Exhibit 10.20
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of April 22,
1998 by and between Borg-Warner Security Corporation, a Delaware corporation
("Seller"), and Mustang Holdings, Inc., a Kansas corporation ("Buyer").
Seller wishes to sell the Shares, as defined herein, to Buyer, and Buyer wishes
to purchase such Shares from Seller, on the terms and subject to the conditions
set forth in this Agreement.
Capitalized terms are generally defined in paragraph 8.
The parties agree as follows:
1. BASIC TRANSACTION. On the terms and subject to the conditions set forth in
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this Agreement:
(a) SALE OF SHARES; ASSUMPTION OF CASUALTY CLAIMS. Seller agrees to sell,
transfer and deliver to Buyer, and Buyer agrees to purchase, the Shares for the
purchase price set forth in paragraph 1(b). Seller agrees to assume the
liabilities and obligations of the Company for each Casualty Claim.
(b) PURCHASE PRICE. Buyer agrees to deliver to Seller at Closing a note in
the principal amount of $ 6.5 million substantially in the form of Exhibit A
("Buyer Note") and a note in the principal amount of $8.8 million substantially
in the form of Exhibit B ("Convertible Note").
(c) CLOSING BALANCE SHEET. Within 30 days after the Closing, Seller will
deliver to Buyer (i) a balance sheet of the Company as of the Closing Date (the
"Closing Balance Sheet") prepared in accordance with GAAP consistent with the
accounting policies and practices used in connection with the preparation of the
Financial Statements and reflecting the assumption by Seller at Closing of each
Casualty Claim and (ii) a certificate setting forth Seller's calculation of Net
Working Capital as of the Closing Date as determined from the Closing Balance
Sheet. If the amount of Net Working Capital shown on such certificate is greater
than $6,488,000, then the Buyer will deliver to Seller a note with substantially
the same terms as the Convertible Note (with a ratable adjustment in the
conversion ratio) in a principal amount equal to such excess within three
business days after the date such certificate is delivered to Buyer. If the
amount of Net Working Capital shown on such certificate is less than $6,488,000,
then the principal amount of the Convertible Note shall be reduced by an amount
equal to such deficiency. Any payment made pursuant to this paragraph shall be
treated for all purposes as an adjustment to the consideration paid or received
with respect to the Shares.
(d) CLOSING. The closing of the transaction contemplated by this Agreement
(the "Closing") will take place at the offices of Seller at 10:00 a.m. on the
second business day following satisfaction or waiver of all conditions to the
parties' obligations to consummate such transaction, or at such other date and
time and in such other place as mutually agreed upon by Seller and Buyer (the
"Closing
Date"). Subject to the provisions of paragraph 6, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this paragraph 1(d) will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF SELLER. Except as set forth on the
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Disclosure Schedule attached hereto (by reference to the applicable paragraph
below), Seller represents and warrants to Buyer:
(a) ORGANIZATION; GOOD STANDING; NO SUBSIDIARIES. Each of Seller and the
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with all corporate power and authority
to own, lease and operate its assets and to carry on its business as presently
conducted. The Company is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the conduct of its business
requires it to be so qualified. The Company does not have any Subsidiaries.
Seller has delivered to Buyer a complete copy of the Company's certificate of
incorporation and by-laws and such certificate of incorporation and by-laws are
in full force and effect as of the date hereof and as of the Closing.
(b) AUTHORIZATION. Seller has corporate power and authority to enter into
this Agreement and all other agreements, documents and instruments contemplated
hereby and to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the other agreements, documents and
instruments contemplated hereby and consummation of the transactions
contemplated hereby and thereby have been approved by all necessary corporate
action on the part of Seller.
(c) ENFORCEABILITY. This Agreement constitutes, and each of the other
agreements, documents and instruments contemplated hereby to be executed by
Seller (when executed and delivered) will constitute, the legal, valid and
binding agreement of Seller, enforceable in accordance with its terms.
(d) NO CONTRAVENTION. Neither the execution and delivery of this Agreement
and the other agreements, documents or instruments contemplated hereby, the
performance by Seller of its obligations hereunder or thereunder, nor the
consummation of the transactions contemplated hereby or thereby will directly or
indirectly (with or without notice or lapse of time) (i) contravene, conflict
with or result in a violation of any provision of Seller's or the Company's
charter or bylaws, (ii) violate any law, statute, regulation, order, decree or
other restriction of any government, governmental agency or court to which
Seller or the Company or any of their respective assets is subject, (iii) result
in the breach of, constitute a default under, accelerate or permit the
acceleration of the performance required by, or create in any party the right to
terminate any agreement, lease, license, instrument of indebtedness or other
obligation to which the Company or any of its assets is subject or (iv) result
in the creation of any Security Interest on any of the Company's assets. Neither
Seller nor the Company needs to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any government or governmental
agency in order for the parties to consummate the transactions contemplated
hereby.
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(e) CAPITALIZATION. The authorized capital stock of the Company consists
of 100 shares of common stock, $.10 par value, all of which are issued and
outstanding. All of the issued and outstanding shares of capital stock of the
Company have been duly authorized, are validly issued, fully paid and
nonassessable and are owned by Seller. There are no outstanding or authorized
options, warrants, purchase rights, conversion or exchange rights or other
contracts or commitments that could require the Company to issue, sell or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation or other
similar rights with respect to the Company. There are no registration rights
with respect to any shares of capital stock of the Company. There are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of the capital stock of the Company. Seller owns beneficially and of record all
of the Shares, free and clear of any Security Interest.
(f) FINANCIAL STATEMENTS. Attached hereto as the "Financial Statements
Schedule" is the unaudited balance sheet and statements of income and cash flow
of the Company as of and for the year ended December 31, 1997 and the quarter
ended March 31, 1998 (the "Financial Statements"). The Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis and present
fairly in all material respects the financial condition and results of operation
of the Company as of such date and for such periods, except that such Financial
Statements lack footnotes and other presentation items.
(g) ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31, 1997, the Company
has conducted its business in the ordinary and usual course, and there has not
been (a) any Material Adverse Effect or any change or circumstance that is
reasonably likely to have a Material Adverse Effect, (b) any transaction between
the Company on the one hand and Seller or any of its Affiliates (other than the
Company) on the other hand, other than intercompany loans and advances, (c) any
acquisition or disposition of businesses or assets, other than in the ordinary
course of business or as contemplated by this Agreement, (d) any creation,
incurrence, assumption or guarantee of any indebtedness for borrowed money or
capitalized lease obligations or (e) the incurrence of any material obligation
by the Company, other than in the ordinary course of business.
(h) TRANSACTIONS WITH AFFILIATES. Except with respect to the provision of
security services to the Company in the ordinary course of business, neither
Seller nor any of its Affiliates:
(i) is a party to any contract, lease, agreement, arrangement or
commitment with the Company;
(ii) owes any material amount to, or is owed a material amount by,
the Company; or
(iii) has any interest in any property or right used in the conduct of
the Company's business.
(i) REAL PROPERTY. The Company has good and marketable title in fee simple
to all real properties owned by it, free and clear of any Security Interest, and
valid and enforceable leaseholds
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in all real estate leased by it. The Disclosure Schedule lists the street
address of each parcel of real property owned or leased by the Company and, in
the case of leased property, identifies the lease term and base rent for each
such parcel.
(j) TANGIBLE ASSETS. The Company has good title to, or a valid leasehold
interest in, the tangible assets it uses regularly in the conduct of its
business, free and clear of all Security Interests. The Company's assets are in
operating condition sufficient for operation of the Company's business. The
Disclosure Schedule lists the identifying and serial number of vehicles leased
by the Company.
(k) ACCOUNTS RECEIVABLE. At the Closing, the Company will have good title
to all of its accounts receivable free and clear of any Security Interests. All
of the accounts receivable of the Company reflected on the Closing Balance Sheet
will be valid and enforceable claims against customers for services rendered in
the ordinary course of the Company's business and will be collectible in full
within 180 days after the Closing Date, subject to no defenses, offsets or
counterclaims, except to the extent of the bad debt reserve reflected on the
Closing Balance Sheet.
(l) INTELLECTUAL PROPERTY. The Disclosure Schedule lists all patents and
registered trademarks, service marks and trade names or rights for the foregoing
used in the conduct of the Company's business and identifies each such
proprietary right that any third party owns and that the Company uses pursuant
to license or agreement. The transactions contemplated by this Agreement will
have no adverse effect on any of the proprietary rights so listed. The conduct
of the Company's business has not infringed any proprietary rights of any other
person.
(m) CONTRACTS. The Disclosure Schedule lists all the contracts of the
following types to which the Company is a party or to which any of its
properties or assets are bound: (i) any collective bargaining agreement; (ii any
indenture, credit agreement, loan agreement, note, mortgage, security agreement,
loan commitment or other contract relating to the borrowing of funds or an
extension of credit to the Company; (ii any contract providing for a partnership
or joint venture of which the Company is a partner or joint venturer; (iv any
guarantee in respect of indebtedness of any Person; (v) any employment,
severance or consulting contract; (vi any technology license agreement (other
than licenses implied by the sale of a product and perpetual, paid-up licenses
for commonly available software programs under which any Company is the
licensee); (vi any agreement that contains a change of control provision or
provisions of similar effect relating to the Company; (vi any agreement that
involves more than $25,000 (other than service agreements with customers that
were not among the 25 customers from whom the Company derived the most revenue
during 1997) that is not terminable without penalty or payment on 30 days' or
less notice; or (ix any agreement that contains any restriction on the Company's
ability to compete with any other business. Each such contract is in full force
and effect, and there is no breach or default by the Company with respect to
each such contract. The Company has not received from any customer listed on the
Disclosure Schedule any notice that such customer intends to discontinue or
substantially curtail purchasing services from the Company.
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(n) COMPLIANCE WITH LAW. The Company is not in violation of any Law or any
judgment, award, rule, regulation, order, decree or writ. The Company holds all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business.
(o) EMPLOYEE MATTERS AND BENEFIT PLANS.
(i) There is no unfair labor practice complaint against the Company
pending before the National Labor Relations Board or any state or local agency.
There is no pending labor strike, dispute, grievance, request for
representation, slowdown or stoppage.
(ii) The Disclosure Schedule lists all Benefit Plans that the Company
maintains or to which the Company contributes for the benefit of any current or
former employee. The Benefit Plans comply in form and in operation with all
requirements of law, including ERISA and the Code. No liability to the Pension
Benefit Guaranty Corporation, Internal Revenue Service or United States
Department of Labor exists or is expected to be incurred with respect to any
Benefit Plan. The Company does not contribute and is not required to contribute
to any "multiemployer plan" (as defined in Section 3(37) of ERISA). The Company
has not completely or partially withdrawn from any multiemployer plan so as to
result in any liability under Section 4201 of ERISA.
(iii) There are no actions, suits or claims pending or, to Seller's
Knowledge, threatened with respect to any Benefit Plan. There has been no
reportable event (within the meaning of Section 4043 of ERISA) or any event or
condition that represents a risk of termination of any Employee Pension Benefit
Plan by the Pension Benefit Guaranty Corporation under circumstances that could
reasonably result in a liability.
(iv) The Company is not party to any (A) severance agreement, or any
policy, program or guidelines obligating it to pay severance benefits, (B)
employment contract or consulting agreement obligating it to pay benefits to
individuals covered under such contract or agreement or (c) agreement,
understanding or policy obligating it to pay any amount or provided benefits to
any former employee. The transactions contemplated by this Agreement will not
create or result in any liability of the Company for severance, bonus or other
compensation.
(p) TAXES.
(i) All federal, state and local tax returns of the Company that are
required to be filed have been duly filed, all such tax returns are true and
correct and all amounts required to be paid with respect to such returns have
been paid. All deficiencies asserted or assessments made as a result of any
examinations of such tax returns have been paid in full, and no issues that have
been raised in connection with any such examinations are currently pending.
(ii) There are not now in force any waivers or agreements by the
Company for the extension of time for the assessment of any tax, nor has any
such waiver or agreement been requested by the Internal Revenue Service or any
other taxing authority.
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(iii) The federal income tax returns of the Company (including where
appropriate consolidated returns of affiliated groups which include the Company)
for the taxable periods ending December 31, 1993 and prior thereto have either
been examined by the Internal Revenue Service or the applicable statute of
limitations for the assessment of deficiencies with respect thereto has expired.
(iv) The Company is not required to file any tax returns or to pay
any Taxes in foreign countries. Seller is not a "foreign person" as that term is
defined in Section 1445(f)(3) of the Code.
(v) The Company's tax basis in its tangible assets is not less than
the amount of tangible assets shown on the Financial Statements.
(q) ENVIRONMENTAL MATTERS.
(i) The Company's operations have been and are in compliance with
all applicable Environmental Laws. There are no actions, suits, investigations
or claims pending or, to Seller's Knowledge, threatened against the Company
alleging the violation of or seeking to impose liability pursuant to any
Environmental Law. There are no facts or circumstances that will result in the
Company incurring liabilities arising under any Environmental Law.
(ii) There has been no past or present spill, discharge, disposal or
release of Hazardous Substances onto or from any facility owned, leased,
operated or used by the Company (a "Facility"), nor are any Hazardous Substances
presently deposited stored, or otherwise located on, under, in or about any
Facility (except in compliance with applicable laws), nor have any Hazardous
Substances migrated from any Facility upon or beneath other properties.
(iii) The Company has not received any notice or other communication
concerning any alleged violation of any applicable Environmental Law that has
not been corrected to the satisfaction of the appropriate authority.
(iv) The Company has not received any requests for information under
42 U.S.C. Section 9604(e) relating to any "Superfund" site, or any similar
requests under authority of state law, and Company has not otherwise been
identified as a "potentially responsible party" at any federal or state
Superfund site.
(v) There are no underground storage tanks for petroleum or any
other substance, or underground piping or conduits associated with such tanks,
located on any Facility.
(vi) There are no Hazardous Substances installed, contained in the
building material, contained in the transformers or other electrical equipment,
or otherwise present on any Facility.
(vii) Buyer has been provided with all environmental audits or
assessments or occupational health studies undertaken by or on behalf of the
Company or, to Seller's Knowledge, governmental agencies with respect to each
Facility.
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(r) LITIGATION. There are no lawsuits, arbitration proceedings, regulatory
proceedings, actions, investigations or other litigation pending or, to Seller's
Knowledge, threatened against the Company or relating to its assets. Neither the
Company nor any of its assets is subject to any judgment, decree, injunction or
other order of any Governmental Authority.
(s) INSURANCE. The Disclosure Schedule sets forth a correct and complete
list of all fire, theft, casualty, general liability, workers' compensation,
business interruption, environmental impairment, product liability, automobile
and other insurance policies maintained by the Company, specifying the type of
coverage, the amount of coverage, the insurer and the expiration date of each
such policy (the "Insurance Policies"), each of which is in full force and
effect.
(t) BANKING FACILITIES. The Disclosure Schedule sets forth a correct and
complete list of each bank, savings and loan or similar financial institution in
which the Company has an account or safety deposit box and the numbers of the
accounts or safety deposit boxes maintained by the Company thereat; and the
names of all persons authorized to draw on each such account or to have access
to any such safety deposit box facility.
(u) SOFTWARE. The Disclosure Schedule sets forth a correct and complete
list and summary description of all computer software programs and information
systems used by the Company (other than commonly available software programs
under which the Company is licensee) ("Software") and identifies Software that
is owned by the Company or licensed by the Company from third parties. The
Company is not in violation of any license, sublicense or agreement with respect
to the Software. All actions and modifications necessary for the continued
effective use of the Software after December 31, 1999 have been taken or made.
(v) BROKERS. Neither Buyer, any Affiliate of Buyer, nor the Company has or
shall have any liability for any brokerage or finder's fee or other commission
of any Person retained by Seller, the Company or any Affiliate of either of them
in connection with any of the transactions contemplated by this Agreement.
(w) PURCHASE FOR INVESTMENT. The Buyer Note and Convertible Note are being
acquired by Seller solely for its own account, with no view to any distribution
thereof in violation of the Securities Act or the applicable securities laws of
any state. Seller understands that the Buyer Note and Convertible Note have not
been registered under the Securities Act or the securities laws of any state and
may not be sold or otherwise transferred unless they are registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration is available. Seller acknowledges that, in connection
with its acquisition of the Buyer Note and Convertible Note, it has been given
the opportunity to make inquiries of officers of Buyer and to obtain such
additional information from Buyer as Seller deemed relevant to its investment
decision.
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3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
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Seller:
(a) ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Kansas. Buyer has delivered
to Seller a complete copy of its certificate of incorporation and by-laws, and
such certificate of incorporation and by-laws are in full force and effect as of
the date hereof and the Closing Date.
(b) AUTHORIZATION. Buyer has corporate power and authority to enter into
this Agreement and the other agreements, documents and instruments contemplated
hereby and to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Buyer has taken all necessary
corporate action to authorize and approve the execution, delivery and
performance of this Agreement and the other agreements, documents and
instruments contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby.
(c) ENFORCEABILITY. This Agreement constitutes, and each of the other
agreements, documents and instruments contemplated hereby to be executed by
Buyer (when executed and delivered) will constitute, the legal, valid and
binding agreement of Buyer enforceable in accordance with its terms.
(d) NO CONTRAVENTION. Neither the execution and delivery of this Agreement
and the other agreements, documents or instruments contemplated hereby, the
performance by Buyer of its obligations hereunder or thereunder, nor the
consummation of the transactions contemplated hereby or thereby will directly or
indirectly (with or without notice or lapse of time) (i) contravene, conflict
with or result in a violation of any provision of Buyer's charter or bylaws,
(ii) violate any law, statute, regulation, order, decree or other restriction of
any government, governmental agency or court to which Buyer or any of its assets
is subject, (iii) result in the breach of, constitute a default under,
accelerate or permit the acceleration of the performance required by, or create
in any party the right to terminate any agreement, lease, license, instrument of
indebtedness or other obligation to which Buyer or any of its assets is subject
or (iv) result in the creation of any Security Interest on any of Buyer's
assets. Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any government or governmental
agency in order for the parties to consummate the transactions contemplated
hereby.
(e) CAPITALIZATION. The authorized capital stock of Buyer consists of 10
million shares of Common Stock, par value $1 per share, 10 shares of which are
issued and outstanding. All of the issued and outstanding shares of Buyer's
capital stock have been duly authorized, are validly issued, fully paid and
nonassessable. At or prior to Closing, Buyer will deliver to Seller an accurate
and complete list of persons that own beneficially or of record shares of
Buyer's capital stock. There are no outstanding or authorized options, warrants,
purchase rights, conversion or exchange rights or other contracts or commitments
that could require Buyer to issue, sell or otherwise cause to become outstanding
any of its capital stock. There are no outstanding stock appreciation, phantom
stock, profit participation or other similar rights with respect to Buyer. There
are no registration rights with respect to any shares of Buyer's capital stock.
There are no voting trusts, proxies or other agreements
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or understandings with respect to the voting of Buyer's capital stock, except
for a shareholder agreement that Buyer delivered to Seller at or prior to
Closing.
(f) PURCHASE FOR INVESTMENT. The Shares are being acquired by Buyer solely
for its own account, with no view to any distribution thereof in violation of
the Securities Act or the applicable securities laws of any state. Buyer
understands that the Shares have not been registered under the Securities Act or
the securities laws of any state and may not be sold or otherwise transferred
unless they are registered under the Securities Act and any applicable state
securities laws or unless an exemption from such registration is available.
Buyer acknowledges that, in connection with its purchase of the Shares, it has
been given the opportunity to make inquiries of officers of the Company and to
obtain such additional information from the Company as Buyer deemed relevant to
its investment decision.
(g) BROKERS. Neither Seller, the Company nor any Affiliate of Seller has
or shall have any liability for any brokerage or finder's fee or other
commission of any Person retained by Buyer or any Affiliate of Buyer in
connection with any of the transactions contemplated by this Agreement.
4. COVENANTS.
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(a) GENERAL. Each of Buyer and Seller will use its best efforts to
take all action and to do all things necessary or advisable to consummate the
transactions contemplated by this Agreement.
(b) NOTICES AND CONSENTS. Seller will cause the Company to give any
notices to third parties, and the Company will use commercially reasonable
efforts to obtain any third party consent that Buyer may reasonably request in
connection with matters disclosed or required to be disclosed on the Disclosure
Schedule. Buyer and Seller will promptly obtain all governmental consents and
authorizations and promptly will make all filings with and give all notices to
governmental agencies necessary or reasonably required to effect the
transactions contemplated by this Agreement.
(c) OPERATION OF BUSINESS. Seller will cause the Company to: operate its
business in the ordinary course in accordance with all laws, rules and
regulations applicable to the Company; collect all its accounts receivable in
the ordinary course using the collection procedures customarily used by it in
past practice; keep its business and properties intact; not sell or otherwise
dispose of any assets or properties of the Company except through the use of
supplies in the ordinary course of business; take all such actions and forebear
from taking such actions as may be necessary in order that the representations
and warranties contained herein shall continue to be true and accurate at all
times between the date hereof and the Closing, except to the extent that any
changes shall occur as a result of the conduct of business in the ordinary
course.
(d) ACCESS. The Company will give Buyer and its counsel, accountants and
other representatives full access to all of its properties, books, tax returns,
contracts, commitments and records relating to its business; and will furnish to
Buyer all such financial, operating and other data, documents and information
with respect to its affairs as Buyer may reasonably request.
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(e) NOTICE OF DEVELOPMENTS. Prior to Closing, Seller will promptly notify
Buyer of the occurrence of any event that would reasonably be expected to have a
Material Adverse Effect. From the date of this Agreement until Closing, Seller
may deliver to Buyer written modification to the Disclosure Schedule to reflect
events or changes after the date of this Agreement, provided that delivery of
any such modification shall not affect Buyer's rights pursuant to the provisions
of paragraph 5(a)(v).
(f) EXCLUSIVITY. Seller will not (and will not cause the Company to)
solicit, initiate or encourage the submission of any proposal or offer from any
Person relating to any (A) liquidation, dissolution or recapitalization, (B)
merger or consolidation, (C) acquisition or purchase of securities or assets or
(D) similar transaction or business combination involving the Company; provided
that Seller, the Company and their directors and officers will remain free to
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing to the extent their fiduciary duties may require.
(g) DIRECTOR AND OFFICER RESIGNATIONS. Seller will cause the Company's
President and each of the directors and officers of the Company who will be
officers, directors or employees of Seller or any of its Affiliates after
Closing to submit their written resignation effective as of the Closing Date.
(h) TAX MATTERS.
(i) Seller will include the Company on Seller's consolidated federal
income tax returns for the period through and including the Closing Date. The
Company will furnish Tax information to Seller for inclusion in Seller's federal
consolidated income tax return for the period that includes the Closing Date in
accordance with the Company's past custom and practice. The Company's income
will be apportioned to the period up to and including the Closing Date and the
period after the Closing Date by closing the books of the Company as of the
Closing Date, except that exemptions, allowances, deductions, property taxes or
other items that are calculated on an annual basis shall be apportioned on a per
diem basis.
(ii) Seller shall be liable for and indemnify Buyer for all Taxes
(including any obligation to contribute to the payment of a tax determined on a
consolidated, combined or unitary basis with respect to a group of corporations
that includes or included the Company) (i) imposed on Seller's Group (other than
the Company) for any taxable year, or (ii) imposed on the Company or for which
the Company may otherwise be liable for any pre-Closing period and any deemed
short taxable year ending on and including the Closing Date. Seller shall be
entitled to any refund of Taxes of the Company received for such periods. Buyer
shall be liable for and shall indemnify Seller for any Taxes of the Company for
any taxable year or period (including any deemed short taxable year) that begins
after the Closing Date.
(iii) Buyer agrees to give to Seller prompt written notice of any
claim, demand, action, suit, proceeding, audit or assessment (a "Tax Claim")
raised, brought, threatened, made or
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commenced against the Company that relates to any matter to which the foregoing
indemnity by Seller may apply and agrees further not to make any admission or
effect any settlement with respect to any such Tax Claim without the prior
written consent of Seller (which consent shall not be unreasonably withheld).
Each party shall cooperate with the other in connection with any Tax
investigation, audit or other proceeding.
(iv) If any Tax Claim shall be made or commenced against Buyer or the
Company in respect of any liability, obligation or claim to which the foregoing
indemnity by Seller relates, Seller shall have the right, at its own expense, to
undertake the defense of such Tax Claim by written notice given to Buyer at any
time before the final determination thereof, and if Seller does undertake the
defense of such Tax Claim, Seller shall have the authority to litigate, settle
or compromise such Tax Claim; provided, however, that in the case of any Tax
Claim relating to any deemed short taxable year ending on and including the
Closing Date, or beginning after the Closing Date, Seller's rights herein shall
be limited to that portion of the Tax Claim to which Seller's indemnification
liability relates. Notwithstanding the foregoing, Seller shall not be entitled
to settle, either administratively or after the commencement of litigation, any
Tax Claim that would adversely affect the liability for Taxes of Buyer or the
Company for any taxable year or period ending after the Closing Date (including
any deemed short taxable year beginning after the Closing Date) to any extent
(including the imposition of income tax deficiencies, the reduction of asset
basis or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of amortization or depreciation deductions, or the reduction
of loss or credit carryforwards) without the prior written consent of Buyer.
Such consent shall not be unreasonably withheld and shall not be necessary to
the extent that Seller has indemnified Buyer against the effects of any such
settlement.
(v) Any Tax allocation or sharing agreement or arrangement, whether
or not written, that may have been entered into by Seller or any member of
Seller's Group and the Company is terminated as of the Closing Date, and will
have no further effect for any taxable year.
(vi) Seller will join with Buyer in making an election under Section
338(h)(10) of the Code (and any corresponding elections under state, local or
foreign tax law) with respect to the purchase and sale of the Shares.
(i) ALLOCATION OF PURCHASE PRICE. The purchase price for the Shares and
the liabilities of the Company will be allocated to the Company's assets for all
purposes (including tax and financial accounting purposes) in a manner
consistent with the fair market values therefor agreed upon by Buyer and Seller
after good faith discussions. Buyer, Seller and the Company will file all tax
returns (including amended returns and claims for refund) and information
reports in a manner consistent with such values.
(j) INSURANCE. The Seller and Company will maintain insurance policies on
the Company's properties and business consistent with past practice until the
Closing Date, except as such policies may be acquired, canceled, amended or
otherwise modified in the ordinary course of business.
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(k) INTERCOMPANY ACCOUNTS; MANAGEMENT AGREEMENTS. All intercompany
indebtedness between the Company, on the one hand, and Seller or any of its
Affiliate (not including the Company), on the other hand, shall be settled in
full on or prior to the Closing Date and any balance contributed to the equity
of the Company. Effective as of the Closing, all management, services or
advisory agreements between Seller and any of its Affiliates, on the one hand,
and the Company, on the other hand, shall be terminated, except as otherwise
provided in paragraph 4(o).
(l) RETENTION OF CORPORATE RECORDS. Buyer shall cause the Company to
retain the books, records and accounts of the Company for a period of not less
than six years from the Closing Date. Seller and its Affiliates shall have
reasonable access to, and the right to obtain copies of, such books, records and
accounts at all reasonable times.
(m) COOPERATION IN GENERAL. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of documents and instruments) as any other party may
request.
(n) PRESS RELEASES. No party shall issue any press release or make any
public announcement relating to the subject matter of this Agreement without the
prior approval of the other party; provided that any party may make any public
disclosure it believes in good faith is required by applicable Law or any
listing or trading agreement concerning its publicly-traded securities, in which
case the disclosing party shall advise the other party prior to making the
disclosure.
(o) EMPLOYEE BENEFIT MATTERS.
(i) Buyer, the Company and Seller shall each promptly and reasonably
cooperate in good faith with each other to ensure that their respective
obligations with respect to employee benefit plans are timely and properly
satisfied, including sharing information regarding employees and coordinating
communications with employees.
(ii) Seller hereby notifies buyer of the existence of the collective
bargaining agreements listed in section 2(m) of the Disclosure Schedule. To the
extent required by law, Buyer shall assume such agreements as part of the
transactions contemplated by this Agreement. Seller will notify the collective
bargaining agents of the transactions contemplated hereby within two business
days of the execution and delivery of this Agreement, and will provide such
agents with Buyer's name and address and the provisions reflecting Buyer's
assumption, to the extent required by law, of such agreements. Seller will
cooperate with Buyer in establishing meetings with such agents.
(iii) (A) Effective upon Closing, without objection from the
collective bargaining units including the Company's employees ("CBUs"), the
Company will have established a new pension plan for its employees covered by
collective bargaining agreements ("CBA Employees"), providing "future service
only" benefits on a basis substantially similar to those provided under the
Seller Plan. All benefits accrued by employees and former employees of the
Company before the Closing Date will
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remain the responsibility of the Seller Plan. Seller and Buyer will use all
reasonable efforts to obtain the consent of the CBUs to the plan contemplated by
this subparagraph (A).
(B) If one or more CBUs object to the Company's establishment of a
new plan as described in paragraph 4(o)(iii)(A), the Company will establish such
a new plan to cover only present and future employees of the Company who are not
participants in the Seller Plan as of the Closing Date (a "New Employee Plan").
Seller will cause the Seller Plan to continue to accrue and provide benefits to
CBA Employees who are participants in the Seller Plan as of the Closing Date and
to recognize service to the Company after the Closing Date for all purposes
until the earlier of (i) the CBA Employee's termination of employment with the
Company, (ii) the CBA Employee is no longer eligible to participate in the
Seller Plan or (iii) the expiration of the collective bargaining agreements
listed on section 2(m) of the Disclosure Schedule relating to such CBA Employee
(the "Expiration Date"). The Company will not become an adopting employer under
the Seller Plan. Seller will not terminate or modify (other than as required by
law) the Seller Plan with respect to CBA Employees prior to the Expiration Date.
(C) If one or more CBUs object to the treatment described in
paragraph 4(o)(iii)(B), the Seller will cause the Seller Plan to accrue service
and provide benefits to CBA Employees and future employees of the Company who
are members of the CBU and are eligible to participate in the Seller Plan and to
recognize service to the Company after the Closing Date for all purposes until
the earlier of (i) the termination of such employees employment with the
Company, (ii) the ineligibility of such employee to participate in the Seller
Plan or (iii) the Expiration Date. The Company will not become an adopting
employer under the Seller Plan. Seller will not terminate the Seller Plan with
respect to such employees prior to the Expiration Date.
(D) All contributions required under the Seller Plan in the event
that paragraph 4(o)(iii)(B) or (C) is applicable will be paid by the Seller. The
Company will reimburse Seller annually for actuarially-determined costs of
benefits accrued during such year for Company participants under the Seller Plan
for periods after the Closing Date. In the case of (B) or (C) above, the Company
will notify Seller from time to time of the employment status, or termination of
employment, of its employees covered under the Seller Plan. The parties intend
that the Company not be treated as an employer under a multiple employer pension
plan or any other pension plan. To the extent that the Company is treated for
any purpose as an adopting employer under the Seller Plan, then to the extent of
any Loss incurred by the Company for such liability, Seller will indemnify the
Company for any Loss from the operation, administration or termination of the
Seller Plan, unless such Loss results from the Company's action or failure to
act after the Closing Date.
(p) FINANCING. As of the Closing Date, Buyer will have at least $2 million
in common equity capital.
(q) NONDISCLOSURE. After the Closing, except as required by Law or court
order, Seller shall not disclose, or use directly or indirectly, to or for the
benefit of any person or entity other than the
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Company, and Seller will use all reasonable efforts to prevent any affiliate
from disclosing, any confidential or proprietary information, data or materials
of or related to the Company.
(r) NONCOMPETITION. For a period of five years from and after the Closing
Date, Seller will not (a) engage directly or indirectly in any business that the
Company conducts as of the Closing Date, except that Seller may (i) own not more
than five percent of the outstanding stock of any publicly-traded corporation,
(ii) retain its interest in Loomis, Fargo & Co., and (iii) own and operate for a
period not more than 12 months a business that derives less than 25 percent of
its revenues from activities in competition with the business that the Company
conducts as of the Closing Date other than any business owned or operated by
Seller or any of its Affiliates (other than the Company) as of the Closing Date
or for which Seller or any of its Affiliates (other than the Company) has
entered into a definitive agreement to acquire as of the Closing Date or (b)
solicit any employee of the Company to terminate such employment.
(s) ACCOUNTS RECEIVABLE. After the Closing the Company will pursue the
collection of accounts receivable existing at the Closing ("Closing
Receivables") generally in the same manner and at the same level of diligence as
the Company shall pursue the collection of its other accounts receivable. Not
later than 200 days after the Closing Date, Buyer shall give notice, certified
by its chief financial officer, to Seller setting forth the collection of
Closing Receivables through the 180th day after Closing and Buyer's calculation
of the excess, if any, of the uncollected Closing Receivables over the bad debt
reserve reflected on the Closing Balance Sheet. Seller shall have 30 days
following the date of such notice to object to such calculation. If Seller fails
to deliver such notice of objection within such period, Seller shall be
conclusively presumed to agree to the calculation delivered by Buyer. If Seller
delivers such notice of objection, Buyer and Seller shall negotiate in good
faith to resolve any dispute and if they are unable to resolve such dispute
within 20 days after Seller's notice of objection, the dispute shall be settled
by submitting such dispute to an accounting firm of national standing. The
decision of such firm shall be final and binding on the parties. The expenses of
such firm will be borne by the non-prevailing party. Any such excess will be
satisfied through an offset by Buyer against the principal amount of the
Convertible Note.
(t) SUFFICIENCY OF OPERATIONS. If the sum of (i) EBITDA less (ii) not more
than $3 million of Capital Expenditures for the 12-month period ending each
March 31 (or such shorter period ending March 31, 1999) prior to April 30, 2000
("Adjusted EBITDA") is less than Interest Expense for such 12 month (or shorter)
period, then within five business days after the anniversary date of Closing,
Seller shall pay Buyer an amount not to exceed the lesser of (i) the difference
between Adjusted EBITDA and Interest Expense or (ii) the cash amount, if any,
actually paid as interest to the holder(s) of the Convertible Note in the 30
days up to and including the date Seller is obligated to make payment hereunder.
Prior to April 30 of each year, Buyer shall deliver to Seller a certificate
setting forth in reasonable detail Buyer's calculation of EBITDA, Capital
Expenditures, Interest Expense and the calculation of any payment due hereunder.
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5. CONDITIONS TO CLOSING.
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(a) CONDITIONS TO BUYER'S OBLIGATION. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to the
following conditions precedent (any of which may be waived by Buyer, in whole or
in part):
(i) All of Seller's representations and warranties in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as if made on the Closing Date.
(ii) Seller shall have performed in all material respects all of the
covenants and agreements contained in this Agreement to be performed by it
before or at Closing.
(iii) No action or proceeding before any court or governmental body
will be pending or threatened wherein an order, decree or judgment would prevent
any of the transactions contemplated hereby or cause such transactions to be
declared unlawful or rescinded.
(iv) Seller shall have received from its lenders the consents and
approvals required to consummate the transactions contemplated in this
Agreement, to release any pledge of the Shares and to release any guarantees by
the Company of Seller's indebtedness. Seller shall have tendered transfer of the
Shares free and clear of any Security Interest.
(v) Any modifications to the Disclosure Schedule delivered by
Seller in accordance with paragraph 4(e) shall not reflect any Material Adverse
Effect.
(vi) Buyer shall have obtained on terms and conditions reasonably
satisfactory to it financing for $10 million of working capital, of which at
least $2 million shall be common equity capital; provided that this condition
will be deemed satisfied as of May 11, 1998.
(vi) Seller shall have delivered to Buyer the following documents:
(1) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers) for transfer to Buyer;
(2) a certificate executed by an officer of Seller certifying
that each of Seller's representations and warranties in this Agreement are true
and correct as of the Closing Date (giving full effect to any supplement to the
Disclosure Schedule delivered by Seller prior to the Closing Date in accordance
with paragraph 4(e) hereof);
(3) an assumption agreement dated the Closing Date in form and
substance reasonably acceptable to Buyer and Seller providing for the assumption
by Seller of the Casualty Claims;
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(4) an assignment and coexistence agreement relating to
certain trademarks dated the Closing Date substantially in the form of Exhibit
C; and
(5) a transition services agreement relating to assistance in
the administration of certain Company medical insurance plans.
(b) CONDITIONS TO SELLER'S OBLIGATION. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions precedent (any of which may be waived
by Seller, in whole or in part):
(i) All of Buyer's representations and warranties in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as if made on the Closing Date.
(ii) Buyer shall have performed in all material respects all of the
covenants and agreements contained in this Agreement to be performed by it
before or at Closing.
(ii) No action or proceeding before any court or governmental body
will be pending or threatened wherein an order, decree or judgment would prevent
any of the transactions contemplated hereby or cause such transactions to be
declared unlawful or rescinded.
(iv) Buyer shall have delivered to Seller (or subject to the
satisfaction of the conditions set forth in paragraph 5(a) tendered delivery
thereof) the Buyer Note and Convertible Note.
(v) Buyer shall have delivered to Seller a certified copy of the
resolutions of the board of directors of the Buyer, authorizing the execution,
delivery and performance of this Agreement and all documents to be executed and
payments to be delivered to Seller at Closing.
(vi) Buyer shall have delivered to Seller evidence in such form
reasonably satisfactory to Seller that Buyer has at least $10 million in working
capital, of which at least $2 million shall be common equity capital, all of
which has been funded at or before the Closing or supported by financial
institutions reasonably acceptable to Seller.
6. TERMINATION. This Agreement may be terminated at any time prior to Closing
-----------
as follows:
(a) by mutual consent of Seller and Buyer;
(b) by Buyer or Seller (A) in the event the other party has breached in
any material respect any representation, warranty or covenant contained herein,
the non-breaching party has notified the other of such breach and the breach has
continued without cure for a period of 30 days after notice of breach or (B) if
the Closing shall not have occurred on or before May 30, 1998 by reason of the
failure of any condition precedent under paragraph 6 hereof (unless the failure
results primarily from such party itself breaching any representation, warranty
or covenant contained herein);
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If this Agreement is terminated, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other party,
other than any liability of any party then in breach, except that if Seller
terminates this Agreement for any reason other than breach by Buyer, Seller
shall pay to Buyer a fee of $300,000.
7. INDEMNIFICATION.
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(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES; COVENANTS. All
representations and warranties set forth in this Agreement will survive the
Closing (and any investigation by Buyer) and continue in full force and effect
for a period of three years thereafter; provided, however, that the
representations and warranties contained in paragraph 2(e) will survive the
Closing and continue in full force and effect forever, the representations and
warranties contained in paragraph 2(p) will survive the Closing and continue in
full force and effect until the applicable statute of limitations shall have run
and the representations and warranties contained in paragraph 2(q) will survive
the Closing and continue in full force and effect for a period of five years
thereafter. Such representations and warranties shall thereafter expire, in each
case except with respect to breaches and violations specified in a written claim
for indemnification under this paragraph 7 prior to such expiration date. All
covenants set forth in this Agreement will survive the Closing and continue in
full force and effect until the applicable statute of limitations shall have
run.
(b) CASUALTY CLAIM AND ASSUMED LIABILITY INDEMNIFICATION. Seller agrees to
indemnify and hold Buyer harmless from and against, and to defend against any
Loss resulting from, relating to or caused by any Casualty Claim or Assumed
Liability.
(c) ENVIRONMENTAL INDEMNIFICATION. Subject to the provisions of paragraph
7(g) and to the extent such representations and warranties survive as set forth
in paragraph 7(a), Seller agrees to indemnify and hold Buyer harmless from and
against, and to defend against any Loss resulting from, relating to or caused by
(i) any breach of any representation or warranty contained in paragraph 2(q)
other than representations or warranties relating to any underground storage
tank (as defined in 42 U.S.C. Section 6991 et seq.) ("UST") and (ii) any
investigation, monitoring, remediation or other clean up of Hazardous Substances
released on or before the Closing from any UST located on any parcel of property
owned, leased or used by the Company or under the ownership, operation or
control of the Company or the removal, improvement, replacement or repair of any
such UST; provided, however, that Seller shall have no obligation to make any
payment pursuant to this paragraph 7(c) with respect to any individual UST
unless and until the aggregate amount of all Losses relating to such UST exceeds
$50,000 and then only for the amount of such excess. Any investigation,
monitoring, remediation, clean up, removal, improvement, replacement or repair
undertaken pursuant to this paragraph shall be performed in a reasonable and
cost-effective manner, taking into account the current use of the site, and
shall be limited to those actions reasonably necessary to comply with those
federal and state requirements relating to USTs and, as applicable, to obtain a
"no further action" letter from the Governmental Authority having jurisdiction
over a UST or other reasonably satisfactory proof of closure of a UST under or
pursuant to Environmental Laws. Buyer agrees to (and after the Closing to cause
the Company to) use reasonable efforts to perform
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any investigatory, remedial or other actions in a manner that will permit Buyer
or the Company to recover the maximum available funds under any applicable state
UST funds and any applicable insurance policies and apply for any reimbursements
or payments from such funds or policies on a timely basis.
(d) GENERAL INDEMNIFICATION BY SELLER. Subject to the provisions of
paragraph 7(g), Seller agrees to indemnify and hold Buyer (and after the Closing
the Company) harmless from and against, and to defend against, any Loss
resulting from, relating to or caused by (i) the breach of any representation or
warranty contained in paragraph 2 to the extent such representation and warranty
survives as set forth in paragraph (a) above (except for paragraph 2(k), which
will be governed exclusively by paragraph 4(s), paragraph 2(p), which will be
governed exclusively by the provisions thereof and paragraph 2(q), which will be
governed exclusively by paragraph 7(c)), (ii) any Indemnified Liability, (iii)
the breach of any covenant or agreement of Seller contained herein, or (iv) any
claim or cost incurred with respect to any obligations to pay any broker's or
finder's fee or any other fee or commission incurred by Seller or any of its
Affiliates.
(e) GENERAL INDEMNIFICATION BY BUYER. Subject to the provisions of
paragraph 7(g), Buyer agrees to indemnify and hold Seller and each of its
Affiliates (excluding after the Closing the Company) harmless from and against,
and to defend against, any Loss resulting from, relating to or caused by (i) the
breach of any representation or warranty contained in paragraph 3 to the extent
such representation and warranty survives as set forth in paragraph (a) above,
(ii) the breach of any covenant or agreement of Buyer contained herein, (iii)
any claim or cost incurred with respect to any obligations to pay any broker's
or finder's fee or any other fee or commission incurred by Buyer or any of its
Affiliates; or (iv) any claim made arising out of acts or omissions by the
Company after the Closing.
(f) EXCLUSIVE REMEDY. In the absence of fraud that has a Material Adverse
Effect and notwithstanding any Law to the contrary and any rights that would
otherwise be available thereunder, the indemnification provisions of this
Agreement set forth the sole and exclusive remedy of Buyer and each of its
Affiliates (including the Company) following the Closing against Seller and its
Affiliates, and of Seller and each of its Affiliates following the Closing
against Buyer and its Affiliates, with respect to any claim for relief based
upon, arising out of or otherwise in respect of this Agreement and the
transactions contemplated hereby.
(g) LIMITATION OF LIABILITY.
(i) No Person shall be liable under this paragraph 7 for (A) any Loss
that is contingent, unless and until such Loss becomes an actual liability and
is due and payable; provided, however, that this paragraph 7(g)(A) shall not
operate to avoid a claim for indemnification with respect to which timely notice
is given where the Loss is contingent at the time such claim is made; (B) any
Loss if and to the extent a reserve or provision for such Loss was included on
the Closing Balance Sheet; (C) any Loss if and to the extent such Loss would not
have occurred but for any voluntary act or omission after the date hereof by
Buyer or after Closing by any Affiliate of Buyer (including the Company);
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(D) any Loss if and to the extent covered by a policy of insurance covering the
Company and payment is due under such policy by the insurer or would have been
due had the insurance policies coverage amounts maintained by the Company prior
to the Closing been maintained by the Company after the Closing; (E) any Loss if
and to the extent the Person seeking indemnification has already recovered such
Loss pursuant to this Agreement or from any third party; or (F) any punitive,
special, indirect, incidental or consequential damages or lost profits payable
to Buyer.
(ii) The liability of Seller under paragraph 7(c)(i), 7(d)(i) and
7(d)(ii) shall be further limited in that Seller shall have no liability under
such paragraphs unless and until the aggregate amount of all Losses arising out
of the matters set forth in such paragraphs in the aggregate exceed $200,000 and
then only for the amount of such excess. Seller's liability for Losses under
paragraph 7(d)(i) shall not exceed an aggregate of $4 million. Seller liability
for Losses under paragraph 7(c) shall not exceed an aggregate of $10 million.
(h) DEFENSE AND PAYMENT OF CLAIMS.
(i) If any third party shall notify any party under this Agreement
(the "Indemnified Party") with respect to any matter which may give rise to a
claim for indemnification against the other party (the "Indemnifying Party")
under this paragraph 7, then the Indemnified Party will give reasonably prompt
notice to the Indemnifying Party; provided that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless the Indemnifying Party
is prejudiced. Such notice will describe the claim in reasonable detail, include
copies of all material written evidence thereof and indicate the estimated
amount, if reasonably practicable, of the Loss that has been or may be sustained
as a result of such third party claim. The Indemnifying Party has the right to
participate in, or by giving notice to the Indemnified Party, to assume and
control the defense of such claim at such Indemnifying Party's own expense. If
the Indemnifying Party does not assume the defense of such claim or shall not
diligently defend such claim so assumed, the Indemnified Party may defend
against the matter in any manner it reasonably may deem appropriate at the
Indemnifying Party's expense and the Indemnifying Party will reimburse the
Indemnified Party periodically for the reasonable costs of defending such
matter, including attorneys' fees and expenses. At the Indemnifying Party's
reasonable request, the Indemnified Party will cooperate with the Indemnifying
Party in the preparation of any such defense, and the Indemnifying Party will
reimburse the Indemnified Party for any expenses incurred in connection with
such request. Within 30 days after any notice to the Indemnifying Party that a
third party claim has been settled or final judgment in respect of such claim
has been issued, the Indemnifying Party shall deliver cash payment to the
Indemnified Party in the amount set forth in such notice.
(ii) The Indemnified Party will give reasonably prompt notice to the
Indemnifying Party of the incurrence of any Loss that does not result from a
third party claim. Any such notice will describe the claim of Loss in reasonable
detail, include copies of all material written evidence thereof and indicate the
estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party as a result. Within 30 days of the notice of
such claim, the Indemnifying Party shall deliver cash payment to the Indemnified
Party in the amount set forth in such
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notice, unless the procedures for arbitration set forth in paragraph 7(h)(iii)
below are elected within such 30 day period.
(iii) If the Indemnifying Party disagrees as to the amount of any
Loss that arises out of a direct claim made pursuant to paragraph 7(h)(ii)
above, at the request of the Indemnifying Party the matter shall be settled
exclusively by arbitration held in such place as is determined by the
arbitrators, pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be heard before one arbitrator,
experienced in the matters at issue, to be selected by the Indemnified Party and
the Indemnifying Party. The arbitrator shall apply the law of the State of
Illinois applicable to contracts made and to be performed entirely in such state
(without giving regard to the conflicts of law provisions thereof) in resolving
such dispute. The arbitrator shall not have power or authority to alter, modify,
amend, add to or subtract from any term or provision of this Agreement, nor to
grant injunctive relief of any nature. In all other respects, the Commercial
Arbitration Rules of the American Arbitration Association shall govern the
arbitration. The parties agree that the decision of the arbitrator pursuant to
this paragraph 7(h)(iii) shall be final and nonappealable and may be enforced by
the Indemnifying Party or the Indemnified Party in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. Any amount awarded by the arbitrator pursuant to this paragraph
7(h)(iii) shall be paid promptly to the appropriate party by wire transfer to an
account designated by such party. The expenses of such arbitration will be borne
by the non-prevailing party.
8. DEFINITIONS. The following terms shall have the following meanings for
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purposes of this Agreement:
"Affiliate" of any particular person or entity means any other person or
entity controlling, controlled by or under common control with such particular
person or entity. "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person or entity, whether through ownership of voting securities, by agreement
or otherwise.
"Assumed Liability" means any liability or obligation of the Company that
relates to:
(i) the lease for real estate located in Charlotte, N.C.
constituting the Company's former headquarters on the terms existing as of the
Closing Date;
(ii) the lease for real estate located in Atlanta, GA constituting
the Company's current headquarters on the terms existing as of the Closing Date
beginning on the date that the Company vacates such real estate;
(iii) the payment due in May 1998 to certain employees of the Company
pursuant to the collective bargaining agreements listed in section 2(m) of the
Disclosure Schedule;
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(iv) an amount not to exceed $20,000 in any month under the
agreements listed on section 2(m)(vi) of the Disclosure Schedule on the terms
existing as of the Closing Date; and
(v) any Loss associated with the termination by Seller of the
employment of the Company's President.
"Benefit Plans" means any (A) nonqualified deferred compensation or
retirement plan or arrangement that is an Employee Pension Benefit Plan, (B)
qualified defined contribution retirement plan or arrangement that is an
Employee Pension Benefit Plan, (C) qualified defined benefit retirement plan or
arrangement that is an Employee Pension Benefit Plan (including any
multiemployer plan), or (D) Employee Welfare Benefit Plan.
"Capital Expenditures" means the aggregate of all expenditures (whether in
cash or accrued as liabilities) by Buyer and its consolidated subsidiaries that,
in conformity with GAAP, are included or required to be included in the
property, plant or equipment or capitalized software account reflected in the
consolidated balance sheet of Buyer and its consolidated subsidiaries.
"Casualty Claim" means any claim, action, suit or other proceeding asserted
against the Company with respect to events, circumstances or activities
occurring prior to the Closing Date (i) for worker's compensation, (ii) arising
out of or relating to the use of motor vehicles in connection with or related to
its business or operations, or (iii) arising out of or relating to acts or
omissions of the Company's drivers, courier guards or their supervisors relating
to their employment, in each case that is an act or omission that otherwise is
of a type generally covered under typical general liability insurance policies.
"Closing" has the meaning specified in paragraph 1(e).
"Closing Balance Sheet" has the meaning specified in paragraph 1(c).
"Closing Date" has the meaning specified in paragraph 1(e).
"Closing Receivables" has the meaning specified in paragraph 4(s).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Pony Express Delivery Services, Inc., a Delaware
corporation.
"Debt" means, with respect to any Person, (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, (iii) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, but excluding trade accounts
payable arising in the ordinary course of business, (iv) all obligations of such
Person under any capital lease of real or personal property that in accordance
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with GAAP has been recorded as a capitalized lease obligation and (v) all
indebtedness of another Person guaranteed directly or indirectly in any manner
by such Person, provided that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course of
business, or any obligation or liability of such Person in respect of leasehold
interests assigned by such Person to any other Person.
"EBITDA" means the sum, without duplication, of (i) the net income (or
loss) of Buyer and its consolidated subsidiaries as determined in accordance
with GAAP, (ii) provisions for taxes based on income, (iii) Interest Expense,
(iv) to the extent that net income has been reduced thereby, amortization
expense, depreciation expense and other non-cash expenses.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental Law" means any federal, state or local law, legislation,
ordinance, rule, code, common law, license, permit, authorization, judicial or
administrative decision, order, injunction or agreement between the Company and
any Governmental Authority, (a) relating to the protection, preservation or
restoration of the environment (including air, water vapor, surface water,
ground water, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource), or to human health or safety, or (b)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances. The term includes the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. Section 9601 et seq.)
("CERCLA"), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.) ("RCRA"). The Clean Water Act, (33 U.S.C. Section 1251 et seq.), the
Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substance Control Act
(15 U.S.C. Section 2601 et seq.), Federal Insecticide Fungicide Rodenticide Act
(7 U.S.C. Section 136 et seq.), Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.), and all applicable judicial, administrative, and
regulatory decrees, judgments, orders and regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Expiration Date" has the meaning specified in paragraph 4(o).
"Financial Statement" has the meaning specified in paragraph 2(f).
"GAAP" means generally accepted United States accounting principles,
consistently applied.
"Governmental Authority" means any federal, territorial, state or local
governmental authority, supra-governmental authority, instrumentality, court,
governmental or self-regulatory organization, commission or tribunal or any
regulatory, administrative or other agency, or any political or other
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subdivision, department or branch of any of the foregoing whether within or
outside the United States.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, under
any Environmental Law applicable in the jurisdiction in which the substance is
present. Hazardous Substance includes any toxic waste, "pollutant or
contaminant," toxic substance, "hazardous waste," "solid waste," special waste,
"hazardous substance" or petroleum or any derivative or by-product thereof,
radon, radioactive material, asbestos containing material, urea formaldehyde
foam insulation, lead and polychlorinated biphenyl.
"Indemnified Liability" means any liability or obligation of the Company
that relates to any period prior to the Closing, whether known (including items
listed on the Disclosure Schedule) or unknown, fixed or contingent, other than:
(i) accounts payable and accrued expenses that were accrued as current
liabilities on the Closing Balance Sheet;
(ii) obligations to furnish services after the Closing under sales
contracts and customer orders;
(iii) obligations to pay for goods and services that will be furnished to
the Company after the Closing that arose out of transactions in the ordinary
course of business of the Company; and
(iv) obligations to be performed after the Closing under leases, licenses
and agreements existing as of the Closing arising from the operation of the
business of the Company in the ordinary course.
"Interest Expense" means for any period the total interest expense with
respect to all Debt for such period on a consolidated basis determined in
accordance with GAAP.
"Knowledge" means actual knowledge after reasonable investigation of facts,
circumstances, practices, actions or transactions of the executive officers of
Seller and the Company.
"Law" means any law, statute, regulation, ordinance, order, decree or
judgment imposed by any Governmental Authority.
"Loss" means any loss, liability, damage, claim or expense (including
reasonable legal fees, expenses and costs).
"Material Adverse Effect" means a material adverse effect on the assets,
business, financial condition or results of operations of the Company, taken as
a whole.
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"Net Working Capital" means (i) the sum of cash, cash equivalents, accounts
receivable, prepaid expenses and other current assets, less (ii) outstanding
checks, accounts and notes payable, accrued expenses and accrued Taxes payable
(other than for income Taxes).
"Person" means any individual, corporation, partnership, limited
partnership, trust, association or other entity.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge or other lien, other than (i) mechanic's and similar liens,
(ii) liens for Taxes not yet due and payable, (iii) liens arising under worker's
compensation, unemployment insurance, social security, retirement and similar
legislation, (iv) liens on goods in transit incurred pursuant to documentary
letters of credit, (v) purchase money liens and liens securing rental payments
under capital lease arrangements and (vi) other liens arising in the ordinary
course of business and not incurred in connection with the borrowing of money.
"Seller's Group" means for the purposes only of matters relating to Taxes
any "affiliated group" (as defined in Section 1504(a) of the Code without the
limitations contained in Section 1504(b) of the Code) that includes the Seller
or any predecessor of or successor to Seller (or another such predecessor or
successor).
"Seller Plan" means the Borg-Warner Security Corporation Retirement Plan.
"Senior Debt" means the principal of (and premium, if any, on) and interest
on and other amounts de on or in connection with any Debt of Buyer, whether
outstanding on the date hereof or hereafter created, incurred or assumed unless,
in the case of any particular Debt, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Debt shall not be senior in right of payment to the Convertible Note. Senior
Debt shall not include (i) Debt evidenced by the Buyer Note or the Convertible
Note, (ii) Debt of Buyer that by operation of law is subordinate to any general
unsecured obligations of Buyer, (iii) Debt of Buyer to any of its subsidiaries,
(iv) to the extent it might constitute Debt, any liability for federal, foreign,
state or local taxes owed or owing by Buyer and (v) to the extent it might
constitute Debt, trade account payables owed or owing by Buyer.
"Shares" means all of the issued and outstanding shares of capital stock of
the Company.
"Subsidiary"means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Tax Claim" has the meaning specified in paragraph 4(h)(iii).
"Tax" means any tax, charge, fee, duty, levy or other assessment, including
any income, gross receipts, net proceeds, ad valorem, turnover, stamp, lease,
fuel, interest equalization, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs
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duties, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind, including any interest, penalty or addition thereto, whether
disputed or not, imposed by any government of the United States or any foreign
country, or any state or political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government or quasi-governmental agencies.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto and any amendment thereof.
9. MISCELLANEOUS.
-------------
(a) EXPENSES. Each party agrees that unless otherwise expressly provided
herein, it shall be responsible for its own costs and expenses, including all
legal, consulting, financial services and accounting costs and expenses;
provided, however, that Buyer shall pay all sales, use, stamp, transfer,
service, recording, real estate and like taxes or fees imposed by any
Governmental Authority in connection with this Agreement.
(b) NOTICES. All notices and other communications by either party will be
in writing to the other party and will be deemed duly given when delivered by
United States certified mail or by Airborne Express, Federal Express or other
reliable courier service or by telecopy addressed as follows:
if to Seller, to: if to Buyer, to:
200 South Michigan Avenue Mustang Holdings, Inc.
Chicago, Illinois 60604 4200 Somerset, Suite 209
Attention: Chief Financial Officer Prairie Village, KS 66208
Facsimile No.: 312/322-8629 Facsimile No.: 913/385-5577
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
(c) ASSIGNMENT. Neither party shall assign this Agreement or any part
hereof without the written consent of the other party. Except as otherwise
provided, this Agreement will bind and inure to the benefit of the parties and
their respective successors and assigns.
(d) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. No waiver by any party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
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(e) COUNTERPARTS. This Agreement may be executed in counterparts, and any
number of counterparts signed in the aggregate by the parties will constitute a
single, original instrument.
(f) DISCLOSURE SCHEDULE. Neither the specification of any dollar amount in
or relating to any representation or warranty contained in this Agreement nor
the inclusion of any specific item in the Disclosure Schedule is intended to
imply that such amount, or higher or lower amounts, or the item so included or
other items, are or are not material, and no party shall use the fact of the
setting forth of any such amount or the inclusion of any such item in any
dispute or controversy between the parties as to whether any obligation, item or
matter not described herein or included in the Disclosure Schedule is or is not
material for purposes of this Agreement. Unless this Agreement specifically
provides otherwise, neither the specification of any item or matter in any
representation or warranty contained in this Agreement nor the inclusion of any
specific item in the Disclosure Schedule is intended to imply that such item or
matter, or other items or matters, are or are not in the ordinary course of
business, and no party shall use the fact of the setting forth or the inclusion
of any such item or matter in any dispute or controversy between the parties as
to whether any obligation, item or matter not described herein or included in
the Disclosure Schedule is or is not in the ordinary course of business for
purposes of this Agreement. Disclosure of any fact or item in any part of the
Disclosure Schedule shall, should the existence of the fact or item or its
contents be relevant to any other part of the Disclosure Schedule, be deemed to
be disclosed with respect to that other part of the Disclosure Schedule, whether
or not an explicit reference appears.
(g) ENTIRE AGREEMENT. Except for the Confidentiality Agreement, dated
November 24, 1997 (the "Confidentiality Agreement"), between Seller and Buyer,
which Confidentiality Agreement shall remain in full force and effect pursuant
to the respective terms of such agreement, this Agreement (including the
documents referred to herein) constitutes the entire agreement between the
parties and supersedes any prior understandings and agreements between the
parties relating to its subject matter. The Exhibits and Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof. This
Agreement shall not confer any rights or remedies upon any Person other than the
parties and their respective successors and permitted assigns.
(h) CHOICE OF LAW. This Agreement will be governed by and construed in
accordance with the internal law (and not the law of conflicts) of the State of
Illinois.
(i) CONSTRUCTION. No party or parties will be deemed the drafter of this
Agreement and if this Agreement is construed by a court of law, such court will
not construe this Agreement or any provision against any party as its drafter.
Whenever possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement. The
descriptive headings of the sections and paragraphs of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
Where appropriate in the context the singular will be deemed to include the
plural, the plural to include the singular, the masculine or neuter genders
shall include all genders and the past, present and future tenses to include
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the others. The word "including" shall mean including without limitation. The
terms "material," "materiality" and like terms when used with respect to the
Company shall be interpreted in the context of the assets, business, financial
position or results of operations of the Company, taken as a whole.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.
SELLER:
BORG-WARNER SECURITY CORPORATION
/s/ Brian S. Cooper
By: _______________________________
Name Printed: Brian S. Cooper
Title: Treasurer
BUYER:
MUSTANG HOLDINGS, INC.
/s/ Terry Matlack
By:_______________________________
Name Printed:Terry Matlack
Title: President
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