjudicated to be invalid or unenforceable, such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. It
is expressly understood and agreed that, although the Company Stockholders and
Heafner consider the restrictions contained in Section 3.12 to be reasonable, if
a final determination is made by a court of competent jurisdiction that the time
or territory or any other restriction contained in this Section 3.12 is
unenforceable against any Company Stockholder, the provisions of this 3.12 shall
be deemed amended to apply as to such maximum time and territory and to such
maximum extent as such court may judicially determine or indicate to be
enforceable.
(d) Remedies. The parties acknowledge that Heafner's damages at law
would be an inadequate remedy for the breach by any Company Stockholder of any
provision of this Section 3.12, and agree in the event of such breach that
Heafner may obtain temporary and permanent injunctive relief restraining such
Company Stockholder from such breach, and, to the extent permissible under
applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained in
this Agreement shall be construed as prohibiting Heafner from pursuing other
remedies available at law or equity for such breach or threatened breach of this
Section 3.12 of this Agreement.
(e) Acknowledgment. Each Company Stockholder acknowledges that such
Company Stockholder is entering into the covenants contained in this Section
3.12, inter alia, due to such Company Stockholder's position, prior to the
Closing Date, as a stockholder of the Company.
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SECTION 3.13. Indemnification. (a) For six years after the Effective
Time, Heafner will cause the Surviving Corporation to indemnify and hold
harmless the present and former officers, directors, employees and agents of the
Company and its Subsidiaries in respect of acts or omissions occurring on or
prior to the Effective Time to the extent provided under the Company's
certificate of incorporation and bylaws in effect on the date hereof; provided
that such indemnification shall be subject to any limitation imposed from time
to time under applicable law. For three years after the Effective Time, Heafner
will cause the Surviving Corporation to provide officers' and directors'
liability insurance in respect of acts or omissions occurring on or prior to the
Effective Time covering each such person currently covered by the Company's
officers' and directors' liability insurance policy on terms substantially
similar to those of such policy in effect on the date hereof, provided that in
satisfying its obligation under this Section 3.13, Heafner shall not be
obligated to cause the Surviving Corporation to pay premiums in excess of the
amount per annum the Company paid in its last full fiscal year, which amount has
been disclosed to Heafner, and if the Surviving Corporation is unable to obtain
the insurance required by this Section 3.13, it shall obtain as much comparable
insurance as possible for an annual premium equal to such maximum amount.
(b) In the event the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 3.13.
(c) The obligations of Heafner and the Surviving Corporation under
this Section 3.13 shall not be terminated or modified in such a manner as to
adversely affect any present or former officer, director, employee or agent to
whom this Section 3.13 applies without the consent of each such affected person
(it being expressly agreed that the present or former officers, directors,
employees and agents to whom this Section 3.13 applies shall be third-party
beneficiaries of this Section 3.13).
(d) Heafner understands that the Company has entered into
contractual indemnification arrangements with each of its current directors, a
list of which arrangements is set forth in Section 3.13 of the Company
Disclosure Schedule and true and correct copies of which have previously been
delivered to Heafner.
SECTION 3.14. Financing Arrangement. (a) Heafner shall use its
commercially reasonable efforts to obtain adequate financing to enable it to
consummate the transactions contemplated by this Agreement, all on terms
satisfactory to Heafner and to the Company. Following the execution of this
Agreement but prior to Closing, the Company shall have the right to inquire of
Heafner as to the status of any proposed financing arrangement contemplated by
this Section 3.14 and, upon any such inquiry, Heafner shall promptly disclose on
a confidential basis such status to the Company and shall provide any details
with respect to any anticipated delays affecting such proposed financing
arrangement.
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(b) The Company and the Company Stockholders acknowledge that
Heafner intends to obtain the financing necessary to consummate the Merger and
the Pending Acquisition (including the refinancing of existing indebtedness of
Heafner, the Company, the Pending Acquisition Company and their respective
subsidiaries) through borrowings under senior bank facilities (the "Senior
Facilities") and the placement and sale of unsecured, "high yield" notes (the
"High Yield Notes"). The Company and the Company Stockholders agree to provide,
and to cause their Representatives (as defined below) to provide, reasonable
cooperation and assistance in connection with Heafner's efforts to arrange the
Senior Facilities and the placement and sale of the High Yield Notes. Without
limiting the generality of the foregoing, the Company and the Company
Stockholders acknowledge and agree that certain financial and other information
(including the financial statements referred to in Section 2.1(e)) concerning
the Company and its Subsidiaries can and will be included in a "confidential
offering memorandum" that will be sent by the placement agent for the High Yield
Notes to potential purchasers thereof. Heafner shall use its commercially
reasonable efforts to prepare and finalize a "preliminary confidential offering
memorandum" for the High Yield Notes by no later than the date that is 30 days
after the date of this Agreement.
SECTION 3.15. Confidentiality. (a) From the date of this Agreement
until the first to occur of (i) the Closing Date and (ii) the third anniversary
of the termination of this Agreement in accordance with Section 6.2, the Company
and Heafner each agree to treat any information, both oral and written (herein
collectively referred to as the "Confidential Material"), received by such party
(hereinafter referred to as the "Receiving Party") concerning the other party,
whether prepared by such other party, its Representatives (as defined below) or
otherwise, and irrespective of the form of communication, which is furnished by
or on behalf of such other party (hereinafter referred to as the "Delivering
Party") in accordance with the provisions of this Agreement, and to take or
abstain from taking certain other actions as hereinafter set forth. As used in
this Section 3.15, a party's "Representatives" shall include the directors,
officers, stockholders, employees, agents, partners or advisors of such party
(including, without limitation, attorneys, accountants, consultants, bankers and
financial advisors) and those of such party's stockholders, subsidiaries,
affiliates and financiers and potential financiers.
The term "Confidential Material" also shall be deemed to include all
notes, analyses, compilations, studies, interpretations or other documents
prepared by the Receiving Party or its Representatives which contain, reflect or
are based upon, in whole or in part, the information furnished to the Receiving
Party or its Representatives by the Delivering Party or its Representatives
pursuant hereto. The term "Confidential Material" does not include information
which (i) is or becomes generally available to the public other than as a result
of a disclosure by the Receiving Party or its Representatives in violation of
this Agreement, (ii) was within the possession of the Receiving Party or its
Representatives prior to its being furnished to the Receiving Party or its
Representatives by or on behalf of the Delivering Party or its Representatives,
provided that the source of such information was not known by the Receiving
Party or its Representatives to be bound by an agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Delivering
Party or any other party with respect to such information, or (iii) becomes
available to the Receiving Party or its Representatives on a non-confidential
basis from a source other than the Delivering Party, provided that such source
was not known by the Receiving Party or its Representatives, after reasonable
inquiry, to be
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bound by an agreement with or other contractual, legal or fiduciary obligation
of confidentiality to the Delivering Party or any other party with respect to
such information.
(b) Except as otherwise provided herein, each of Heafner and the
Company agrees that it shall use the other party's Confidential Material solely
for the purpose of evaluating the transactions contemplated by this Agreement
and for no other purpose, that it shall not use the other party's Confidential
Material in connection with the operation of its own business, that the other
party's Confidential Material will be kept confidential and that such party and
its Representatives will not disclose any of the other party's Confidential
Material in any manner whatsoever; provided that a Receiving Party and its
Representatives may make any disclosure of Confidential Material (i) to which
the Delivering Party gives its prior written consent, (ii) to its
Representatives who need to know the Confidential Information for the purpose of
evaluating the transactions contemplated by this Agreement and who (excluding
attorneys) agree in writing to be bound by the terms of this Section 3.15 to the
same extent as if they were parties hereto (other than (A) with respect to
Sections 3.15(e) and 3.15(f), which shall not be binding upon any of the
auditors, attorneys, banks, financing sources or third party advisors of the
Receiving Party, and (B) with respect to Section 3.15(g), which shall not be
binding upon any Representatives of the Receiving Party), and (iii) as required
by law, government regulation, court order or other lawful process. Each
Receiving Party agrees to undertake reasonable precautions to safeguard and
protect the confidentiality of the Delivering Party's Confidential Material, to
accept responsibility for any breach of this Agreement by any of its
Representatives, and at its sole expense to take all reasonable measures
(including but not limited to court proceedings) to restrain its Representatives
from prohibited or unauthorized disclosure or uses of the Delivering Party's
Confidential Material.
Neither party shall disclose, either directly or indirectly, to any
manufacturer or customer of the other party any aspect of the transactions
contemplated by this Agreement or the potential for any such transaction. In
addition, except as otherwise provided herein, each Receiving Party agrees that,
without the prior written consent of the Delivering Party, it will not disclose
to any other person the fact that the Delivering Party's Confidential Material
has been made available to such party, that discussions or negotiations are
taking place concerning the Agreement or any of the terms, conditions or other
facts with respect thereto (including the status thereof). It is understood and
agreed that nothing contained herein shall be deemed to inhibit, impair or
restrict Heafner's ability or the ability of its Representatives to have
discussions or negotiations with other persons for the purposes of discussing or
negotiating potential financing of the transactions contemplated hereby as long
as each of such persons agrees in writing to be bound by the terms of this
Section 3.15 (other than potential purchasers of the High Yield Notes). It is
further understood and agreed that in any discussions with third parties
regarding the transactions contemplated by this Agreement (including any
discussions pursuant to Section 3.5 or discussions arising as a result of a
breach of this Section 3.15), Heafner and the Company, together with their
respective Representatives, shall characterize such transactions as a "merger of
equals" and not as an acquisition by one party of the other party.
(c) In the event that a Receiving Party or any of its
Representatives is requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) to disclose any of the
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Delivering Party's Confidential Material, it shall provide the Delivering Party
with prompt written notice of any such request or requirement so that the
Delivering Party may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Section 3.15. If, in the absence of
a protective order or other remedy or the receipt of a waiver by the Delivering
Party, the Receiving Party or any of its Representatives are nonetheless, upon
the advice of counsel, legally compelled to disclose the Delivering Party's
Confidential Material to any tribunal or else stand liable for contempt or
suffer other censure or penalty, the Receiving Party or its Representatives may,
without liability hereunder, disclose to such tribunal only that portion of the
Delivering Party's Confidential Material which such counsel advises such party
is legally required to be disclosed, provided that it exercises its reasonable
best efforts (at the Delivering Party's reasonable cost and expense) to preserve
the confidentiality of the Delivering Party's Confidential Material, including
by cooperating with the Delivering Party to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
the Delivering Party's Confidential Material by such tribunal.
(d) In the event this Agreement is terminated pursuant to Section
6.2 hereof, each Receiving Party will promptly deliver to the Delivering Party
all Confidential Material (and all copies thereof) furnished to such Receiving
Party or its Representatives by or on behalf of the Delivering Party pursuant
hereto; provided that any portion of documentation prepared solely by a
Receiving Party or its Representatives in connection with the evaluation of the
transactions contemplated hereby, including, without limitation,
computer-generated information, analyses, compilations, studies, word
processing, visual or auditory records or recordings, that contains or is
derived from the Delivering Party's Confidential Material shall be destroyed by
such party (and, at the request of the Delivering Party, the Receiving Party
shall certify in writing to the Delivering Party as to such destruction).
Notwithstanding the return of the Delivering Party's Confidential Material, each
Receiving Party and its Representatives will continue to be bound by its
obligations of confidentiality and other obligations hereunder.
(e) From the date of this Agreement until the earlier of (1) the
Closing Date and (2) the first anniversary of the termination of this Agreement
in accordance with Section 6.2, each of the Company and Heafner hereby agrees
not to solicit for employment, offer employment to, or employ or hire in any
manner any person who (x) is employed by the other party or one of its
Subsidiaries at any time from and after the date hereof and prior to the
termination of this Agreement in accordance with Section 6.2 and (y) whose total
annual compensation is then in excess of $25,000; provided, however, that the
foregoing restriction shall not apply with respect to any such person whose
employment is involuntarily terminated by such other party.
(f) The parties agree and acknowledge that each of the Company and
Heafner currently has employment agreements with various members of such party's
management that contain covenants not to compete against such party following
termination of employment. Each of the Company and Heafner agrees at all times
to respect such covenants of which such party has knowledge (after reasonable
inquiry), and not to take any actions that may violate or conflict with such
covenants of which such party has knowledge (after reasonable inquiry), to the
extent that such party engages in discussions with any such employees following
the termination of their employment with such other party for any reason.
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(g) From the date of this Agreement until the earlier of (i) the
Closing Date and (ii) the first anniversary of the termination of this Agreement
in accordance with Section 6.2, neither the Company nor Wingate Partners II,
L.P. nor any affiliate of either of them shall, directly or indirectly, solicit
or initiate, enter into or conduct, discussions concerning, or exchange
information or enter into any negotiations concerning, the acquisition of the
capital stock or assets of, or a merger involving, the Pending Acquisition
Company regarding a possible acquisition transaction; provided that the
foregoing restriction shall be void and of no force and effect if the Pending
Acquisition Company currently conducts any of its operations in the Company's
current market area (which area consists of Maryland, Virginia, North Carolina,
Tennessee, South Carolina, Georgia, Alabama, Florida, Mississippi, West
Virginia, Delaware and Kentucky).
(h) It is further understood and agreed that money damages would not
be a sufficient remedy for any breach of this Section 3.15 by a Receiving Party
or any of its Representatives and that the Delivering Party shall be entitled to
equitable relief, including injunction and specific performance, as a remedy for
any such breach. Such remedies shall not be deemed to be the exclusive remedies
for a breach by a Receiving Party of this Section 3.15 but shall be in addition
to all other remedies available at law or equity to the Delivering Party. No
failure or delay by the Delivering Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.
SECTION 3.16. Disclosure Supplements. (a) From time to time prior to
the Closing, the Company and the Company Stockholders shall promptly supplement
their disclosure to Heafner with respect to (i) any matter arising after the
date of this Agreement that, if existing or occurring on or prior to the date of
this Agreement, would have been required to be set forth or described in the
Company Disclosure Schedule or (ii) any information with respect to any matter
arising after the date of this Agreement that is necessary to complete or
correct any information in such Company Disclosure Schedule or in any
representation and warranty of the Company and the Company Stockholders set
forth in Section 2.1 that has been rendered inaccurate thereby. Upon the
delivery of such supplement to Heafner, the relevant representations and
warranties set forth in Section 2.1 and the relevant portions of the Company
Disclosure Schedule shall be deemed to have been amended by such additional
information and, if such additional information set forth in such supplement
(together with any additional information set forth in any prior supplement)
reveal facts, events or circumstances that, individually or in the aggregate,
could reasonably be expected to have a Company Material Adverse Effect, then the
condition stated in Section 4.1(a) shall be deemed not to have been satisfied
and this Agreement may be terminated by Heafner in accordance with the
provisions of Section 6.2(a)(iii), subject to the cure period specified therein;
provided that, if this Agreement is not so terminated and thereafter the Closing
occurs, then all rights to seek indemnification pursuant to Section 5.1(a) of
this Agreement based upon such additional information set forth in such
supplement and the alleged breach of any representation or warranty so amended
shall be deemed to have been waived.
(b) From time to time prior to the Closing, Heafner shall promptly
supplement its disclosure to the Company and the Company Stockholders with
respect to (i) any matter arising after the date of this Agreement that, if
existing or occurring on or prior to the date of this Agreement, would have been
required to be set forth or described in the Heafner Disclosure
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Schedule or (ii) any information with respect to any matter arising after the
date of this Agreement that is necessary to complete or correct any information
in such Heafner Disclosure Schedule or in any representation and warranty of
Heafner set forth in Section 2.3 that has been rendered inaccurate thereby. Upon
the delivery of such supplement to the Company and the Company Stockholders, the
relevant representations and warranties set forth in Section 2.3 and the
relevant portions of the Heafner Disclosure Schedule shall be deemed to have
been amended by such additional information and, if such additional information
set forth in such supplement (together with any additional information set forth
in any prior supplement) reveal facts, events or circumstances that,
individually or in the aggregate, could reasonably be expected to have a Heafner
Material Adverse Effect, then the condition stated in Section 4.2(a) shall be
deemed not to have been satisfied and this Agreement may be terminated by the
Company in accordance with the provisions of Section 6.2(a)(iv), subject to the
cure period specified therein; provided that, if this Agreement is not so
terminated and thereafter the Closing occurs, then all rights to seek
indemnification pursuant to Section 5.1(b) of this Agreement based upon such
additional information set forth in such supplement and the alleged breach of
any representation or warranty so amended shall be deemed to have been waived.
(c) Nothing set forth in this Section 3.16 shall relieve any party
of any liability for a breach by such party of a covenant or agreement of such
party set forth in this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Obligations of Heafner and Acquisition.
The obligations of Heafner and Acquisition to perform this Agreement are subject
to the satisfaction of each of the following conditions unless waived on or
prior to the Closing Date by Heafner:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Company and the Company Stockholders made in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as if made on and as of the Closing
Date (except for those representations and warranties expressly made as of a
particular date, which shall be true and correct only as of such date); provided
that the foregoing condition shall be deemed satisfied if the facts, events or
circumstances underlying any inaccuracies in any such representations and
warranties as of the Closing Date (without giving effect to any "Company
Material Adverse Effect" or other material adverse effect qualification or any
other materiality qualification or similar qualifications contained therein),
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect, and the Company and the Company Stockholders
shall have performed and complied with in all material respects all covenants
and agreements required to be performed or complied with on or prior to the
Closing Date.
(b) Certificates. Heafner shall have received a certificate of the
chief executive officer and the chief financial officer of the Company and a
certificate of each Company Stockholder, in each case in customary form
reasonably satisfactory to the parties.
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(c) Opinion of Counsel. Heafner shall have received the opinion
dated the Closing Date of counsel to the Company Stockholders and the Company,
in customary form reasonably satisfactory to the parties.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger and the transactions contemplated by this Agreement
under the HSR Act shall have been terminated or shall have expired.
(e) No Legal Bar. No action or proceeding by or before any
governmental authority or agency shall be pending or threatened challenging or
seeking to restrain or prohibit the Merger or any of the transactions
contemplated by this Agreement, the Escrow Agreement, the Class B Stockholder
Agreement, the Class B Registration Rights Agreement or the Second Amended and
Restated Articles. No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary injunction, permanent injunction or
other order enacted, entered, promulgated, enforced or issued by any
governmental authority or agency or other legal restraint or prohibition
preventing the transactions contemplated by this Agreement, the Escrow
Agreement, the Class B Stockholder Agreement, the Class B Registration Rights
Agreement or the Second Amended and Restated Articles shall be in effect.
(f) Consents, Amendments and Terminations. Heafner shall have
received duly executed and delivered copies of all waivers, consents,
terminations and approvals listed in Section 2.1(d) of the Company Disclosure
Schedule, all in form and substance reasonably satisfactory to Heafner. Other
than the filing of the Certificate of Merger with the Delaware Secretary of
State, all consents, notices, authorizations and approvals legally required for
the consummation of the Merger and the transactions contemplated by this
Agreement, the Escrow Agreement, the Class B Stockholder Agreement, the Class B
Registration Rights Agreement and the Second Amended and Restated Articles shall
have been filed, occurred or been obtained.
(g) Due Diligence. Heafner and its representatives shall have
completed a due diligence review of the condition (financial or otherwise),
assets, liabilities, operations and business of, and any other matters relating
to, the Company and its Subsidiaries, and the results of such due diligence
shall be satisfactory to Heafner; provided that the condition set forth in this
Section 4.1(g) shall be deemed to have been satisfied unless Heafner notifies
the Company and the Company Stockholders in writing by the close of business on
March 27, 1998 that the results of such due diligence are not satisfactory to
Heafner.
(h) Escrow, Stockholder and Registration Rights Agreements;
Investment Letter. Each of the Company Stockholders shall have duly executed and
delivered to Heafner the Escrow Agreement in customary form as agreed to by the
parties and the Escrow Agent, the Class B Stockholder Agreement, the
Registration Rights Agreement and the Investment Letter, which Investment Letter
shall be in substantially the form of Exhibit C.
(i) Share Certificates and Corporate Records. Heafner shall have
received certificates representing all issued and outstanding shares of Company
Capital Stock, together with stock powers duly endorsed in blank, and Heafner
shall have received the complete stock ledgers, minute books and similar
corporate records of the Company.
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(j) Financial Statements. Heafner shall have received an unaudited
balance sheet of the Company and related statements of income and retained
earnings and cash flows for the most recent month end that is at least 20 days
prior to the Closing Date (the "Closing Date Financial Statement"), certified by
the chief executive officer and chief financial officer of the Company.
(k) Financing. Heafner shall have received adequate financing to
consummate the transactions contemplated by this Agreement, all on terms
satisfactory to Heafner and the Company; provided that the terms of such
financing shall be deemed to be satisfactory to Heafner and the Company if (i)
the gross proceeds from such financing shall be sufficient to consummate the
transactions contemplated by this Agreement; (ii) the interest rate on any
revolving indebtedness included in such financing would be no more than 9.0%;
(iii) the interest rate on any other indebtedness included in such financing
would no more than 10.5%; and (iv) the other terms of the financing would be
reasonably customary for financings of such type (other than any requirement
that warrants or other equity securities be issued by Heafner in connection with
such financing); and provided, further, that the terms of such financing shall
also be deemed to be satisfactory to Heafner and the Company if such financing
could be obtained upon the terms listed above if (x) Heafner's existing
subordinated borrowings from The 1818 Mezzanine Fund, L.P. (the "1818 Fund")
were to remain in place following Closing (without considering the interest rate
on such subordinated borrowings for purposes of the interest rate parameters set
forth above in this subsection (k) and without issuing any equity securities
described above in this subsection (k)), and (y) the consent of the 1818 Fund,
which would be required in order to leave such subordinated borrowings in place,
could be obtained with the use of commercially reasonable efforts by Heafner.
(l) Additional Documents. Heafner shall have received such other
documents, certificates or instruments as it may reasonably request.
SECTION 4.2. Conditions of Obligations of the Company Stockholders.
The obligations of the Company and the Company Stockholders to perform this
Agreement are subject to the satisfaction of each of the following conditions
unless waived on or prior to the Closing Date by all of the Company
Stockholders:
(a) Representations, Warranties and Covenants. The representations
and warranties of Heafner made in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as if made on and as of the Closing Date (except for those representations
and warranties expressly made as of a particular date, which shall be true and
correct only as of such date); provided that the foregoing condition shall be
deemed satisfied if the facts, events or circumstances underlying any
inaccuracies in any such representations and warranties as of the Closing Date
(without giving effect to any "Heafner Material Adverse Effect" or other
material adverse effect qualification or any other materiality qualification or
similar qualifications contained therein), individually or in the aggregate,
could not reasonably be expected to have a Heafner Material Adverse Effect, and
Heafner and Acquisition shall have performed and complied with in all material
respects all covenants and agreements required to be performed or complied with
on or prior to the Closing Date.
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(b) Certificate. The Company Stockholders shall have received a
certificate of the chief executive officer and the chief financial officer of
Heafner, in customary form reasonably satisfactory to the parties.
(c) Opinion of Counsel. The Company Stockholders shall have received
the opinion dated the Closing Date of counsel to Heafner and Acquisition in
customary form reasonably satisfactory to the parties.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger and the transactions contemplated by this Agreement
under the HSR Act shall have been terminated or shall have expired.
(e) No Legal Bar. No action or proceeding by or before any
governmental authority or agency shall be pending or threatened challenging or
seeking to restrain or prohibit the Merger or any of the transactions
contemplated by this Agreement, the Escrow Agreement, the Class B Stockholder
Agreement, the Class B Registration Rights Agreement or the Second Amended and
Restated Articles. No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary injunction, permanent injunction or
other order enacted, entered, promulgated, enforced or issued by any
governmental authority or agency or other legal restraint or prohibition
preventing the transactions contemplated by this Agreement, the Escrow
Agreement, the Class B Stockholder Agreement, the Class B Registration Rights
Agreement or the Second Amended and Restated Articles shall be in effect.
(f) Consents. Other than the filing of the Certificate of Merger
with the Delaware Secretary of State, all consents, notices, authorizations and
approvals legally required for the consummation of the Merger and the
transactions contemplated by this Agreement, the Escrow Agreement, the Class B
Stockholder Agreement, the Class B Registration Rights Agreement and the Second
Amended and Restated Articles shall have been filed, occurred or been obtained.
(g) Escrow, Stockholder and Registration Rights Agreements. Heafner
shall have duly executed and delivered to the Company Stockholders the Escrow
Agreement, the Class B Stockholder Agreement and the Class B Registration Rights
Agreement.
(h) Filing of Amended and Restated Articles. The Second Amended and
Restated Articles of Incorporation of Heafner, in substantially the form
attached hereto as Exhibit D (the "Second Amended and Restated Articles"), shall
have been duly filed by Heafner with the Secretary of State of North Carolina.
(i) Financing. Heafner shall have received adequate financing to
consummate the transactions contemplated by this Agreement, all on terms
satisfactory to Heafner and the Company; provided that the terms of such
financing shall be deemed to be satisfactory to Heafner and the Company if (i)
the gross proceeds from such financing shall be sufficient to consummate the
transaction contemplated by this Agreement; (ii) the interest rate on any
revolving indebtedness included in such financing would be no more than 9.0%;
(iii) the interest rate on any other indebtedness included in such financing
would no more than 10.5%; and (iv) the other terms of the financing would be
reasonably customary for financings of such type (other than any
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requirement that warrants or other equity securities be issued by Heafner in
connection with such financing); and provided, further, that the terms of such
financing shall also be deemed to be satisfactory to Heafner and the Company if
such financing could be obtained upon the terms listed above if (x) Heafner's
existing subordinated borrowings from The 1818 Mezzanine Fund, L.P. (the "1818
Fund") were to remain in place following Closing (without considering the
interest rate on such subordinated borrowings for purposes of the interest rate
parameters set forth above in this subsection (i) and without issuing any equity
securities described above in this subsection (i)), and (y) the consent of the
1818 Fund, which would be required in order to leave such subordinated
borrowings in place, could be obtained with the use of commercially reasonable
efforts by Heafner.
(j) Due Diligence. The Company Stockholders and their
representatives shall have completed a due diligence review of the condition
(financial or otherwise), assets, liabilities, operations and business of, and
any other matters relating to, Heafner and its Subsidiaries, and the results of
such due diligence shall be satisfactory to the Company Stockholders; provided
that the condition set forth in this Section 4.2(j) shall be deemed to have been
satisfied unless the Company Stockholders notify Heafner in writing by the close
of business on March 27, 1998 that the results of such due diligence are not
satisfactory to the Company Stockholders.
(k) Financial Statements. The Company Stockholders shall have
received the audited consolidated financial statements of Heafner and its
Subsidiaries for the year ended December 31, 1997 (the "Audited Financial
Statements") and such Audited Financial Statements shall not differ in any
material respect from the unaudited financial statements for such period
referred to in Section 2.3(e)(i)(A) (the "Unaudited Financial Statements");
provided that, upon receipt of such Audited Financial Statements, such Audited
Financial Statements shall be deemed to replace for all purposes under this
Agreement the Unaudited Financial Statements.
(l) Additional Documents. The Company Stockholders shall have
received such other documents, certificates or instruments as they may
reasonably request.
ARTICLE V
Indemnity
SECTION 5.1. Indemnification.
(a) Indemnification by Company Stockholders as a Group. From and
after the Closing, the Company Stockholders, severally and not jointly,
indemnify and hold harmless Heafner and its subsidiaries, affiliates, directors,
officers, employees and other agents and representatives from and against any
and all liabilities, judgments, claims, settlements, losses, damages (excluding
punitive damages and other special damages), fees, liens, taxes, penalties,
obligations and expenses (collectively, "Losses") incurred or suffered by any
such person arising from, by reason of or in connection with:
(i) any misrepresentation by, or breach of any representation,
warranty, covenant or agreement of, the Company or the Company
Stockholders as a group contained
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in this Agreement or any certificate or other document delivered by the
Company or the Company Stockholders as a group under this Agreement;
(ii) the breach of, or failure to perform by, the Company or
the Company Stockholders as a group of any agreement made by the Company
or the Company Stockholders as a group in this Agreement; and
(iii) any and all actions, suits, proceedings, demands,
judgments, costs and reasonable legal and other expenses incident to any
of the matters referred to in clauses (i) through (ii) of this Section
5.1(a).
(b) Indemnification by Company Stockholders Individually. From and
after the Closing, and without duplication with respect to any matters within
the scope of the provisions of Section 5.1(a), each Company Stockholder,
severally and not jointly, indemnifies and holds harmless Heafner, and its
subsidiaries, affiliates, directors, officers, employees and other agents and
representatives from and against any and all Losses incurred or suffered by any
such person arising from, by reason of or in connection with:
(i) any misrepresentation by, or breach of any representation,
warranty, covenant or agreement of, such Company Stockholder individually
contained in this Agreement or in any certificate or other document
delivered by such Company Stockholder individually hereunder;
(ii) the breach of, or failure to perform by, such Company
Stockholder individually of any agreement made by such Company Stockholder
in this Agreement; and
(iii) any and all actions, suits, proceedings, demands,
judgments, costs and reasonable legal and other expenses incident to any
of the matters referred to in clauses (i) and (ii) of this Section 5.1(b).
(c) Indemnification by Heafner. From and after the Closing, Heafner
indemnifies and holds harmless the Company Stockholders, and their respective
agents and representatives, from and against any and all Losses incurred or
suffered by any such person arising from, by reason of or in connection with:
(i) any misrepresentation by, or breach of any representation,
warranty, covenant or agreement of, Heafner or Acquisition contained in
this Agreement or any certificate or other document delivered by Heafner
or Acquisition under this Agreement;
(ii) the breach of, or failure to perform by, Heafner or
Acquisition of any agreement made by it in this Agreement; and
(iii) any and all actions, suits, proceedings, demands,
judgments, costs and reasonable legal and other expenses incident to any
of the matters referred to in clauses (i) and (ii) of this Section 5.1(c).
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62
(d) Indemnification Procedures. If any party (the "Indemnified
Party") receives notice of any third-party claim or commencement of any
third-party action or proceeding (an "Asserted Liability") with respect to which
any other party hereto (an "Indemnifying Party") is obligated to provide
indemnification pursuant to Section 5.1(a), (b) or (c), the Indemnified Party
shall promptly give the Indemnifying Party notice thereof. The Indemnified
Party's failure so to notify the Indemnifying Party shall not cause the
Indemnified Party to lose its right to indemnification under this Article,
except to the extent that such failure materially prejudices the Indemnifying
Party's ability to defend against an Asserted Liability that such Indemnified
Party has the right to defend against hereunder. Such notice shall describe the
Asserted Liability in reasonable detail. The Indemnifying Party may defend
against an Asserted Liability on behalf of the Indemnified Party utilizing
counsel reasonably acceptable to the Indemnified Party, unless (i) the
Indemnified Party reasonably objects to such assumption of the defense on the
ground that counsel for such Indemnifying Party cannot represent both the
Indemnified Party and the Indemnifying Party because such representation would
be reasonably likely to result in a conflict of interest or because there may be
defenses available to the Indemnified Party that are not available to such
Indemnifying Party, (ii) the Indemnifying Party is not, in the reasonable
judgment of the Indemnified Party, capable (by reason of insufficient financial
capacity, bankruptcy, receivership, liquidation, managerial deadlock, managerial
neglect or similar events) of maintaining a reasonable defense of such action or
proceeding, or (iii) the action or proceeding seeks injunctive or other
equitable relief against the Indemnified Party. If the Indemnifying Party
defends an Asserted Liability, it shall do so at its own expense and shall not
be responsible for the costs of defense, investigative costs, attorney's fees or
other expenses incurred to defend the Asserted Liability (collectively, "Defense
Costs") of the Indemnified Party (which may continue to defend, at its own
expense). If the Indemnified Party assumes or maintains the defense of an
Asserted Liability by reason of clause (i), (ii) or (iii) above, or because the
Indemnifying Party has not elected to assume the defense, then such Indemnifying
Party shall indemnify the Indemnified Party for its reasonable Defense Costs.
The Indemnifying Party may settle any Asserted Liability only with the consent
of the Indemnified Party, which consent shall not be unreasonably withheld.
(e) Treatment of Payments. Any payment made pursuant to this Section
5.1 shall be treated as an adjustment to the Merger Consideration for income tax
purposes.
SECTION 5.2. Limitations.
(a) Expiration Date. The indemnification and reimbursement
obligations hereunder shall expire on the second anniversary of the Closing Date
(the "Expiration Date"), except (i) as to any claims for, or any claims that may
result in, any Loss for which indemnity may be sought hereunder of which the
Indemnifying Party has received written notice from the Indemnified Party on or
before the Expiration Date or (ii) as to any representations, warranties,
covenants or agreements expressly surviving such two year period as set forth in
Section 6.6.
(b) Cap. The total indemnification obligations of the Company
Stockholders (other than for claims relating to or arising out of Section
2.1(c), 2.2(a), 3.1, 3.12 or 3.15 (collectively, the "Heafner Excluded Claims"))
to Heafner pursuant to this Article V and Section 3.8 shall not exceed (i) for
all Company Stockholders in the aggregate $17,500,000 and (ii) for each Company
Stockholder an amount equal to the product of (x) $17,500,000 and (y) a
fraction, the numerator
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63
of which is the amount of the Cash Consideration received by such Company
Stockholder and the denominator of which is $18,000,000; provided that, after
the first anniversary of the Closing Date, the amount of the total
indemnification obligations of the Company Stockholders (other than for claims
relating to or arising out of Heafner Excluded Claims and other than with
respect to indemnification claims against the Company Stockholders that were
paid on or prior to such first anniversary) to Heafner pursuant to this Article
V and Section 3.8 shall not exceed an amount equal to the sum of (x) $8,750,000
and (y) the amount of all indemnification claims against the Company
Stockholders pending on such anniversary date (which sum shall not exceed (1)
$17,500,000 less (2) the aggregate amount of all payments made on or prior to
such anniversary date by the Company Stockholders with respect to
indemnification claims against the Company Stockholders). The total
indemnification obligations of Heafner to the Company Stockholders pursuant to
this Article V and Section 3.8 shall not exceed in the aggregate $17,500,000;
provided that, after the first anniversary of the Closing Date, the amount of
the total indemnification obligations of Heafner to the Company Stockholders
(other than with respect to indemnification claims against Heafner that were
paid on or prior to such first anniversary date) pursuant to this Article V and
Section 3.8 shall not exceed an amount equal to the sum of (x) $8,750,000 and
(y) the amount of all indemnification claims against Heafner pending on such
anniversary date (which sum shall not exceed (1) $17,500,000 less (2) the
aggregate amount of all payments made on or prior to such anniversary date by
Heafner with respect to indemnification claims against Heafner). Notwithstanding
anything to the contrary set forth in this Agreement, the indemnification
obligations of the Company Stockholders to Heafner with respect to Heafner
Excluded Claims shall not count towards, or be subject to, the limitations set
forth in the first sentence of this paragraph (b) or the $300,000 deductible set
forth in Section 5.2(c), and there shall be no limitation on such
indemnification obligations.
(c) Deductible. Heafner shall not be entitled to indemnification
pursuant to this Article V or Section 3.8 with respect to any claim for
indemnification (other than in connection with Heafner Excluded Claims), unless
the aggregate Losses to Heafner, with respect to all claims for indemnification
pursuant to Section 5.1(a) and (b) and Section 3.8, exceed $300,000, in which
case the Company Stockholders shall be obligated, subject to the limitations set
forth in paragraph (b) of this Section 5.2, to pay an amount equal to all such
Losses (excluding such first $300,000). The Company Stockholders shall not be
entitled to indemnification pursuant to this Article V or Section 3.8 with
respect to any claim for indemnification (other than claims relating to or
arising out of Section 2.3(c), 3.1 or 3.13), unless the aggregate Losses to the
Company Stockholders, with respect to all claims for indemnification pursuant to
Section 5.1(c) and Section 3.8, exceeds $300,000 in which case Heafner shall be
obligated, subject to the limitations set forth in paragraph (b) of this Section
5.2, to pay an amount equal to all such Losses (excluding such first $300,000).
(d) Form of Payment. (i) The sole recourse for all claims for
indemnification made against the Company Stockholders pursuant to this Article V
or Section 3.8 shall be to the Class B Stock Consideration, except with respect
to Heafner Excluded Claims and claims relating to fraudulent acts or omissions.
With respect to claims for indemnification made against the Company Stockholders
pursuant to this Article V or Section 3.8, upon the Company Stockholders
agreeing to satisfy any such claims or upon a determination of the Company
Stockholders' liability hereunder with respect to any such claims, the Company
Stockholders may satisfy any such obligations using (at their sole option)
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64
cash or shares of the Class B Stock Consideration deposited with the Escrow
Agent pursuant to the Escrow Agreement.
(ii) The sole recourse for all claims for indemnification made
against Heafner pursuant to this Article V or Section 3.8 shall be to up to
1,400,667 newly issued shares of Class B Common Stock (as reduced after the
first anniversary of the Closing Date pursuant to this Article V) (appropriately
adjusted to reflect stock splits (including reverse stock splits) of Class B
Common Stock), except with respect to fraudulent acts or omissions. With respect
to claims for indemnification made against Heafner pursuant to this Article V or
Section 3.8, upon Heafner agreeing to satisfy any such claims or upon a
determination of Heafner's liability hereunder with respect to any such claims,
such claims shall be satisfied by (at Heafner's sole option) payment of cash or
issuance and payment by Heafner of additional shares of Class B Common Stock.
(iii) Solely for purposes of satisfying and paying
indemnification obligations pursuant to this Article V and Section 3.8, each
share of Class B Common Stock being paid or issued to satisfy such
indemnification obligations shall be valued at an amount equal to $12.49
(appropriately adjusted to reflect stock splits (including reverse stock splits)
of Class B Common Stock).
(e) Tax Benefits. The amount of any and all Losses for which
indemnification is provided pursuant to this Article V and Section 3.8 shall be
(i) increased to take account of any net tax cost incurred by the Indemnified
Party arising from the receipt of indemnity payments hereunder ("grossed-up" for
taxes on such increase) and (ii) reduced to take account of any net tax benefit
realized by the Indemnified Party arising from the incurrence or payment of any
such Losses. In computing the amount of any such tax cost or tax benefit, the
Indemnified Party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any and all
Losses.
(f) Insurance Proceeds. The amount of any and all Losses for which
indemnification is provided pursuant to this Article V or Section 3.8 shall be
net of any amounts actually received by the Indemnified Party under insurance
policies with respect to such Losses. In the event that any claim for
indemnification asserted under this Article V or Section 3.8 is, or may be, the
subject of the Company's or any party's hereto insurance coverages or other
right to indemnification or contribution from any third party (a "Third Party
Contributor"), the Indemnified Party agrees to promptly notify the applicable
insurance carrier of such claim and tender defense thereof to such carrier, and
shall also promptly notify any potential Third Party Contributor. Each
Indemnified Party agrees to pursue, at the sole cost and expense of the
Indemnifying Party, such claims diligently and to reasonably cooperate, at the
sole cost and expense of the Indemnifying Party, with each such insurance
carrier and Third Party Contributor, and to make no claim for indemnification
under this Article V or Section 3.8 for a period of 180 days after making a
claim for such insurance or contribution. If insurance coverage or contribution
is denied (in whole or in part), or if no resolution of an insurance or
contribution claim shall have occurred within such 180 days, the Indemnified
Party may proceed for indemnification under this Article V or Section 3.8, and
such Indemnifying Party shall be subrogated to the rights of the Indemnified
Party against such insurance carrier or Third Party Contributor.
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(g) Sole Remedy. Upon and after the Closing, and except with respect
to matters referred to in Sections 3.12 and 3.15, the provisions of this Article
V and Section 3.8 represent the sole remedy available to any party hereto for a
misstatement or omission from any representation, or a breach of any warranty,
covenant or agreement contained in this Agreement, and, except with respect to
fraudulent acts or omissions, effective upon and after the Closing, each party
hereby unconditionally waives any other rights that they may have at law or in
equity for a misstatement or omission from any representation, or a breach of
any warranty or covenant or agreement contained in this Agreement.
SECTION 5.3. No Election Subject to Section 5.2(g), nothing
contained in this Article V or Section 3.8 shall be deemed an election of
remedies under this Agreement or limit in any way the liability of any party
under this Agreement in the event the Closing does not occur or under any other
agreement to which such party is a party relating to this Agreement, the Escrow
Agreement, the Class B Stockholder Agreement, the Class B Registration Rights
Agreement or the Second Amended or Restated Articles or the transactions
contemplated by hereby or thereby.
SECTION 5.4. Company Stockholders' Representative. Each of the
Company Stockholders hereby constitutes and appoints Wingate Management Company
II, L.P. (the "Representative") to act as its representative for all purposes
under this Article V, and the Representative agrees to accept such appointment.
The Representative shall have the authority to act on behalf of, and to bind,
each Company Stockholder for all purposes of the provisions of this Article V.
Without limiting the generality of the foregoing, each Company Stockholder
hereby irrevocably constitutes and appoints, with full power of substitution,
the Representative its true and lawful attorney-in-fact, with full power and
authority in its name, place and stead, to execute, certify, acknowledge,
deliver, file and record all agreements, certificates, instruments and other
documents and any amendment thereto, which the Representative deems necessary or
appropriate in connection with the Company Stockholders' obligations under this
Article V. Each Company Stockholder's appointment of the Representative as its
attorney-in-fact shall be deemed to be a power coupled with an interest and
still survive the incompetency, bankruptcy or dissolution of the such Company
Stockholder giving such power. No new representative may be appointed or
substituted without the prior written consent of Heafner.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement. This Agreement, the Certificate of
Merger, the Escrow Agreement, the Class B Stockholder Agreement, the Class B
Registration Rights Agreement and the Second Amended and Restated Articles and
the schedules, annexes and exhibits hereto and thereto contain the entire
agreement among the parties with respect to the transactions contemplated by
this Agreement and supersede all prior agreements or understandings among the
parties. The Letter of Intent, dated January 20, 1998, is expressly superseded,
void and no longer of any force or effect.
SECTION 6.2. Termination. (a) This Agreement shall terminate on the
first to occur of any of the following events:
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(i) the mutual written agreement of Heafner and the Company;
(ii) by written notice of Heafner or the Company to the other,
if the Closing shall not have occurred prior to the close of business on
June 15, 1998;
(iii) by written notice of Heafner to the Company, in the
event (1) the Company or any Company Stockholder shall have materially
breached any of its representations, warranties or agreements contained in
this Agreement if the Company or such Company Stockholder fails to cure
such breach within five business days following notification thereof by
Heafner or (2) the satisfaction of any condition to Heafner's obligations
under this Agreement becomes impossible or impracticable with the use of
commercially reasonable efforts if the failure of such condition to be
satisfied is not caused by a breach of this Agreement by Heafner or
Acquisition;
(iv) by written notice of the Company to Heafner, in the event
(1) Heafner shall have materially breached any of its representations,
warranties or agreements contained in this Agreement if Heafner fails to
cure such breach within five business days following notification thereof
by the Company or (2) the satisfaction of any condition to the obligations
of the Company or the Company Stockholders under this Agreement becomes
impossible or impracticable with the use of commercially reasonable
efforts if the failure of such condition to be satisfied is not caused by
a breach of this Agreement by the Company or any Company Stockholder;
(v) by written notice of the Company to Heafner, if the
Company Stockholders, in their collective determination, find the
information disclosed pursuant to Section 3.11 to be unsatisfactory (such
written notice to be submitted to Heafner by no later than the close of
business on March 27, 1998); or
(vi) by written notice of the Company to Heafner, if by the
date that is 14 days after the date of this Agreement, Heafner has not
provided the Company with copies of a "commitment" letter with respect to
the Senior Facilities from the bank or banks providing such facilities and
a "highly confident" letter from each placement agent or co-agent with
respect to the High Yield Notes, in each case in customary form for
financings of such type, with respect to the financing contemplated by
Section 3.14; provided that the termination right granted to the Company
pursuant to this Section 6.2(a) shall be deemed to be waived and expired,
if such right is not exercised by the Company within three business days
after the end of such 14-day period.
(b) Nothing in this Section shall relieve any party of any liability
for a breach of this Agreement prior to its termination. Except as aforesaid,
upon the termination of this Agreement, all rights and obligations of the
parties under this Agreement shall terminate, except their obligations under
Sections 3.1, 3.7, 3.15, 6.11 and 6.12.
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SECTION 6.3. Descriptive Headings; Certain Interpretations. (a)
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) Whenever any party makes any representation, warranty or other
statement to such party's knowledge, such party will be deemed to have made due
inquiry into the subject matter of such representation, warranty or other
statement.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to
generally accepted accounting principles refers to United States generally
accepted accounting principles; and (vii) a reference in this Agreement to an
Article, Section, Annex, Exhibit or Schedule is to the Article, Section, Annex,
Exhibit or Schedule of this Agreement.
SECTION 6.4. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and sufficient if delivered
personally or sent by facsimile (with confirmation of receipt) or by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to Heafner, to:
The J.H. Heafner Company, Inc.
814 East Main Street
P.O. Box 837
Lincolnton, NC 28093-0837
Facsimile: (704) 732-6480
Attention: President
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68
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 841-1010
Attention: Scott F. Smith
If to the Company, to:
ITCO Logistics Corporation
c/o Wingate Partners
750 N. St. Paul, Suite 1200
Dallas, Texas 75201
Facsimile: (214) 871-8799
Attention: V. Edward Easterling, Jr.
with a copy to:
Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Facsimile: (214) 651-5940
Attention: David H. Oden, Esq.
If to any Company Stockholder, to the address or facsimile number of
such Company Stockholder set forth on the signature pages of this
Agreement, with a copy to:
Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Facsimile: (214) 651-5940
Attention: David H. Oden, Esq.
or to such other address or facsimile number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective when
received or, if given by mail, when delivered at the address specified in this
Section or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
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SECTION 6.5. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
SECTION 6.6. Survival. Except as set forth in 5.2, all
representations and warranties, agreements and covenants contained in this
Agreement or in any document delivered pursuant to this Agreement or in
connection with this Agreement (unless otherwise expressly provided) shall
survive the Closing and shall remain in full force and effect until the
Expiration Date; provided, that the representations and warranties in Sections
2.1(c), 2.2(a) and 2.3(c) and the covenants and agreements in Sections 3.1, 3.6,
3.8, 3.12, 3.13, 3.15, 6.11 and 6.12 and Article V (solely with respect to
claims regarding the foregoing sections) shall not expire on the Expiration Date
and shall survive, as set forth in such Sections or Articles, or, if not set
forth, shall survive forever or until the expiration of the applicable statute
of limitations.
SECTION 6.7. Benefits of Agreement. All of the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, including in the
case of Heafner, to its financing parties. This Agreement is for the sole
benefit of the parties hereto and not for the benefit of any third party.
SECTION 6.8. Amendments and Waivers. No modification, amendment or
waiver of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
SECTION 6.9. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
hereto without the prior written consent of the other parties; except that
Heafner may assign all of its rights hereunder to persons providing Heafner with
financing to enable it to consummate the transactions described herein. Any
instrument purporting to make an assignment in violation of this Section shall
be void.
SECTION 6.10. Enforceability. It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
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SECTION 6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
SECTION 6.12. DISPUTE RESOLUTION; CONSENT TO JURISDICTION. EACH OF
THE PARTIES TO THIS AGREEMENT AGREES TO BE BOUND BY THE PROVISIONS SET FORTH IN
ANNEX B TO THIS AGREEMENT. EACH OF THE COMPANY AND THE COMPANY STOCKHOLDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE FOR PURPOSES OF
ALL LEGAL PROCEEDINGS WHICH ARE NOT GOVERNED BY ANNEX B AND WHICH ARISE OUT OF
OR RELATE TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF
THE COMPANY AND THE COMPANY STOCKHOLDERS AGREES NOT TO COMMENCE ANY LEGAL
PROCEEDING RELATED THERETO EXCEPT IN SUCH COURT. EACH OF THE COMPANY AND THE
COMPANY STOCKHOLDERS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE IN
ANY SUCH COURT OR ANY CLAIM THAT A LEGAL PROCEEDING COMMENCED IN SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed and delivered as of the day and year first above written.
THE J.H. HEAFNER COMPANY, INC.
By: /s/ J. Michael Gaither
------------------------------------------------
Name: J. Michael Gaither
Title: Senior Vice President and General Counsel
ITCO MERGER CORPORATION
By: /s/ J. Michael Gaither
------------------------------------------------
Name: J. Michael Gaither
Title: Secretary
ITCO LOGISTICS CORPORATION
By:
------------------------------------------------
Name: V. Edward Easterling, Jr.
Title: President
COMPANY STOCKHOLDERS:
WINGATE PARTNERS II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
By: WINGATE MANAGEMENT COMPANY II, L.P.,
its general partner
By: WINGATE MANAGEMENT LIMITED, L.L.C.,
its sole general partner
By:
------------------------------------------------
V. Edward Easterling, Jr., Principal
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed and delivered as of the day and year first above written.
THE J.H. HEAFNER COMPANY, INC.
By:
------------------------------------------------
Name:
Title:
ITCO MERGER CORPORATION
By:
------------------------------------------------
Name:
Title:
ITCO LOGISTICS CORPORATION
By: /s/ V. Edward Easterling, Jr.
------------------------------------------------
Name: V. Edward Easterling, Jr.
Title: President
COMPANY STOCKHOLDERS:
WINGATE PARTNERS II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
By: WINGATE MANAGEMENT COMPANY II, L.P.,
its general partner
By: WINGATE MANAGEMENT LIMITED, L.L.C.,
its sole general partner
By: /s/ V. Edward Easterling, Jr.
------------------------------------------------
V. Edward Easterling, Jr., Principal
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----------------------------------------------------
Armistead Burwell, Jr.
1311 Forest Hills Road, B-8
Wilson, NC 27896
/s/ William E. Berry
----------------------------------------------------
William E. Berry
1213 Waverly Road
Wilson NC 27896
/s/ Richard P. Johnson
----------------------------------------------------
Richard P. Johnson
4229 Lomo Alto Court
Dallas, TX 75219
/s/ Leon R. Ellin
----------------------------------------------------
Leon R. Ellin
7308 Bay Hill Court
Raleigh, NC 27615
WINGATE AFFILIATES II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
By: WINGATE MANAGEMENT LIMITED, L.L.C.,
its sole general partner
By: /s/ V. Edward Easterling, Jr.
------------------------------------------------
V. Edward Easterling, Jr., Principal
CALLIER INVESTMENT COMPANY
c/o Wingate
750 North St. Paul, Suite 1200
Dallas, Texas 75201
By: /s/ James T. Callier
------------------------------------------------
James T. Callier
President
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/s/ Armistead Burwell, Jr.
----------------------------------------------------
Armistead Burwell, Jr.
1311 Forest Hills Road, B-8
Wilson, NC 27896
/s/ William E. Berry
----------------------------------------------------
William E. Berry
1213 Waverly Road
Wilson NC 27896
/s/ Richard P. Johnson
----------------------------------------------------
Richard P. Johnson
4229 Lomo Alto Court
Dallas, TX 75219
/s/ Leon R. Ellin
----------------------------------------------------
Leon R. Ellin
7308 Bay Hill Court
Raleigh, NC 27615
WINGATE AFFILIATES II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
By: WINGATE MANAGEMENT LIMITED, L.L.C.,
its sole general partner
By:
------------------------------------------------
V. Edward Easterling, Jr., Principal
CALLIER INVESTMENT COMPANY
c/o Wingate
750 North St. Paul, Suite 1200
Dallas, Texas 75201
By:
------------------------------------------------
James T. Callier
President
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Annex A
to the Agreement and Plan of Merger
Company Stockholders; Ownership of Shares
Stockholder Preferred Shares % Common Shares % Cash Consideration* Stock Consideration*
- ----------- ---------------- --- ------------- --- ------------------ --------------------
1. Wingate Partners II, L.P. 7,632 94.2 84,800 91.2
2. Armistead Burwell, Jr. 162 2.0 1,800 1.9
3. William E. Berry 108 1.3 1,200 1.3
4. Richard P. Johnson -- -- 1,800 1.9
5. Leon R. Ellin -- -- 1,200 1.3
6. Wingate Affiliates II, L.P. 144 1.8 1,600 1.7
7. Callier Investment Company 54 0.7 600 0.7
----- ------ ------ ----------- ----------------
8,100 100.00% 93,000 100.00% $18,000,000 1,400,667 shares
- ----------
* To be allocated in accordance with a schedule to be delivered by the
Company at the Closing.
A-1
76
ANNEX B
TO AGREEMENT AND PLAN OF MERGER
DISPUTE RESOLUTION PROCEDURE
1. Scope of Arbitration. The parties to the Agreement and Plan of
Merger to which this Annex B is attached (the "Agreement") will submit to final
and binding arbitration as the sole and exclusive remedy for all claims for
damages arising out of, involving, or relating to (a) the Agreement or (b) the
events giving rise to the Agreement, including any and all non-contractual
claims for damages related to the Agreement or the events giving rise to it
(including claims for fraudulent inducement of contract). Notwithstanding the
foregoing, the dispute resolution procedure set forth in this Annex B shall not
apply to (i) claims for injunctive or other equitable relief pursuant to Section
3.12 or 3.15 of the Agreement or any other agreement entered into in connection
with the Agreement (including the Class B Stockholder Agreement, the Class B
Registration Rights Agreement and the Second Amended and Restated Articles) or
(ii) any claims for damages arising out of, involving, or relating to the Class
B Stockholder Agreement, the Class B Registration Rights Agreement or the Second
Amended and Restated Articles (including claims for fraudulent inducement of
contract).
2. Notice of Dispute. Any party shall give the other parties written
notice of the existence and nature of any dispute proposed to be arbitrated
pursuant to this Annex B (the "Written Notice"). Such Written Notice must be
served on the other parties as described below. The party serving Written Notice
shall be referred to as the "Claiming Party." The party to whom the claims are
directed shall be referred to as the "Responding Party."
3. Appointment of Arbitrators. Each party shall appoint one person
to serve as an arbitrator within 15 days of receipt of the Written Notice. The
two arbitrators thus appointed shall within seven days of their appointment
together select a third arbitrator with such knowledge and expertise as
necessary to serve as chairman of the panel of arbitrators, and this person
shall serve as chairman. The three arbitrators shall determine all matters,
including the panel's final decision with respect to the claims presented in the
arbitration, by majority vote. If the two arbitrators selected by the parties
are unable to agree upon the appointment of the third arbitrator within seven
days of their appointment, both shall give written notice of such failure to
agree to the parties, and if the parties fail to agree upon the selection of
such third arbitrator within five days thereafter, such third arbitrator shall
be appointed from, and pursuant to the rules for commercial arbitration of, the
American Arbitration Association. Prior to appointment, each arbitrator shall
agree to conduct such arbitration in strict accordance with the terms of this
Annex B.
4. Initial Meeting of the Arbitrators. Within seven days of the
selection of the third arbitrator, the arbitrators shall conduct an initial
meeting with the parties (the "Initial Meeting"). All meetings between the
arbitrators, or between the arbitrators and the parties, including the Initial
Meeting, may be conducted by telephone, with the exception of the arbitration
hearing at which evidence is presented. At the Initial Meeting, the parties and
the arbitrators shall agree upon a schedule for the arbitration proceedings,
with dates no later than the deadlines
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provided in Section 7 below. The statement of claim, the response to the
statement of claim and counterclaims (if any), and the response to the
counterclaims (if any) (collectively, the "Pleadings") shall be submitted to
each arbitrator on the date they are served, unless service occurs prior to
appointment of all three arbitrators. If service of any of the Pleadings occurs
prior to the appointment of any of the arbitrators, copies of any such Pleadings
shall be submitted to such arbitrator promptly after such arbitrator's
appointment.
5. Conduct of the Arbitration. With respect to each dispute to be
arbitrated pursuant to this Annex B, no more than eleven months shall pass
between the selection of the third arbitrator and the release of a decision by
the arbitration panel; no more than eight depositions (lasting in total for all
eight depositions no more than 50 hours) may be taken by each of the Claiming
Party or the Responding Party, and no more than 30 interrogatories may be asked
for by each of the Claiming Party or the Responding Party. Any arbitration held
pursuant to this Annex B shall take place in Charlotte, North Carolina. The law
of the State of Delaware shall supply the substantive law of the arbitration
proceedings, and any claims or counterclaims alleged pursuant to federal law
shall be adjudicated as if pled in a federal court in Delaware. All proceedings,
including discovery, depositions, and the arbitration hearings shall be governed
by the Federal Rules of Civil Procedure and the Local Rules of Civil Procedure
of the United States District Court for the District of Delaware, unless such
rules conflict with the provisions of this Annex B, in which case the provisions
of this Annex B control; provided, however, that the parties agree that the
provisions of Federal Rule of Civil Procedure 26(a) shall not apply.
6. Motions. The parties may make applications to the panel of
arbitrators regarding issues of discovery, procedure and privilege. Any such
motions shall be made to and resolved by the arbitrators as soon as practicable.
No party shall be permitted to file any motions for dismissal of claims
(including dismissal based upon failure to join an indispensable party), or for
summary judgment, concerning the claims or counterclaims asserted in any
arbitration under this Annex B.
7. Schedule of Arbitration Proceedings. At the Initial Meeting, the
parties and the arbitrators shall agree to a schedule that conforms with the
following deadlines:
Event Deadline Not Later Than
----- -----------------------
Service of a statement of 15 days after service of the Written Notice
claim by the Claiming Party
Service of response to the
statement of claim and
counterclaims (if any) by 21 days after receipt of the statement of
the Responding Party claim
Service of response to
counterclaims (if any) by Seven days after receipt of counterclaims (if
the Claiming Party any)
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Commencement of document One day after service of response to the
discovery statement of claim
Commencement of deposition 75 days after service of the statement of
discovery claim
Completion of all discovery 200 days after service of the statement of
claim
Commencement of the 28 days after completion of discovery
arbitration hearing
Issuance of a decision by 14 days after receipt of the last hearing
the arbitrators transcript by the arbitrators. All sessions of
the arbitration hearings shall be promptly
transcribed and transcripts shall be promptly
provided to the parties and the arbitrators.
8. Decision Binding on the Parties. Unless the parties agree
otherwise in writing, the arbitrators' decision shall become binding on the
parties at such time as the decision is confirmed by order of the Delaware Court
of Chancery. The parties hereby irrevocably and unconditionally submit to the
jurisdiction of such court for any and all proceedings relating to such
confirmation. Any award ordered shall be paid within 10 days of confirmation of
the arbitrators' decision.
9. Cost of Arbitration Proceeding. Except as provided herein, the
costs incurred by the parties in conjunction with an arbitration proceeding
pursuant to this Annex B, including reasonable attorney's fees, fees paid to
experts, and fees for obtaining transcripts shall be paid or reimbursed in
accordance with the provisions of Article V of the Agreement. In the event that
the arbitrators determine that no party is entitled to indemnification by any
other party, then (a) each party shall pay its own expenses, including
attorney's fees, fees paid to experts, fees for obtaining transcripts, expenses
of witnesses called solely by that party, and all fees charged by the arbitrator
appointed by such party and (b) the parties shall each pay fifty percent of all
remaining expenses of the arbitration proceeding.
10. Extensions of Time. The parties may jointly agree, in writing,
to extend any of the deadlines set forth in Section 7 above.
11. Service of Documents. Any process, notice, memorandum, motion,
demand, or other paper or communication, or application to the panel of
arbitrators shall be deemed to have been sufficiently served or submitted if (a)
personally delivered, or (b) sent by a nationally recognized overnight courier
service.
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