EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
BY AND AMONG
CITY TRUCK HOLDINGS, INC.
AND
HDA PARTS SYSTEM, INC.
AND
THE SHAREHOLDERS OF
TISCO, INC. AND TISCO OF REDDING, INC.
JANUARY 12, 1999
TABLE OF CONTENTS
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PAGE
ARTICLE I. PURCHASE AND SALE......................................... 1
1.1 Purchase Price................................................. 1
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1.2 Post-Closing Purchase Price Adjustment......................... 2
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ARTICLE II. CLOSING................................................... 3
2.1 Closing........................................................ 3
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2.2 Sale of Capital Stock of the Companies......................... 3
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2.3 Payment of Purchase Price...................................... 3
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2.4 Section 338(h)(10) Election.................................... 3
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE
EXISTING SHAREHOLDERS..................................... 3
3.1 Corporate Organization and Standing............................ 3
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3.2 Authorization.................................................. 4
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3.3 No Conflict or, Violation...................................... 4
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3.4 Capitalization of the Companies................................ 4
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3.5 Title to Shares................................................ 5
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3.6 Facilities..................................................... 6
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3.7 Financial Statements........................................... 8
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3.8 Books and Records.............................................. 9
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3.9 Litigation..................................................... 9
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3.10 Licenses and Permits: Compliance with Laws..................... 9
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3.11 Tax Matters.................................................... 10
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3.12 Brokers, Finders............................................... 11
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3.13 Absence of Certain Changes..................................... 11
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3.14 Material Contracts............................................. 15
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3.15 Proprietary Rights............................................. 16
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3.16 Labor Matters.................................................. 18
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3.17 Consents....................................................... 18
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3.18 Employee Benefit Plans: Employment Agreements.................. 18
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3.19 Compliance with Environmental Laws............................. 21
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3.20 Certain Business Relationships with the Company................ 25
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3.21 Undisclosed Liabilities........................................ 25
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3.22 Insurance...................................................... 25
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3.23 Accounts Receivable............................................ 26
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3.24 Inventory...................................................... 26
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3.25 Payments....................................................... 26
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3.26 Customers...................................................... 27
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3.27 Computer Systems............................................... 27
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3.28 Investment Intent: Accredited Investors; Suitability
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and Sophistication............................................. 27
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3.29 Material Misstatements Or Omissions............................ 29
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND HDA......... 29
4.1 Corporate Organization and Standing............................ 29
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4.2 Authorization.................................................. 29
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4.3 No Conflict or Violation....................................... 29
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4.4 Capitalization of Holdings and HDA............................. 30
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4.5 Subsidiaries of HDA............................................ 30
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4.6 HDA Financial Statements....................................... 30
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4.7 Stock.......................................................... 30
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4.8 Investment..................................................... 31
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4.9 Sufficient Funds............................................... 31
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ARTICLE V. POST-CLOSING COVENANTS..................................... 31
5.1 Further Assurances............................................. 31
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5.2 Tax Matters.................................................... 32
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ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY HOLDINGS
AND HDA.................................................... 36
6.1 No Injunctive Proceedings...................................... 36
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6.2 Representations and Warranties................................. 36
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6.3 Performance of Agreements...................................... 36
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6.4 Compliance Certificate......................................... 36
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6.5 Stock Certificates............................................. 36
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6.6 Stock Books.................................................... 36
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6.7 Officers and Directors......................................... 36
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6.8 Opinion of Counsel............................................. 36
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6.9 Consents, Etc.................................................. 36
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6.10 Ancillary Agreements........................................... 36
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6.11 Nonforeign Affidavit........................................... 37
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ARTICLE VII. CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY THE
EXISTING SHAREHOLDERS...................................... 37
7.1 No Injunctive Proceedings...................................... 37
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7.2 Representations and Warranties................................. 37
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7.3 Performance of Agreements: Instruments of Transfer............. 37
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7.4 Compliance Certificates........................................ 37
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7.5 Ancillary Agreements........................................... 37
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ARTICLE VIII. ACTIONS BY THE PARTIES AFTER THE CLOSING................... 38
8.1 Indemnification by the Existing Shareholders................... 38
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8.2 Indemnification by Holdings and HDA............................ 38
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8.3 Survival of Representations, Warranties and Covenants.......... 39
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8.4 Threshold...................................................... 39
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8.5 Notice and Opportunity to Defend............................... 39
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8.6 Indemnification Payments....................................... 39
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8.7 Tax Effect..................................................... 40
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ARTICLE IX. MISCELLANEOUS................................................ 40
9.1 Expenses....................................................... 40
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9.2 Notices........................................................ 40
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9.3 Counterparts................................................... 41
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9.4 Entire Agreement............................................... 41
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9.5 Headings....................................................... 41
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9.6 Assignment: Amendment of Agreement............................. 41
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9.7 Governing Law.................................................. 42
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9.8 Further Assurances............................................. 42
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9.9 No Third-Party Rights.......................................... 42
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9.10 Non-Waiver..................................................... 42
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9.11 Severability................................................... 42
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9.12 Incorporation of Exhibits and Schedules........................ 42
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9.13 Knowledge...................................................... 42
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iii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of January
12, 1999, is entered into by and among City Truck Holdings, Inc., a Delaware
corporation ("Holdings"), HDA Parts System, Inc., an Alabama corporation
("HDA"), the shareholder of Tisco, Inc., a California corporation ("Tisco"),
identified on Annex A hereto (the "Existing Tisco Shareholder") and each of the
shareholders of Tisco of Redding, Inc., a California corporation ("Redding" and,
together with Tisco, the "Companies"), identified on Annex B hereto
(individually, an "Existing Redding Shareholder" and collectively, the "Existing
Redding Shareholders"). The Existing Tisco Shareholder and the Existing Redding
Shareholders are referred to herein as each an "Existing Shareholder" and
collectively, the "Existing Shareholders." Holdings, HDA and the Existing
Shareholders are referred to herein as each a "Party" and collectively, the
"Parties."
RECITALS
WHEREAS, the Existing Shareholders own all of the capital stock of the
Companies;
WHEREAS, HDA desires to acquire all of the capital stock of the
Companies;
AGREEMENT
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE
1.1 Purchase Price. Upon the terms and subject to the conditions set
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forth herein, HDA will purchase from the Existing Shareholders all of the
capital stock of the Companies for an aggregate price (the "Purchase Price")
determined as follows: (a) cash in an amount equal to (i) $5,750,000 (Five
Million Seven Hundred Fifty Thousand Dollars), (ii) (A) minus the amount (if
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any) by which the distributions made by Tisco or Redding to the Existing Tisco
Shareholder or any Existing Redding Shareholder or any persons related directly
or indirectly by blood or marriage to the Existing Tisco Shareholder or any
Existing Redding Shareholder (the "Related Party Distributions") between July
31, 1998 and Closing (as defined) is greater than $630,000 (representing the
aggregate of $390,000 attributable to Taxes (as defined) relating to income of
the Companies paid or estimated to be payable by the Existing Shareholders for
fiscal 1998 and $240,000 attributable to Taxes relating to income of the
Companies paid or estimated to be payable by the Existing Shareholders for the
period between October 1, 1998 and the Closing (such estimated amount, the
"Estimated Existing Shareholders' Taxes")) or (B) plus the amount (if any) by
----
which the Related Party Distributions between July 31, 1998 and Closing is less
than $630,000, payable by wire transfer in immediately available funds to the
Existing Shareholders (the "Estimated Cash Purchase Price"), (b) 1,717 shares of
Common Stock of Holdings, par value $.01 per share (the "Common Stock"), and (c)
7,482.232 shares of Series A Preferred Stock of Holdings, par value $.0l per
share (the "Series A Preferred Stock"). The Purchase Price shall be allocated
among the Existing Shareholders in the manner specified in Annex C. The Taxes
relating to income of the Companies for the period between October 1, 1998 and
the Closing shall include Taxes on income recognized
by the Companies as a result of the election pursuant to Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder contemplated hereby.
1.2 Post-Closing Purchase Price Adjustment.
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(a) Tax Returns. The Existing Shareholders will prepare at their
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expense draft schedules of Taxes relating to income of the Companies payable by
the Existing Shareholders for fiscal 1998 and for the period October 1, 1998 to
the Closing Date (as defined) (the "Draft Tax Obligations"). The Existing
Shareholders will deliver such Draft Tax Obligations to HDA as soon as possible
but in any event within 75 days after the Closing.
(b) Tax Notice.
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(i) Within 30 days after the receipt of the Draft Tax Obligations,
HDA will deliver to the Existing Shareholders a written notice certifying
that either (A) it agrees with the Draft Tax Obligations or (B) it
disagrees with the Draft Tax Obligations, in which case it will provide
therewith a reasonably detailed written report stating the basis for
disagreement with the Draft Tax Obligations (the "Tax Notice"). The
Existing Shareholders shall provide reasonable access to their respective
accountants' work papers and personnel and to such historical financial
information as HDA shall reasonably request in order to review the Draft
Tax Obligations.
(ii) If the Tax Notice is not timely given as described in Section 1
.2(b)(i), the Draft Tax Obligations furnished by the Existing Shareholders
to HDA pursuant to Section 1.2(a) shall be final, binding and conclusive
upon the Parties. If HDA disagrees with such Draft Tax Obligations as
described in Section 1.2(b)(i)(B), and if the disagreement is not resolved
by mutual agreement among the Parties within 30 days following delivery of
the Tax Notice, such dispute will be resolved by a "Big 5" accounting firm
("BFAF"), other than PricewaterhouseCoopers LLP, selected by mutual
agreement of HDA and the Existing Shareholders. The costs of resolving such
a dispute shall be borne equally by HDA and the Existing Shareholders.
(iii) Upon appointment of a BFAF, such BFAF in consultation with the
Parties shall establish a schedule for resolution of the dispute that is
reasonably calculated to result in a resolution as expeditiously as
practicable, and in any event, no later than six months after the Closing
Date. In resolving such dispute, the BFAF shall revise the Draft Tax
Obligations only with respect to the issues raised in the Tax Notice. The
decision of the BFAF shall be final and binding on HDA and the Existing
Shareholders in the absence of manifest error.
(c) Post-Closing Adjustment. Within two business days after a final
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resolution by the BFAF of such disagreements as may arise out the review of the
Draft Tax Obligations in accordance with Section 1.2(b) above, and an
appropriate adjustment to the Draft Tax Obligations to reflect such resolution,
or if Section 1.2(b)(i)(A) or the first sentence of Section 1.2(b)(ii)
applies, two business days after delivery of, or expiration of the period for
delivering, the Tax Notice (as applicable), the actual cash portion of the
Purchase Price (the "Cash Purchase Price") will be determined based on the
Existing Shareholders' Taxes (as adjusted pursuant to this sentence, if
applicable) instead of the Estimated Existing Shareholders' Taxes, and to the
extent that the Estimated Cash Purchase Price was less than the Cash Purchase
Price, the difference and interest
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thereon due to the Existing Shareholders will promptly be paid to the Existing
Shareholders by HDA. Similarly, to the extent the Estimated Cash Purchase Price
was more than the Cash Purchase Price, the excess and interest thereon will be
promptly returned by the Existing Shareholders to HDA. Any amounts payable
pursuant to this paragraph shall bear interest from the Closing Date through the
date of payment at an annual rate equal to LIBOR as reported in The Wall Street
Journal on the Closing Date.
ARTICLE II.
CLOSING
2.1 Closing. The Closing of the transactions contemplated herein (the
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"Closing") shall be held at 10:00 a.m. local time on January 12, 1999 (the
"Closing Date") at the offices of Jones, Day, Reavis & Pogue, 77 West Wacker,
Chicago, Illinois 60601. The place of the Closing and the Closing Date may be
varied by agreement among the parties.
2.2 Sale of Capital Stock of the Companies. On the terms and subject
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to the conditions of this Agreement, on the Closing Date, the Existing
Shareholders shall sell, transfer and assign to HDA, and HDA shall purchase and
acquire from the Existing Shareholders, all of the capital stock of the
Companies.
2.3 Payment of Purchase Price. At the Closing, (a) HDA shall wire
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transfer the Cash Purchase Price in immediately available funds in the amounts
and to the bank accounts designated by the Existing Shareholders on Annex C
hereto (less $500,000 (Five Hundred Thousand Dollars) to be delivered to the
Escrow Agent (as defined) pursuant to Section 8.6 hereof) and (b) Holdings shall
issue and sell, and the Existing Tisco Shareholder shall purchase from Holdings,
the number of shares of Common Stock and Series A Preferred Stock set opposite
each such Existing Shareholder's name on Annex C hereto.
2.4 Section 338(h)(l0) Election. The Existing Shareholders shall
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deliver to HDA such duly executed documents, forms and consents as HDA shall
deem to be reasonably necessary to effect an election pursuant to Section
338(h)(l0) of the Code and the regulations thereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
THE EXISTING SHAREHOLDERS
The Existing Tisco Shareholder with respect to Tisco, and the Existing
Redding Shareholders, jointly and severally with respect to Redding, represent
and warrant to Holdings and HDA as follows, except as set forth in a disclosure
schedule ("Schedule") attached hereto and made a part hereof, the number of each
Schedule corresponding to the Section number to which it refers:
3.1 Corporate Organization and Standing. (a) Tisco is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of California and has all requisite corporate power and authority to own
or lease its properties and to carry on its business as presently conducted.
Tisco has delivered to HDA or its representatives complete and correct copies of
its Articles of Incorporation and Bylaws (or other charter documents) and all
amendments
3
thereto. Tisco is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business as now
being conducted by it or the property owned or leased by it makes such
qualification necessary, except where a failure to be so duly qualified and in
good standing could not reasonably be expected to have a material adverse effect
on the business, operations, assets, results of operations or financial
condition of Tisco, all of which are listed on Schedule 3.1(a). Tisco does not
own, and has not at any time within the past five years owned, any capital stock
of, or other securities or interests evidencing an equity interest in, any
corporation, partnership, limited liability company or other entity.
(b) Redding is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has all requisite
corporate power and authority to own or lease its properties and to carry on its
business as presently conducted. Redding has delivered to HDA or its
representatives complete and correct copies of its Articles of Incorporation and
Bylaws (or other charter documents) and all amendments thereto. Redding is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of the business as now being conducted by
it or the property owned or leased by it makes such qualification necessary,
except where a failure to be so duly qualified and in good standing could not
reasonably be expected to have a material adverse effect on the business,
operations, assets, results of operations or financial condition of Redding, all
of which are listed on Schedule 3.1(b). Redding does not own, and has not at any
time within the past five years owned, any capital stock of, or other securities
or interests evidencing an equity interest in, any corporation, partnership,
limited liability company or other entity.
3.2 Authorization. This Agreement, the Ancillary Agreements (as
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defined), and the transactions contemplated hereby and thereby have been duly
authorized (in the case of non-natural persons). This Agreement has been, and
the Ancillary Agreements will be, duly executed and delivered by the Existing
Shareholders party thereto, and are (or will be, as the case may be) the legal,
valid and binding obligations of the Existing Shareholders party thereto,
enforceable against them in accordance with their terms.
3.3 No Conflict or Violation. Neither the execution and delivery of
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this Agreement, the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby or thereby, will (a) violate, conflict with or
result in or constitute a default under or result in the termination or the
acceleration of, or the creation in any party of any right (whether or not with
notice or lapse of time or both) to declare a default, accelerate, terminate or
cancel any indenture, contract, lease, sublease, loan agreement, note or other
agreement, obligation or liability ("Contractual Obligation") to which the
Companies or any Existing Shareholder is a party or by which it, he or she is
bound or to which its, his or her assets are subject or result in the creation
of any lien or encumbrance upon any of said assets, (b) violate, conflict with
or result in a breach of or constitute a default under any provision of the
Articles of Incorporation or Bylaws (or other organizational documents) of Tisco
or Redding, (c) violate, conflict with or result in a breach of or constitute a
default under any judgment, order, decree, rule or regulation of any court or
governmental agency to which the Companies or any Existing Shareholder is
subject or (d) violate, conflict with or result in a breach of any applicable
rule or regulation of any federal, state, local or other governmental authority.
3.4 Capitalization of the Companies. (a) The authorized capital stock
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of Tisco consists of 100,000 shares of capital stock, without par value ("Tisco
Common Stock"). As of the
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date of this Agreement, 25,000 shares of Tisco Common Stock are outstanding, all
of which shares have been duly authorized, validly issued and are fully paid and
non-assessable and are owned by the Existing Tisco Shareholder (the "Tisco
Shares"). There are (x) no preemptive or similar rights on the part of any
holder of any class of securities of Tisco and (y) no options, warrants,
conversion or other rights, agreements or commitments of any kind obligating
Tisco, contingently or otherwise, to issue, sell or otherwise cause to be
outstanding any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares.
(b) The authorized capital stock of Redding consists of 500,000 shares
of capital stock, without par value ("Redding Common Stock"). As of the date of
this Agreement, 127 shares of Redding Common Stock are outstanding, all of which
shares have been duly authorized, validly issued and are fully paid and non-
assessable and are owned in the aggregate by the Existing Redding Shareholders,
and individually by the person and entity in the amounts specified on Annex B
hereto (the "Redding Shares"). There are (x) no preemptive or similar rights on
the part of any holder of any class of securities of Redding and (y) no options,
warrants, conversion or other rights, agreements or commitments of any kind
obligating Redding, contingently or otherwise, to issue, sell or otherwise cause
to be outstanding any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares.
3.5 Title to Shares. (a) The Existing Tisco Shareholder has, and at
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Closing will have, good and valid title to the Tisco Shares owned by it, free
and clear of any claims, liens, security interests, options, charges,
restrictions and interests of others whatsoever. Upon delivery to HDA at the
Closing of certificates representing the Tisco Shares owned by the Existing
Tisco Shareholder, duly endorsed by it for transfer to HDA, HDA will obtain good
and valid title to such Tisco Shares, free and clear of any claims, liens,
security interests, options, charges, restrictions and interests of others
whatsoever except for any restrictions created by HDA. There are no voting
trusts, proxies, or other agreements or understandings to which Tisco or the
Existing Tisco Shareholder is a party with respect to the voting, dividend
rights or disposition of any of the Tisco Shares. The Existing Tisco Shareholder
has no obligation, absolute or contingent, to any other person or entity to
issue, sell or otherwise dispose of any capital stock of Tisco or to effect any
merger, consolidation, reorganization or other business combination of Tisco or
to enter into any agreement with respect thereto.
(b) The Existing Redding Shareholders have, and at Closing will have,
good and valid title to the Redding Shares owned by them, free and clear of any
claims, liens, security interests, options, charges, restrictions and interests
of others whatsoever. Upon delivery to HDA at the Closing of certificates
representing the Redding Shares owned by the Existing Redding Shareholders, duly
endorsed by them for transfer to HDA, HDA will obtain good and valid title to
such Redding Shares, free and clear of any claims, liens, security interests,
options, charges, restrictions and interests of others whatsoever except for any
restrictions created by HDA. There are no voting trusts, proxies, or other
agreements or understandings to which Redding or any Existing Redding
Shareholder is a party with respect to the voting, dividend rights or
disposition of any of the Redding Shares. The Existing Redding Shareholders have
no obligation, absolute or contingent, to any other person or entity to issue,
sell or otherwise dispose of any capital stock of Redding or to effect any
merger, consolidation, reorganization or other business combination of Redding
or to enter into any agreement with respect thereto.
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3.6 Facilities. Schedule 3.6(a) contains a complete and accurate
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list of all real property used in connection with the business of Tisco ("Tisco
Real Property"), all of which is leased ("Tisco Leased Real Property"), Tisco
does not own any real property. Schedule 3.6(b) contains a complete and accurate
list of all real property used in connection with the business of Redding
("Redding Real Property"), all of which is leased ("Redding Leased Real
Property"), Redding does not own any real property.
(a) Actions. (i) There are no pending or, to the best knowledge of
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Tisco, threatened, condemnation proceedings or other actions, claims, suits,
litigation, proceedings, notices of violation, inquiry or investigations
(collectively, "Tisco Actions") relating to any facility located on the Tisco
Real Property.
(ii) There are no pending or, to the best knowledge of Redding,
threatened, condemnation proceedings or other actions, claims, suits,
litigation, proceedings, notices of violation, inquiry or investigations
(collectively, "Redding Actions") relating to any facility located on the
Redding Real Property.
(b) Leases or Other Agreements. (i) Other than the oral leases
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identified on Schedule 3.6(a) between Tisco and the owner(s) of the Tisco Real
Property, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any person the right to purchase, use or occupy any Tisco
Facility or any Tisco Real Property or any portion thereof, or interest in any
such Tisco Facility or Tisco Real Property.
(ii) Other than the oral lease identified on Schedule 3.6(b) between
Redding and the owner(s) of the Redding Real Property, there are no leases,
subleases, licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any person the right to
purchase, use or occupy any Redding Facility or any Redding Real Property or any
portion thereof, or interest in any such Redding Facility or Redding Real
Property.
(c) Facility Leases and Leased Real Property. (i) With respect to
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each Tisco Facility lease, Tisco has an unencumbered interest in the leasehold
estate. Tisco enjoys peaceful and undisturbed possession of all Tisco Leased
Real Property. Each Tisco Facility lease is valid, binding and enforceable in
accordance with its terms. Tisco is not in default under any Tisco Facility
lease or sublease, and no event or condition exists that with notice or lapse of
time or both would constitute a default by Tisco under any Tisco Facility lease
or sublease.
(ii) With respect to each Redding Facility lease, Redding has an
unencumbered interest in the leasehold estate. Redding enjoys peaceful and
undisturbed possession of all Redding Leased Real Property. Each Redding
Facility lease is valid, binding and enforceable in accordance with its terms.
Redding is not in default under any Redding Facility lease or sublease, and no
event or condition exists that with notice or lapse of time or both would
constitute a default by Redding under any Redding Facility lease or sublease.
(d) Certificate of Occupancy. (i) All Tisco Facilities have
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received all required approvals of governmental authorities (including, without
limitation, permits and a certificate of occupancy or similar certificate
permitting lawful occupancy of the Tisco Facilities) required in
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connection with the operation thereof and are and have been operated and
maintained in accordance with applicable regulations in all material respects.
(ii) All Redding Facilities have received all required approvals of
governmental authorities (including, without limitation, permits and a
certificate of occupancy or similar certificate permitting lawful occupancy of
the Redding Facilities) required in connection with the operation thereof and
are and have been operated and maintained in accordance with applicable
regulations in all material respects.
(e) Utilities. (i) All Tisco Facilities are supplied with utilities
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(including, without limitation, water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such Tisco
Facilities as currently operated, and there is no condition which would
reasonably be expected to result in the termination of the present access from
any Tisco Facility to such utility services.
(ii) All Redding Facilities are supplied with utilities (including,
without limitation, water, sewage, disposal, electricity, gas and telephone) and
other services necessary for the operation of such Redding Facilities as
currently operated, and there is no condition which would reasonably be expected
to result in the termination of the present access from any Redding Facility to
such utility services.
(f) Improvements, Fixtures and Equipment. (i) The improvements
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constructed on the Tisco Facilities, including, without limitation, all
leasehold improvements, and all fixtures and equipment and other tangible assets
owned, leased or used by Tisco at the Tisco Facilities are (A) insured to the
extent and in a manner customary in the industry, (B) structurally sound with no
known material defects, (C) in good operating condition and repair, subject to
ordinary wear and tear, (D) not in need of maintenance, repair or correction
except for ordinary routine maintenance and repair, the cost of which would not
be material, (E) sufficient for the operation of Tisco as presently conducted
and (F) in conformity with all applicable regulations.
(ii) The improvements constructed on the Redding Facilities,
including, without limitation, all leasehold improvements, and all fixtures and
equipment and other tangible assets owned, leased or used by Redding at the
Redding Facilities are (A) insured to the extent and in a manner customary in
the industry, (B) structurally sound with no known material defects, (C) in good
operating condition and repair, subject to ordinary wear and tear, (D) not in
need of maintenance, repair or correction except for ordinary routine
maintenance and repair, the cost of which would not be material, (E) sufficient
for the operation of Redding as presently conducted and (F) in conformity with
all applicable regulations.
(g) No Special Assessment. (i) Tisco has not received notice of any
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special assessment relating to any Tisco Facility or any portion thereof, and
there is no pending or threatened special assessment.
(ii) Redding has not received notice of any special assessment
relating to any Redding Facility or any portion thereof, and there is no pending
or threatened special assessment.
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3.7 Financial Statement.
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(a) The unaudited balance sheet and statements of income,
stockholders' equity and cash flows of Tisco at and for the fiscal year ended
September 30, 1998 were prepared in accordance with GAAP consistently applied
(except that certain footnote disclosures have been omitted) and fairly present
the financial condition and results of operations of Tisco as of its date and
for such period. Tisco has no liabilities of any nature, whether absolute,
accrued, asserted or unasserted or contingent or whether due or to become due
that should have been recorded or reserved for on such balance sheet and were
not so recorded or reserved.
(b) The unaudited balance sheet and statements of income,
stockholders' equity and cash flows of Redding at and for the fiscal year ended
September 30, 1998 were prepared in accordance with GAAP consistently applied
(except that certain footnote disclosures have been omitted) and fairly present
the financial condition and results of operations of Redding as of its date and
for such period. Redding has no liabilities of any nature, whether absolute,
accrued, asserted or unasserted or contingent or whether due or to become due
that should have been recorded or reserved for on such balance sheet and were
not so recorded or reserved.
(c) The compiled balance sheets and statements of income,
stockholders' equity and cash flows of Tisco at and for the fiscal years ended
September 30, 1997 and 1996 were prepared in accordance with GAAP consistently
applied and fairly present the financial condition of Tisco as of their
respective dates and for each such period. Tisco has no liabilities of any
nature, whether absolute, accrued, asserted or unasserted or contingent or
whether due or to become due that should have been recorded or reserved for on
any such balance sheet and were not so recorded or reserved.
(d) The compiled balance sheets and statements of income,
stockholders' equity and cash flows of Redding at and for the fiscal years ended
September 30, 1997 and 1996 were prepared in accordance with GAAP consistently
applied and fairly present the financial condition of Redding as of their
respective dates and for each such period. Redding has no liabilities of any
nature, whether absolute, accrued, asserted or unasserted or contingent or
whether due or to become due that should have been recorded or reserved for on
any such balance sheet and were not so recorded or reserved.
(e) The unaudited balance sheet and statements of income,
stockholders' equity and cash flows of Tisco at and for the two months ended
November 30, 1998 were prepared in accordance with GAAP consistently applied
(except that certain footnote disclosures have been omitted) and fairly present
the financial condition and results of operations of Tisco as of its date and
for such period and are consistent with the financial statements described in
Sections 3.7(a) and (c).
(f) The unaudited balance sheet and statements of income,
stockholders' equity and cash flows of Redding at and for the two months ended
November 30, 1998 were prepared in accordance with GAAP consistently applied
(except that certain footnote disclosures have been omitted) and fairly present
the financial condition and results of operations of Redding as of its date and
for such period and are consistent with the financial statements described in
Sections 3.7(b) and (d).
8
(g) Copies of the financial statements described in Section 3.7(a)-
(f) have been provided to HDA or its representatives.
3.8 Books and Records. (a) Tisco has made and kept and given HDA and
-----------------
its representatives access to books and records and accounts, which, in
reasonable detail, accurately and fairly reflect the activities of Tisco. The
minute books of Tisco accurately and adequately reflect all action taken by the
shareholders, board of directors and committees of the board of directors of
Tisco. The copies of the stock book records of Tisco are true, correct and
complete, and accurately reflect all transactions effected in Tisco's equity
interests through and including the date hereof. Tisco has not engaged in any
transaction, maintained any bank account or used any corporate funds except for
the transactions, bank accounts and funds which have been and are reflected in
the normally maintained books and records of Tisco, all of which have been
provided or made available to HDA and its representatives.
(b) Redding has made and kept and given HDA and its representatives
access to books and records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of Redding. The minute books of
Redding accurately and adequately reflect all action taken by the shareholders,
board of directors and committees of the board of directors of Redding. The
copies of the stock book records of Redding are true, correct and complete, and
accurately reflect all transactions effected in Redding's stock interests
through and including the date hereof. Redding has not engaged in any
transaction, maintained any bank account or used any corporate funds except for
the transactions, bank accounts and funds which have been and are reflected in
the normally maintained books and records of Redding, all of which have been
provided or made available to HDA and its representatives.
3.9 Litigation. (a) There is no claim, action, suit, proceeding, or
----------
investigation pending or, to the best knowledge of Tisco, threatened against
Tisco or the directors, officers, agents or employees of Tisco (in their
capacity as such), or any properties or rights of Tisco. There are no orders,
writs, injunctions or decrees currently in force against Tisco or the directors,
officers, agents or employees of Tisco (in their capacity as such) with respect
to the conduct of Tisco's business.
(b) There is no claim, action, suit, proceeding, or investigation
pending or, to the best knowledge of Redding, threatened against Redding or the
directors, officers, agents or employees of Redding (in their capacity as such),
or any properties or rights of Redding. There are no orders, writs, injunctions
or decrees currently in force against Redding or the directors, officers, agents
or employees of Redding (in their capacity as such) with respect to the conduct
of Redding's business.
3.10 Licenses and Permits: Compliance with Laws. (a) Schedule 3.10(a)
------------------------------------------
sets forth a complete list of all licenses, franchises, permits, approvals and
other governmental authorizations (collectively, "Tisco Licenses and Permits")
held by Tisco. Tisco owns, holds or possesses all Tisco Licenses and Permits
necessary or appropriate to entitle it to use its corporate name, to own or
lease, operate and use its assets and properties and to carry on and conduct its
business and operations as presently conducted. Tisco is not in violation of or
default under any Tisco Licenses or Permits or any judgment, order, writ,
injunction or decree of any court or administrative agency issued against it or
any law, ordinance, rule or regulation applicable to it. Tisco's conduct of its
business has been and is in compliance with all applicable laws, statutes,
ordinances and regulations. Tisco has not received any notice asserting a
failure to comply with any law, statute, ordinance, regulation, rule
9
or order of any foreign, federal, state or local government or any other
governmental department or agency.
(b) Schedule 3.10(b) sets forth a complete list of all licenses,
franchises, permits, approvals and other governmental authorizations
(collectively, "Redding Licenses and Permits") held by Redding, Redding owns,
holds or possesses all Redding Licenses and Permits necessary or appropriate to
entitle it to use its corporate name, to own or lease, operate and use its
assets and properties and to carry on and conduct its business and operations as
presently conducted. Redding is not in violation of or default under any Redding
Licenses or Permits or any judgment, order, writ, injunction or decree of any
court or administrative agency issued against it or any law, ordinance, rule or
regulation applicable to it. Redding's conduct of its business has been and is
in compliance with all applicable laws, statutes, ordinances and regulations.
Redding has not received any notice asserting a failure to comply with any law,
statute, ordinance, regulation, rule or order of any foreign, federal, state or
local government or any other governmental department or agency.
3.11 Tax Matters.
-----------
(a) For purposes of this Agreement, (i) "Tax" means any federal,
state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, 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 whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and (ii) "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
including any amendment thereof.
(b) Each Company has timely filed, or caused to be timely filed, all
Tax Returns that they were required to file. All such Tax Returns were correct
and complete in all respects. All Taxes owed by each Company (whether or not
shown on any Tax Return) have been paid. Neither Company currently is the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where either Company
does not file Tax Returns that they are or may be subject to taxation by that
jurisdiction. There are no liens on any of the assets of either Company that
arose in connection with any failure (or alleged failure) to pay any Tax.
(c) Each Company withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party.
(d) There is no dispute or claim concerning any Tax liability of
either Company either (i) claimed or raised by any authority in writing or (ii)
of which such Company has knowledge. To the knowledge of each Company and each
Existing Shareholder, no audit or examination of any Tax Return is currently in
progress, and neither Company has received notice of any proposed audit or
examination. Each Company has furnished to HDA or its representatives correct
and complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by either Company with
respect to the last five fiscal
10
years. Neither Company has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) Neither Company has filed a consent under Section 341(f) of the
Code concerning collapsible corporations (or any comparable state income tax
provision). Neither Company has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Section 280G
of the Code. Neither Company is a party to any Tax allocation, sharing or
indemnity agreement. Neither Company (i) has been a member of an affiliated
group of corporations filing a consolidated federal income Tax Return or (ii)
has liability for the Taxes of any person under Treasury Regulation Sec. 1.1
502-6 (or any similar provision of state, local or foreign law), as a transferee
or successor, by contract, or otherwise. Schedule 3.11 hereto sets forth all
material elections (e.g., accelerated depreciation, Sec. 263(a) regarding the
allocation of overhead to inventory, and LIFO election for inventory
accounting) in effect as of the date hereof with respect to Taxes affecting
either Company.
(f) The unpaid Taxes of each Company did not exceed the reserve for
Tax liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of such
Company's balance sheet at November 30, 1998. Each Company has made provision,
in conformity with GAAP consistently applied, on their respective compiled
balance sheet disclosed in Section 3.7(b) and (c), and the Companies have made
provisions on the most recent consolidated interim financial statements for the
payment of all Taxes which may subsequently become due.
(g) (i) Tisco has been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code at all times since October 1, 1989
and will be an S corporation up to and including the Closing Date.
(ii) Redding has been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code at all times during its existence
and will be an S corporation up to and including the Closing Date.
3.12 Brokers. Finders. Neither Tisco nor Redding has retained any
----------------
broker or finder in connection with the transactions contemplated herein, and is
not obligated and has not agreed to pay any brokerage or finder's commission,
fee or similar compensation.
3.13 Absence of Certain Changes.
--------------------------
(a) Since September 30, 1998, Tisco has conducted its business in
the ordinary course and there has not occurred with respect to Tisco:
(i) any material adverse effect on the business, operations,
assets, results of operations, financial condition or prospects of Tisco
("Tisco Material Adverse Effect");
(ii) any revaluation of assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts
receivable;
11
(iii) any payment, discharge or satisfaction of any liabilities
or obligations, other than in the ordinary course of business;
(iv) any incurrence of liabilities, except liabilities
incurred in the ordinary course of business, or increase or change in any
assumptions underlying or methods of calculating, any doubtful account
contingency or other reserves;
(v) any capital expenditure exceeding $5,000, the execution of
any lease or the incurring of any obligation to make any capital
expenditure or execute any lease other than in the ordinary course of
business;
(vi) the failure to pay or satisfy when due any liability,
except where the failure would not have a Tisco Material Adverse Effect;
(vii) any assets (whether real, personal or mixed, tangible or
intangible) of Tisco becoming subject to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, except
in the ordinary course of business;
(viii) the failure to carry on diligently the business in the
ordinary course so as to preserve for HDA the assets, business and
goodwill of Tisco's suppliers, customers, distributors and others having
business relations with it;
(ix) the disposition or lapsing of any Tisco Proprietary Rights
(as defined below) or any disposition or disclosure to any person of any
Tisco Proprietary Rights not heretofore a matter of public knowledge;
(x) any cancellation or waiver of any material claims or
rights of value, or any sale, lease, transfer, assignment, distribution or
other disposition of any assets, except for sales of inventory in the
ordinary course of business, or any disposal of any material assets for any
amount;
(xi) an amendment, cancellation or termination of any contract,
commitment, agreement, lease, transaction or permit relating to assets or
the business or entry into any contract, commitment, agreement, lease,
transaction or permit which is not in the ordinary course of business,
including, without limitation, any employment or consulting agreements;
(xii) any bonus paid or promised, an increase in the base
compensation, or other payment or loan to any director, officer or
employee, whether now or hereafter payable or granted (other than increases
in base compensation not to exceed 5% per annum in the ordinary course
consistent in timing and amount with past practices), or entry into or
variation of the terms of any employee benefit plan, or employment or
incentive agreement with any such person;
(xiii) an adverse change in employee relations which has or is
reasonably likely to have an adverse effect on the productivity, the
financial condition, results of operations or business of Tisco or the
relationships between the employees of Tisco and the management of Tisco;
12
(xiv) any change in any method of accounting or keeping books
of account or accounting practices other than changes necessary to conform
to changes in GAAP;
(xv) any material damage, destruction or loss of any asset,
whether or not covered by insurance;
(xvi) the issuance, delivery or sale of any equity securities,
or alteration in terms of any outstanding securities issued by it or any
increase in its indebtedness for borrowed money;
(xvii) the declaration, payment or setting aside for payment of
any dividend or other distribution (whether in cash, stock or property or
otherwise), the redemption, purchase or other acquisition of any shares of
Tisco Common Stock, or the creation of any securities convertible into or
exchangeable for any shares of Tisco Common Stock or any options, warrants
or other rights to purchase or subscribe to any of the foregoing (except an
amount not to exceed the lesser of (A) the amount of Tisco's undistributed
S corporation earnings for fiscal 1998 and for the period between October
1, 1998 and the Closing and (B) $390,000);
(xviii) the consummation or adoption of any plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of Tisco;
(xix) the existence of any other event or condition which, in
any one case or in the aggregate, has been or might reasonably be expected
to have a Tisco Material Adverse Effect; or
(xx) an agreement to do any of the things described in the
preceding clauses (i) - (xix) other than as expressly provided for herein.
(b) Since September 30, 1998, Redding has conducted its business in
the ordinary course and there has not occurred with respect to Redding:
(i) any material adverse effect on the business, operations,
assets, results of operations, financial condition or prospects of Redding
("Redding Material Adverse Effect");
(ii) any revaluation of assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts
receivable;
(iii) any payment, discharge or satisfaction of any liabilities
or obligations, other than in the ordinary course of business;
(iv) any incurrence of liabilities, except liabilities
incurred in the ordinary course of business, or increase or change in any
assumptions underlying or methods of calculating, any doubtful account
contingency or other reserves;
13
(v) any capital expenditure exceeding $5,000, the execution
of any lease or the incurring of any obligation to make any capital
expenditure or execute any lease other than in the ordinary course of
business;
(vi) the failure to pay or satisfy when due any liability,
except where the failure would not have a Redding Material Adverse Effect;
(vii) any assets (whether real, personal or mixed, tangible or
intangible) of Redding becoming subject to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, except
in the ordinary course of business;
(viii) the failure to carry on diligently the business in the
ordinary course so as to preserve for HDA the assets, business and goodwill
of Redding's suppliers, customers, distributors and others having business
relations with it;
(ix) the disposition or lapsing of any Redding Proprietary
Rights (as defined below) or any disposition or disclosure to any person of
any Redding Proprietary Rights not heretofore a matter of public knowledge;
(x) any cancellation or waiver of any material claims or
rights of value, or any sale, lease, transfer, assignment, distribution or
other disposition of any assets, except for sales of inventory in the
ordinary course of business, or any disposal of any material assets for any
amount;
(xi) an amendment, cancellation or termination of any
contract, commitment, agreement, lease, transaction or permit relating to
assets or the business or entry into any contract, commitment, agreement,
lease, transaction or permit that is not in the ordinary course of
business, including, without limitation, any employment or consulting
agreements;
(xii) any bonus paid or promised, an increase in the base
compensation, or other payment or loan to any director, officer or
employee, whether now or hereafter payable or granted (other than increases
in base compensation not to exceed 5% per annum in the ordinary course
consistent in timing and amount with past practices), or entry into or
variation of the terms of any employee benefit plan, or employment or
incentive agreement with any such person;
(xiii) an adverse change in employee relations which has or is
reasonably likely to have an adverse effect on the productivity, the
financial condition, results of operations or business of Redding or the
relationships between the employees of Redding and the management of
Redding;
(xiv) any change in any method of accounting or keeping books
of account or accounting practices other than changes necessary to conform
to changes in GAAP;
(xv) any material damage, destruction or loss of any asset,
whether or not covered by insurance;
14
(xvi) the issuance, delivery or sale of any equity securities,
or alteration in terms of any outstanding securities issued by it or any
increase in its indebtedness for borrowed money;
(xvii) the declaration, payment or setting aside for payment any
dividend or other distribution (whether in cash, stock or property or
otherwise), the redemption, purchase or other acquisition of any shares of
Redding Common Stock, or the creation of any securities convertible into or
exchangeable for any shares of Redding Common Stock or any options,
warrants or other rights to purchase or subscribe to any of the foregoing
(except an amount not to exceed the lesser of (A) the amount of Redding's
undistributed S corporation earnings for fiscal 1 99& and for the period
between October 1, 1998 and the Closing or (B) $240,000);
(xviii) the consummation or adoption of any plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of Redding;
(xix) the existence of any other event or condition which, in
any one case or in the aggregate, has been or might reasonably be expected
to have a Redding Material Adverse Effect; or
(xx) an agreement to do any of the things described in the
preceding clauses (i) - (xix) other than as expressly provided for herein.
3.14 Material Contracts. Schedule 3.14 attached hereto sets forth a
------------------
complete and correct list of all the Material Contracts to which Tisco or
Redding or, in the case of Section 3.14(g), any Existing Shareholder, is a
party. As used in this Agreement, "Material Contracts" means:
(a) all such contracts not made in the ordinary course of business;
(b) all such leases or other agreements under which Tisco or Redding
is a lessor or lessee of any real property or any machinery, equipment, vehicle
or other tangible personal property owned by a third party and used in the
business of Tisco or Redding, which entails annual payments, in the case of any
such lease or agreement, in excess of $5,000;
(c) all such options with respect to any property, real or personal,
whether Tisco Redding is the grantor or grantee thereunder;
(d) all such distribution, franchise, license, technical assistance,
sales, commission, consulting, agency or advertising contracts related to
Tisco's or Redding's assets or business and that are not cancelable on not more
than 30 days notice and without cancellation penalties or severance payments, in
the case of any such contract or group of contracts, in excess of
$5,000;
(e) all such mortgages, indentures, security agreements, pledges,
notes, loan agreements or guaranties relating to Tisco or Redding;
15
(f) all such contracts and agreements to which Tisco or Redding is a
party and which are (i) outstanding contracts with its officers; employees,
agents, consultants, advisors, salespeople, sales representatives, distributors,
sales agents or dealers of Tisco or Redding other than contracts which by their
terms are cancelable by Tisco or Redding with notice of not more than 30 days
and without cancellation penalties or severance payments; in the case of any
such contract or group of contracts, in excess of $5,000; (ii) collective
bargaining agreements and (iii) pension, profit-sharing, bonus, retirement,
stock option or employee benefit plans or other similar plans or arrangements of
Tisco or Redding;
(g) any covenant not to compete or similar restriction on Tisco or
Redding or any Existing Tisco Shareholder or Existing Redding Shareholder;
(h) any contract with the United States, state or local government or
any agency or department thereof, involving expenditures or liabilities in
excess of $5,000; or
(i) any contract or agreement providing for the receipt or payment
(whether the obligations are fixed or contingent) of $5,000 or more after the
date of this Agreement, including; without limitation, agreements calling for
penalties or payments upon voluntary termination or withdrawal by Tisco or
Redding.
The Existing Shareholders have furnished to HDA or its representatives true and
correct copies of all Material Contracts, including all amendments and
supplements thereto.
3.15 Proprietary Rights.
------------------
(a) (i) Schedule 3.15(a)(i) lists the material patents, trademarks
(whether registered or unregistered), service marks, trade names, service names,
brand names, logos and copyrights (collectively, the "Tisco Proprietary Rights")
for Tisco. Schedule 3.15(a)(i) also sets forth: (A) for each patent, the number,
normal expiration date and subject matter for each country in which such patent
has been issued, or, if applicable, the application number, date of filing and
subject matter for each country, (B) for each trademark, the application serial
number or registration number; the class of goods covered and the expiration
date for each country in which a trademark has been registered and (C) for each
copyright, the number and date of filing for each country in which a copyright
has been filed. The Tisco Proprietary Rights listed in Schedule 3.15(a)(i) are
all those used by Tisco in connection with its businesses. True and correct
copies of all patents (including all pending applications) owned, controlled,
created or used by or on behalf of Tisco or in which Tisco has any interest
whatsoever have been provided to HDA or its representatives.
(ii) Schedule 3.15(a)(ii) lists the material patents, trademarks
(whether registered or unregistered), service marks, trade names, service names;
brand names, logos and copyrights (collectively, the "Redding Proprietary
Rights") for Redding. Schedule 3.15(a)(ii) also sets forth: (A) for each patent,
the number, normal expiration date and subject matter for each country in which
such patent has been issued, or, if applicable, the application number, date of
filing and subject matter for each country, (B) for each trademark, the
application serial number or registration number, the class of goods covered and
the expiration date for each country in which a trademark has been registered
and (C) for each copyright, the number and date of filing for each country in
which a copyright has been filed. The Redding Proprietary Rights listed in
Schedule 3.15(a)(ii) are all those used by Redding in connection with its
businesses. True and correct copies of all patents (including
16
all pending applications) owned, controlled, created or used by or on behalf of
Redding or in which Redding has any interest whatsoever have been provided to
HDA or its representatives.
(b) (i) Tisco has no obligation to compensate any person for the use
of any such Tisco Proprietary Rights nor has Tisco granted to any person any
license, option or other rights to use in any manner any of its Tisco
Proprietary Rights, whether requiring the payment of royalties or not.
(ii) Redding has no obligation to compensate any person for the use
of any such Redding Proprietary Rights nor has Redding granted to any person any
license, option or other rights to use in any manner any of its Redding
Proprietary Rights, whether requiring the payment of royalties or not.
(c) (i) Tisco owns or has a valid right to use each of the Tisco
Proprietary Rights, and the Tisco Proprietary Rights will not cease to be valid
rights of Tisco by reason of the execution, delivery and performance of this
Agreement, the Ancillary Agreements or the consummation of the transactions
contemplated hereby and thereby. All of the pending patent applications have
been duly filed. Tisco has not received any notice of invalidity or infringement
of any rights of others with respect to such trademarks. Tisco has taken all
reasonable and prudent steps to protect the Tisco Proprietary Rights from
infringement by any other person. No other person (i) has the right to use any
Tisco Proprietary Rights, (ii) has notified Tisco that it is claiming any
ownership of or right to use such Tisco Proprietary Rights or (iii) to the best
knowledge of Tisco, is infringing upon any such Tisco Proprietary Rights in any
way. Tisco's use of any Tisco Proprietary Rights does not and will not conflict
with, infringe upon or otherwise violate the valid rights of any third party in
or to such Tisco Proprietary Rights, and no action has been instituted against
or notices received by Tisco that are presently outstanding, alleging that
Tisco's use of the Tisco name and its variations used in the Tisco business
infringes upon or otherwise violates any rights of a third party in or to such
Tisco Proprietary Rights. There are not, and it is reasonably expected that
after the Closing there will not be, any restrictions on right of Tisco to sell
products manufactured or remanufactured by Tisco in connection with the
operation of its business.
(ii) Redding owns or has a valid right to use each of the Redding
Proprietary Rights, and the Redding Proprietary Rights will not cease to be
valid rights of Redding by reason of the execution, delivery and performance of
this Agreement, the Ancillary Agreements or the consummation of the transactions
contemplated hereby and thereby. All of the pending patent applications have
been duly filed. Redding has not received any notice of invalidity or
infringement of any rights of others with respect to such trademarks. Redding
has taken all reasonable and prudent steps to protect the Redding Proprietary
Rights from infringement by any other person. No other person (i) has the right
to use any Redding Proprietary Rights, (ii) has notified Redding that it is
claiming any ownership of or right to use such Redding Proprietary Rights or
(iii) to the best knowledge of Redding, is infringing upon any such Redding
Proprietary Rights in any way. Redding's use of any Redding Proprietary Rights
does not and will not conflict with, infringe upon or otherwise violate the
valid rights of any third party in or to such Redding Proprietary Rights, and no
action has been instituted against or notices received by Redding that are
presently outstanding, alleging that Redding's use of the Redding name and its
variations used in the Redding business infringes upon or otherwise violates any
rights of a third party in or to such Redding Proprietary Rights. There are not,
and it is reasonably expected that after the Closing there will not be, any
17
restrictions on right of Redding to sell products manufactured or remanufactured
by Redding in connection with the operation of its business.
3.16 Labor Matters. (a) Tisco is not a party to any labor agreement
-------------
with respect to its employees with any labor organization, union, group or
association, and there are no employee unions (nor any other similar labor or
employee organizations) under local statutes, custom or practice. Tisco has not
experienced any attempt by organized labor or its representatives to make it
conform to demands of organized labor relating to its employees or to enter into
a binding agreement with organized labor that would cover the employees of
Tisco. There is no labor strike or labor disturbance pending or, to the best
knowledge of Tisco, threatened against Tisco; nor is any grievance currently
being asserted, and Tisco has not experienced a work stoppage or other labor
difficulty, and is not and has not engaged in any unfair labor practice. Without
limiting the foregoing, Tisco is in compliance with the Immigration Reform and
Control Act of 1986 and maintains a current Form I-9, as required by such Act,
in the personnel file of each employee hired after November 9, 1986.
(b) Redding is not a party to any labor agreement with respect to
its employees with any labor organization, union, group or association, and
there are no employee unions (nor any other similar labor or employee
organizations) under local statutes, custom or practice. Redding has not
experienced any attempt by organized labor or its representatives to make it
conform to demands of organized labor relating to its employees or to enter into
a binding agreement with organized labor that would cover the employees of
Redding. There is no labor strike or labor disturbance pending or, to the best
knowledge of Redding, threatened against Redding, nor is any grievance currently
being asserted, and Redding has not experienced a work stoppage or other labor
difficulty, and is not and has not engaged in any unfair labor practice. Without
limiting the foregoing, Redding is in compliance with the Immigration Reform and
Control Act of 1986 and maintains a current Form I-9, as required by such Act,
in the personnel file of each employee hired after November 9, 1986.
3.17 Consents. (a) No consent, approval, authorization, order,
--------
filing, registration or qualification (each, a "Tisco Consent") of or with any
court, governmental authority or third person is required to be made or obtained
by Tisco in connection with the execution and delivery of this Agreement, the
Ancillary Agreements or the consummation by the Existing Tisco Shareholder of
the transactions contemplated herein and therein.
(b) No consent, approval, authorization, order, filing, registration
or qualification (each a "Redding Consent") of or with any court, governmental
authority or third person is required to be made or obtained by Redding in
connection with the execution and delivery of this Agreement, the Ancillary
Agreements or the consummation by the Existing Redding Shareholders of the
transactions contemplated herein and therein.
3.18 Employee Benefit Plans: Employment Agreements.
---------------------------------------------
(a) Plans. (i) Schedule 3.18(a)(i) sets forth a true, complete and
-----
accurate list of: (A) any and all severance or employment agreements with any
current or former director, officer or employee; (B) any and all severance
programs or policies; (C) any and all plans or arrangements relating to current
or former directors, officers or employees containing change in control
provisions; (D) any agreements, plans, policies or arrangements (including,
without limitation, collective bargaining agreements or consulting agreements)
established, maintained or contributed to by Tisco
18
for the benefit of any of Tisco's current or former directors, officers or
employees, including bonus, incentive compensation, stock ownership, stock
option, stock appreciation, stock purchase, phantom stock, vacation, retirement,
insurance, severance, supplemental unemployment, disability, death benefit,
hospitalization, medical, workers compensation, pension, profit-sharing or
deferred compensation plans; or any employee welfare and employee pension
benefit plans (as such terms are defined in Sections 3(1) and 3(2),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (singularly, a "Tisco Employee Benefit Plan" and collectively, the
"Tisco Employee Benefit Plans"); and (E) all Tisco Employee Benefit Plans,
except those disclosed above, previously established, maintained or contributed
to by Tisco, or any one of them acting alone ("Tisco Terminated Employee Benefit
Plans").
(ii) Schedule 3.18(a)(ii) sets forth a true, complete and accurate
list of: (A) any and all severance or employment agreements with any current or
former director, officer or employee; (B) any and all severance programs or
policies; (C) any and all plans or arrangements relating to current or former
directors, officers or employees containing change in control provisions; (D)
any agreements, plans, policies or arrangements (including, without limitation,
collective bargaining agreements or consulting agreements) established,
maintained or contributed to by Redding for the benefit of any of Redding's
current or former directors, officers or employees, including bonus, incentive
compensation, stock ownership, stock option, stock appreciation, stock purchase,
phantom stock, vacation, retirement, insurance, severance, supplemental
unemployment, disability, death benefit, hospitalization, medical, workers
compensation, pension, profit-sharing or deferred compensation plans; or any
employee welfare and employee pension benefit plans (as such terms are defined
in Sections 3(1) and 3(2), respectively, of ERISA) (singularly, a "Redding
Employee Benefit Plan" and collectively, the "Redding Employee Benefit Plans");
and (E) all Redding Employee Benefit Plans, except those disclosed above,
previously established, maintained or contributed to by Redding, or any one of
them acting alone ("Redding Terminated Employee Benefit Plans").
(b) Pension and Welfare Benefit Plans. With respect to the Tisco
---------------------------------
Employee Benefit Plans and Tisco Terminated Employee Benefit Plans, each as
described on Schedule 3.18(a)(i), and with respect to the Redding Employee
Benefit Plans and Redding Terminated Employee Benefit Plans, each as described
on Schedule 3.18(a)(ii):
(i) each Tisco and Redding Employee Benefit Plan is in compliance
with the requirements provided by any and all statutes, orders or governmental
rules or regulations currently in effect and applicable to such Tisco and
Redding Employee Benefit Plans, including but not limited to ERISA and the Code,
and each Tisco and Redding Employee Benefit Plan has been administered in
accordance with its terms;
(ii) with respect to Tisco's and Redding's employee welfare benefit
plans, as applicable, any trust related to such ERISA Plans (which term shall
have the meaning set forth in Section 3(3) of the ERISA with respect to employee
benefit plans maintained or contributed to by Tisco or Redding, as applicable,
or any of their respective affiliates that currently cover employees and are
subject to ERISA) has been determined to be tax-exempt by the IRS pursuant to
Code (S) 501(c)(9) and nothing has occurred since the time of such
determination to cause the loss of such trust's tax-exempt status. Each ERISA
Plan intended to be qualified pursuant to Code (S) 401(a) and Code (S) 501(a)
is qualified under Code (S) 401(a) and Code (S) 501(a) and has received a
determination letter from the IRS covering the Tax Reform Act of 1986, as
amended, that such
19
ERISA Plans are so qualified and each trust established in connection with any
such plan is exempt from federal income taxation and nothing (either in form or
operation) has since occurred from the date of the last favorable determination
letter to cause the loss of such ERISA Plans' or trusts' qualification;
(iii) all required reports and descriptions of such ERISA Plans
(including without limitation the IRS Form 5500 Annual Return/Report, summary
annual report and summary plan description) have been timely filed and
distributed;
(iv) any notices required by ERISA or the Code or any other state
or federal law or any ruling or regulation of any state or federal
administrative agency with respect to such Tisco and Redding Employee Benefit
Plans have been appropriately given;
(v) all required contributions for all periods ending prior to
Closing (including periods from the first day of the current plan year to
Closing) will be made to such Tisco and Redding Employee Benefit Plans prior to
the Closing Date by Tisco or Redding, as applicable;
(vi) Tisco or Redding, as applicable, has not taken any action
directly or indirectly that obligates Tisco or Redding, as applicable, to
institute, modify or change any Tisco or Redding Employee Benefit Plan, any
change in the manner in which contributions are made or the basis on which such
contributions are determined;
(vii) all insurance premiums have been paid in full, subject only
to normal retrospective adjustments in the ordinary course, with regard to such
Tisco and Redding Employee Benefit Plans for policy years or other applicable
policy periods ending on or before Closing;
(viii) with respect to each such Tisco and Redding Employee Benefit
Plan, Tisco or Redding, as applicable, and their respective affiliates have not
engaged in any prohibited transactions (as defined in ERISA (S) 406 or Code (S)
4975), no penalty, fine, tax, action, suit, grievance, arbitration or other
manner of litigation, or claim (other than routine claims for benefits made in
the ordinary course of plan administration for which plan administrative review
procedures have not been exhausted) are pending, threatened or imminent against
or with respect to such Tisco and Redding Employee Benefit Plans, Tisco or
Redding, as applicable, or any respective fiduciary (as defined in ERISA (S)
3(21)) of such Tisco and Redding Employee Benefit Plans (including any action,
suit, grievance, arbitration or other manner of litigation, or claim regarding
conduct which allegedly interferes with the attainment of rights under such
plans); neither Tisco or Redding, as applicable, nor any respective fiduciary
with respect to such plans has any knowledge of any facts that would give rise
to or could give rise to any penalty, fine, tax, action, suit, grievance,
arbitration or other manner of litigation, or claim, and Tisco or Redding, as
applicable, has not incurred any lien under Section 401 (a)(29) or any material
liability for any tax or civil penalty imposed by Section 4971 or 4976 of the
Code or Section 502 of ERISA and no condition or set of circumstances exists
that presents a risk to Tisco or Redding, as applicable, of incurring any such
lien or liability;
(ix) no Tisco or Redding Employee Benefit Plan is (A) a "defined
benefit" plan (as defined in Section 3(35) of ERISA, nor was any Terminated
Employee Benefit Plan such a "defined benefit" plan, (B) a "multiemployer plan"
within the meaning of Section 3(37) of ERISA, (C) a "multiple employer" or a
"multiple employer welfare arrangement" within the meaning of
20
Section 413(c) of the Code or Section 3(40) of ERISA, respectively, or (D) a
"welfare benefit fund" as defined in Section 419(e) of the Code;
(x) Tisco or Redding, as applicable, is not subject to any
liability under Title IV of ERISA, including without limitation any withdrawal
liability on behalf of a multiemployer plan;
(xi) none of Tisco or Redding, as applicable, or any of their
respective directors, officers, employees or any other fiduciary has any
liability for a material breach of fiduciary responsibility imposed by ERISA for
failure to comply with ERISA or the Code for any action or failure to act in
connection with the administration or investment of such Tisco and Redding
Employee Benefit Plans;
(xii) except as disclosed on Schedule 3.18(a)(i) or Schedule
3.1 8(a)(ii), none of such Tisco and Redding Employee Benefit Plans has been
completely or partially terminated;
(xiii) no current or former employee of Tisco or Redding, as
applicable, will be entitled to any payment, additional benefits or any
acceleration of the time of payment or vesting of any benefits under any Tisco
or Redding Employee Benefit Plan as a result of the transactions contemplated by
this Agreement and no trustee under any "rabbi trust" or similar arrangement in
connection with any Tisco or Redding Employee Benefit Plan will be entitled to
payment as a result of the transactions contemplated by this Agreement;
(xiv) there is no pending or threatened investigation or audit
against or involving such Tisco and Redding Employee Benefit Plans by any
governmental agency or other third party; and
(xv) no Tisco or Redding Employee Benefit Plan provides medical,
life or other welfare benefits (whether or not insured), with respect to current
or former employees after retirement or other termination of service (other than
coverage mandated by applicable law). With respect to any contract or
arrangement with an insurance company providing funding under any Tisco or
Redding Employee Benefit Plan, there is no material liability for any
retroactive rate adjustment. Except as disclosed on Schedule 3.18(a)(i) or
Schedule 3.18(a)(ii), Tisco or Redding, as applicable, has the right to amend or
terminate their participation with respect to each Tisco and Redding Employee
Benefit Plan. Each Tisco and Redding Employee Benefit Plan that is a "group
health plan," as defined in Section 5000 of the Code has been operated in
accordance with Section 4980B of the Code, Section 9801 and the secondary payor
requirements of Section 1862(b) of the Social Security Act.
3.19 Compliance with Environmental Laws.
----------------------------------
(a) Definitions. The following terms, when used in this Section
-----------
3.19, shall have the following meanings. Any of these terms may, unless the
context otherwise requires, used in the singular or the plural depending on the
reference.
(i) "Tisco," for the purposes of this Section, shall include
(A) Tisco, (B) all partnerships, joint ventures and other entities or
organizations in which Tisco was at any time or is a partner, joint
venturer, member or participant and (C) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or
other entities,
21
whether in existence as of the date hereof or at any time prior to the date
hereof, the assets or obligations of which have been acquired or assumed by
Tisco or to which Tisco has succeeded.
(ii) "Redding," for the purposes of this Section, shall include
(A) Redding, (B) all partnerships, joint ventures and other entities or
organizations in which Redding was at any time or is a partner, joint
venturer, member or participant and (C) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or
other entities, whether in existence as of the date hereof or at any time
prior to the date hereof, the assets or obligations of which have been
acquired or assumed by Redding or to which Redding has succeeded.
(iii) "Release" shall mean and include any existing or
previously existing spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment or the workplace of any hazardous substance, and/or
otherwise as defined in any Environmental Law.
(iv) "Hazardous Substance" shall mean any pollutant,
contaminant, chemical, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical compound
or hazardous substance, material or waste, whether solid, liquid or gas,
including, without limitation, any quantity of asbestos in any form, urea
formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum products or by-products or derivatives,
radioactive substance or material, pesticide waste waters, sludges, slag
and any other substance, material or waste that is subject to regulation,
control or remediation under any Environmental Laws.
(v) "Environmental Laws" shall mean all laws, statutes,
regulations, rules, ordinances, by-laws, orders or determinations of any
governmental or judicial authority at the federal, state or local level,
whether existing as of the date hereof, previously enforced, or
subsequently enacted which regulate or relate to the protection or clean-up
of the environment, the use, treatment, storage, transportation,
generation, manufacture, processing, distribution, handling or disposal of,
or emission, discharge or other release or threatened release of Hazardous
Substances or otherwise dangerous substances, wastes, pollution or
materials (whether, gas, liquid or solid), the preservation or protection
of waterways, groundwater, drinking water, air, wildlife, plants or other
natural resources, or the health and safety of persons or property,
including, without limitation, protection of the health and safety of
employees. Environmental Laws shall include, without limitation, the
Federal Insecticide, Fungicide, Rodenticide Act, Resource Conservation &
Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act,
Occupational Safety and Health Act, Toxic Substances Control Act, Clean Alr
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Emergency Planning and Community Right-to-Know Act and the Hazardous
Materials Transportation Act.
(vi) "Environmental Conditions" means the introduction into the
environment, whether or not yet discovered, of any pollution, including,
without limitation, any contaminant, irritant or pollutant or other
Hazardous Substance (whether or not upon any Tisco Facility or Redding
Facility or former Tisco Facility or Redding Facility or other property and
whether or not such pollution constituted at the time thereof a violation
of any
22
Environmental Law as a result of any Release of any kind whatsoever of any
Hazardous Substance) as a result of which Tisco or Redding has or may
become liable to any person or by reason of which any Tisco Facility or
Redding Facility, former Tisco Facility or Redding Facility or any of the
assets of Tisco or Redding may suffer or be subjected to any lien or as a
result of which Tisco or Redding or HDA could incur any damage, loss,
cost, expense, claim, demand, order or liability to a third party
(including, without limitation, any governmental authority).
(b) Notice of Violation. (i) Tisco has not received a notice of
-------------------
alleged, actual or potential responsibility for, or any inquiry or investigation
regarding, (A) any Release or threatened Release of any Hazardous Substance at
any location, whether at the Tisco Facilities, the former Tisco Facilities or
otherwise or (B) an alleged violation of or non-compliance with the conditions
of any permit required under any Environmental Law or the provisions of any
Environmental Law. Tisco has not received notice of any other claim, demand or
action by any individual or entity alleging any actual or threatened injury or
damage to any person, property, natural resource or the environment arising from
or relating to any Release or threatened Release of any Hazardous Substances at,
on, under, in, to or from any Tisco Facilities or former Tisco Facilities, or in
connection with any operations or activities of Tisco.
(ii) Redding has not received a notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, (A) any Release
or threatened Release of any Hazardous Substance at any location, whether at the
Redding Facilities, the former Redding Facilities or otherwise or (B) an alleged
violation of or non-compliance with the conditions of any permit required under
any Environmental Law or the provisions of any Environmental Law. Redding has
not received notice of any other claim, demand or action by any individual or
entity alleging any actual or threatened injury or damage to any person,
property, natural resource or the environment arising from or relating to any
Release or threatened Release of any Hazardous Substances at, on, under, in, to
or from any Redding Facilities or former Redding Facilities, or in connection
with any operations or activities of Redding.
(c) Environmental Conditions. There are no present or past
------------------------
Environmental Conditions.
(d) Environmental Audits or Assessments. (i) True, complete and
----------------------- -----------
correct copies of the written reports, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of Tisco,
of all environmental audits or assessments which have been conducted at any
Facility or former Facility within the past five years, either by Tisco or any
attorney, environmental consultant or engineer engaged for such purpose, have
been delivered to HDA or its representatives and a list of all such reports,
audits and assessments and any other similar report, audit or assessment of
which Tisco has knowledge is included in Schedule 3.19(d)(i) hereto.
(ii) True, complete and correct copies of the written reports, and all
parts thereof, including any drafts of such reports if such drafts are in the
possession or control of Redding, of all environmental audits or assessments
which have been conducted at any Facility or former Facility within the past
five years, either by Redding or any attorney, environmental consultant or
engineer engaged for such purpose, have been delivered to HDA or its
representatives and a list of all such reports, audits and assessments and any
other similar report, audit or assessment of which Redding has knowledge is
included in Schedule 3.19(d)(ii) hereto.
23
(e) Indemnification Agreements. (i) Tisco is not a party, whether as
--------------------------
a direct signatory or as successor, assign or third party beneficiary, or
otherwise bound, to any lease or other contract (excluding insurance policies
disclosed on Schedule 3.22) under which Tisco is obligated by or entitled to the
benefits of directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
environmental conditions.
(ii) Redding is not a party, whether as a direct signatory or as
successor, assign or third party beneficiary, or otherwise bound, to any lease
or other contract (excluding insurance policies disclosed on the Schedule) under
which Redding is obligated by or entitled to the benefits of directly or
indirectly, any representation, warranty, indemnification, covenant,
restriction or other undertaking concerning environmental conditions.
(f) Releases or Waivers. (i) Tisco has not released any other person
-------------------
from any claim under any Environmental Law or waived any rights concerning any
Environmental Condition.
(ii) Redding has not released any other person from any claim under
any Environmental Law or waived any rights concerning any Environmental
Condition.
(g) Notices, Warnings and Records. (i) Tisco has given all notices
-----------------------------
and warnings, made all reports, and has kept and maintained all records required
by and in compliance with all Environmental Laws.
(ii) Redding has given all notices and warnings, made all reports, and
has kept and maintained all records required by and in compliance with all
Environmental Laws.
(h) Compliance. (i) Tisco has never violated and is presently in
----------
compliance with all Environmental Laws;
(ii) Redding has never violated and is presently in compliance with
all Environmental Laws.
(i) Hazardous Material. (i) Tisco has not generated, manufactured,
------------------
refined, transported, treated, disposed, stored, handled, transferred, produced
or processed any Hazardous Material.
(ii) Redding has not generated, manufactured, refined, transported,
treated, disposed, stored, handled, transferred, produced or processed any
Hazardous Material.
(j) Underground Storage Tanks. (i) There are no underground storage
-------------------------
tanks at any Tisco Facility owned or operated by Tisco. Tisco does not own or
operate any underground storage tanks, whether currently in use or formerly
used.
(ii) There are no underground storage tanks at any Redding Facility
owned or operated by Redding. Redding does not own or operate any underground
storage tanks, whether currently in use or formerly used.
(k) Asbestos Containing Material. (i) There is no asbestos containing
----------------------------
material at any Tisco Facility owned or operated by Tisco.
24
(ii) There is no asbestos containing material at any Redding Facility
owned or operated by Redding.
(1) Liens. (i) No lien has been imposed on any Tisco Facility pursuant
-----
to any Environmental Law.
(ii) No lien has been imposed on any Redding Facility pursuant to any
Environmental Law.
3.20 Certain Business Relationships with the Company. (a) Except as
-----------------------------------------------
disclosed on Schedule 3.20(a), neither the Existing Tisco Shareholder nor any of
its affiliates has been involved in any business arrangement or relationship
with Tisco within the past 12 months, and neither the Existing Tisco Shareholder
nor any of its affiliates owns any assets, tangible or intangible, that are used
in the business of Tisco.
(b) Except as disclosed on Schedule 3.20(b), none of the Existing
Redding Shareholders has been involved in any business arrangement or
relationship with Redding within the past 12 months, and none of such Existing
Redding Shareholders owns any assets, tangible or intangible, that are used in
the business of Redding.
3.21 Undisclosed Liabilities. (a) Tisco has no liabilities or
-----------------------
obligations, whether accrued, absolute, contingent or otherwise except (i) to
the extent reflected or reserved for on its balance sheet at November 30, 1998,
(ii) liabilities or obligations incurred in the normal and ordinary course of
business of Tisco since November 30, 1998, (iii) liabilities or obligations
disclosed in Schedule 3.21(a) hereto and in the other Schedules attached hereto
or (iv) liabilities or obligations disclosed elsewhere in this Agreement.
(b) Redding has no liabilities or obligations, whether accrued,
absolute, contingent or otherwise except (i) to the extent reflected or reserved
for on its balance sheet at November 30, 1998, (ii) liabilities or obligations
incurred in the normal and ordinary course of business of Redding since November
30, 1998, (iii) liabilities or obligations disclosed in Schedule 3.21(b) hereto
and in the other Schedules attached hereto or (iv) liabilities or obligations
disclosed elsewhere in this Agreement.
3.22 Insurance. Schedule 3.22 contains a complete and accurate list
---------
of all policies or binders of fire, liability, title, worker's compensation,
product liability and other forms of insurance (showing as to each policy or
binder the carrier, policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided, loss
experience history by line of coverage) maintained by Tisco or Redding, as
applicable, on their respective (a) businesses, (b) assets or (c) employees at
any time since December 31, 1992. All insurance coverage applicable to Tisco or
Redding, as applicable, or their respective businesses or assets is in full
force and effect, insures Tisco or Redding, as applicable, in reasonably
sufficient amounts. There is no default under any such coverage nor has there
been any failure to give notice or present any claim under any such coverage in
a due and timely fashion. There are no premiums for any such insurance that are
due or past due and no notice of cancellation or nonrenewal of any such coverage
has been received. All products liability, general liability and workers'
compensation insurance policies maintained by Tisco or Redding, as applicable,
have been occurrence policies and not claims made policies. There are no
outstanding performance bonds covering or issued for the benefit of
25
Tisco or Redding, as applicable. No insurer has advised Tisco or Redding, as
applicable, that it intends to reduce coverage, increase premiums or fail to
renew any existing policy or binder.
3.23 Accounts Receivable. The accounts receivable set forth on
-------------------
Tisco's and Redding's balance sheets at November 30, 1998, and all accounts
receivable arising since November 30, 1998, represent bona fide claims of Tisco
or Redding, as applicable, against debtors for sales, services performed or
other charges arising on or before the date hereof, and all the goods delivered
and services performed which gave rise to said accounts were delivered or
performed in accordance with the applicable orders, contracts or customer
requirements. Said accounts receivable are, except to the extent of the
appropriate reserves for bad debts on accounts receivable as set forth on such
balance sheets, subject to no defenses, counterclaims or rights of setoff and
are fully collectible in the ordinary course of business without cost in
collection efforts therefor and, in the case of accounts receivable arising
since the date of such balance sheets, to the extent of a reasonable reserve
rate for bad debts on accounts receivable which is not greater than the rate
reflected by the reserve for bad debts on such balance sheets.
3.24 Inventory. Schedule 3.24 contains a complete and accurate list
---------
of the addresses at which all inventory as set forth on Tisco's and Redding's
balance sheets at November 30, 1998, and all inventory acquired since November
30, 1998, is located. The inventory as set forth on such balance sheets or
arising since November 30, 1998 was acquired and has been maintained in
accordance with the regular business practices of Tisco or Redding, as
applicable, consists of new, unused and remanufactured items of a quality and
quantity usable or saleable in the ordinary course of business, and is valued at
the lower of cost or market on a FIFO basis. None of such inventory is obsolete,
unusable, damaged or unsaleable in the ordinary course of business, except for
inventory that has been written down to realizable market value, or for which
adequate reserves have been provided in such balance sheets.
3.25 Payments. (a) Tisco has not, directly or indirectly, paid or
--------
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the business, assets or operations of Tisco, that is, or
may be with the passage of time or discovery, illegal under any federal, state
or local laws of the United States (including, without limitation, the U.S.
Foreign Corrupt Practices' Act) or any other country having jurisdiction. Tisco
has not participated, directly or indirectly, in any boycotts or other similar
practices affecting any of its actual or potential customers and has at all
times done business in an open and ethical manner.
(b) Redding has not, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the business, assets or operations of Redding, that is, or
may be with the passage of time or discovery, illegal under any federal, state
or local laws of the United States (including, without limitation, the U.S.
Foreign Corrupt Practices' Act) or any other country having jurisdiction.
Redding has not participated, directly or indirectly, in any boycotts or other
similar practices affecting any of its actual or potential customers and has at
all times done business in an open and ethical manner.
26
3.26 Customers, Distributors and Suppliers. (a) Schedule 3.26(a) sets
-------------------------------------
forth a complete and accurate list of the names and addresses of Tisco's (i) ten
largest (in terms of dollar volume) customers, distributors and other agents and
representatives during Tisco's last fiscal year, showing the approximate total
sales in dollars by Tisco to such customer during such fiscal year; and (ii)
suppliers during Tisco's last fiscal year, showing the approximate total
purchases in dollars by Tisco from such supplier during such fiscal year. Since
September 30, 1998, there has been no adverse change in the business
relationship of Tisco with any customer, distributor or supplier named on
Schedule 3.26(a). Tisco has not received any communication from any customer,
distributor or supplier named on Schedule 3.26(a) of any intention to terminate
or materially reduce purchases from or supplies to Tisco.
(b) Schedule 3.26(b) sets forth a complete and accurate list of the
names and addresses of Redding's (i) ten largest (in terms of dollar volume)
customers, distributors and other agents and representatives during Redding's
last fiscal year, showing the approximate total sales in dollars by Redding to
such customer during such fiscal year; and (ii) suppliers during Redding's last
fiscal year, showing the approximate total purchases in dollars by Redding from
such supplier during such fiscal year. Since September 30, 1998, there has been
no adverse change in the business relationship of Redding with any customer,
distributor or supplier named on Schedule 3.26(b). Redding has not received any
communication from any customer, distributor or supplier named on Schedule
3.26(b) of any intention to terminate or materially reduce purchases from or
supplies to Redding.
3.27 Computer Systems. (a) The computer systems used in Tisco's
----------------
business are capable of the following before, during or after January 1, 2000
("Year 2000 Compliant"): (i) handling date information involving all and any
dates before, during or after January 1, 2000, including accepting input,
providing output and performing date calculations in whole or in part; (ii)
operating, accurately without interruption on and in respect of any and all
dates before, during or after January 1, 2000 and without any change in
performance; (iii) responding to and processing two digit year input without
creating any ambiguity as to the century; and (iv) storing and providing date
input information without creating any ambiguity as to the century. Tisco has
not been notified in writing by any of its key vendors or suppliers that such
persons' computer systems are not Year 2000 Compliant.
(b) The computer systems used in Redding's business are capable of
the following before, during or after January 1, 2000 ("Year 2000 Compliant"):
(i) handling date information involving all and any dates before, during or
after January 1, 2000, including accepting input, providing output and
performing date calculations in whole or in part; (ii) operating, accurately
without interruption on and in respect of any and all dates before, during or
after January 1, 2000 and without any change in performance; (iii) responding to
and processing two digit year input without creating any ambiguity as to the
century; and (iv) storing and providing date input information without creating
any ambiguity as to the century. Redding has not been notified in writing by any
of its key vendors or suppliers that such persons' computer systems are not Year
2000 Compliant.
3.28 Investment Intent; Accredited Investors; Suitability and
--------------------------------------------------------
Sophistication.
- --------------
(a) The Common Stock and Series A Preferred Stock to be purchased by
the Existing Tisco Shareholder hereunder are being purchased for its own account
and not with the view to, or for resale in connection with, any distribution or
public offering thereof within the meaning
27
of the Securities Act of 1933 (the "Securities Act") except in compliance with
the Securities Act. The Existing Tisco Shareholder understands that the Common
Stock and Series A Preferred Stock have not been registered under the Securities
Act by reason of their issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act, the availability of
which exemption or exemptions depends upon, among other things, the bona fide
nature of the investment intent as expressed herein. The Existing Tisco
Shareholder acknowledges that shares of Common Stock or Series A Preferred Stock
originally issued, any shares of Common Stock or Series A Preferred Stock issued
upon any direct or indirect transfer of any such security, each certificate for
shares of Common Stock issued upon the conversion of any shares of Series A
Preferred Stock and each certificate issued upon the direct or indirect transfer
of any such shares of Common Stock shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES
MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED,
EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT
IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT,
PROVIDED THAT IN A TRANSACTION PURSUANT TO
(iii) ABOVE, IF REQUESTED BY THE ISSUER
HEREOF, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE IS
FURNISHED TO SUCH ISSUER STATING THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT IS AVAILABLE. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
AND OTHER CONDITIONS AS SET FORTH IN THE
STOCKHOLDERS' AGREEMENT, DATED AS OF SEPTEMBER
30, 1998, AS AMENDED, BY AND AMONG THE
STOCKHOLDERS OF CITY TRUCK HOLDINGS, INC. AND
CITY TRUCK HOLDINGS, INC.
Whenever the legend requirements imposed by this Section 3.28(a) shall terminate
or a holder shall provide an opinion of counsel stating that such legend is no
longer required, the respective holders of the securities for which such legend
requirements have terminated shall be entitled to receive from Holdings
certificates without such legend. In the event any disagreement arises regarding
whether the legend requirement imposed by this Section 3.28(a) has terminated,
the holders of such securities shall be entitled to receive from Holdings
certificates without such legend if any such holder provides Holdings with a
written opinion of counsel stating that such legend is no longer necessary or
required.
(b) The Existing Tisco Shareholder is an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D promulgated under the Securities
Act.
28
(c) The Existing Tisco Shareholder has (i) such knowledge and
experience in financial and business matters that it is capable of independently
evaluating the risks and merits of purchasing the Common Stock and Series A
Preferred Stock, (ii) independently evaluated the risks and merits of purchasing
the Common Stock and Series A Preferred Stock and (iii) sufficient financial
resources to bear the loss of its entire investment in such securities.
3.29 Material Misstatements Or Omissions. No representations or
-----------------------------------
warranties by any Existing Shareholder in this Agreement, nor any document,
exhibit, statement, certificate or Schedule heretofore or hereinafter furnished
to HDA or its representatives pursuant hereto, or in connection with the
transactions contemplated hereby, including, without limitation, the Schedules,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND HDA
Holdings and HDA represent and warrant to the Existing Shareholders as
follows:
4.1 Corporate Organization and Standing. Each of Holdings and HDA is
-----------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate power
and authority to own or lease its properties and to carry on its business as
presently conducted. Each of Holdings and HDA has delivered to the Existing
Shareholders or their representatives complete and correct copies of its
Certificate or Articles of Incorporation and Bylaws (or other charter documents)
and all amendments thereto. Each of Holdings and HDA is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business as now being conducted by it or the property
owned or leased by it makes such qualification necessary, except where a failure
to be so duly qualified and in good standing could not reasonably be expected to
have a material adverse effect on the business, operations, assets, results of
operations or financial condition of Holdings, HDA and the HDA Subsidiaries (as
defined), taken as a whole.
4.2 Authorization. This Agreement, the Ancillary Agreements and the
-------------
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of HDA and Holdings. This Agreement has
been, and the Ancillary Documents will be, duly executed and delivered by HDA
and Holdings, and are (or will be, as the case may be) the legal, valid and
binding obligations of HDA and Holdings, enforceable against them in accordance
with their respective terms.
4.3 No Conflict or Violation. Neither the execution and delivery of
------------------------
this Agreement and the Ancillary Agreements, nor (subject to obtaining the
consents listed on Schedule 4.3) the consummation of the transactions
contemplated hereby or thereby will (a) violate, conflict with or result in or
constitute a default under or result in the termination or the acceleration of,
or the creation in any party of any right (whether or not with notice or lapse
of time or both) to declare a default, accelerate, terminate or cancel any
Contractual Obligation to which Holdings, HDA or any of their subsidiaries is a
party or by which any of them is bound or to which any of their assets are
subject or result in the creation of any lien or encumbrance upon any of said
assets, (b) violate, conflict with or result in a breach of or constitute a
default under any provision of the
29
Certificate or Articles of Incorporation or Bylaws of Holdings or HDA, (c)
violate, conflict with or result in a breach of or constitute a default under
any judgment, order, decree, rule or regulation of any court or governmental
agency to which Holdings or HDA is subject or (d) violate, conflict with or
result in a breach of any applicable rule or regulation of any federal, state,
local or other governmental authority.
4.4 Capitalization of Holdings and HDA. The authorized capital stock
----------------------------------
of Holdings consists of 250,000 shares of Common Stock and 850,000 shares of
Series A Preferred Stock. As of the date hereof, _______ shares of Common Stock
and _______ shares of Series A Preferred Stock, respectively, are outstanding,
all of which shares have been duly authorized, validly issued and are fully paid
and nonassessable. There are no preemptive rights on the part of any holder of
any class of securities of Holdings. Holdings owns all of the outstanding
capital stock of HDA, and Holdings does not own any capital stock of, or other
securities evidencing an equity interest in, any other corporation, partnership
or other entity. There are no preemptive rights on the part of any holder of any
class of securities of HDA. As of the date hereof, there are no outstanding
options or warrants obligating Holdings or HDA to issue, sell or otherwise cause
to be outstanding any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares.
4.5 Subsidiaries of HDA. Except for the corporations, partnerships
-------------------
and other entities set forth on Schedule 4.5 (the "HDA Subsidiaries"), HDA does
not own any capital stock of, or other securities evidencing an equity interest
in, any corporation, partnership or other entity. All of the issued and
outstanding shares of capital stock of the HDA Subsidiaries have been duly
authorized, validly issued, are fully paid and non-assessable and are owned by
HDA, free and clear of any claims, liens, security interests, options, changes,
restrictions and interests of others whatsoever. There are no options, warrants,
conversions or other rights, agreements or commitments of any kind obligating
any HDA Subsidiary, contingently or otherwise, to issue, sell or otherwise cause
to be outstanding any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares.
4.6 HDA Financial Statements. The audited consolidated balance sheet
------------------------
and statements of income, stockholders' equity and cash flows of HDA and its
subsidiaries at and for the fiscal year ended December 31, 1997 (the "HDA
Audited Financial Statements") were prepared in accordance with GAAP
consistently applied and fairly present the consolidated financial condition and
results of operations of HDA and its subsidiaries as of their date and for such
period. As of December 31, 1997, HDA and its subsidiaries had no liabilities of
any nature, whether absolute, accrued, asserted or unasserted or contingent or
whether due or to become due that should have been recorded or reserved for on
such balance sheet in accordance with GAAP and were not so recorded or reserved.
The unaudited consolidated balance sheet and statements of income, stockholders
equity and cash flows of HDA and its subsidiaries at and for the ten months
ended October 31, 1998, were prepared in accordance with GAAP consistently
applied and fairly present the consolidated financial condition and results of
operations of HDA and its subsidiaries as of their date and for such period and
are consistent with the HDA Audited Financial Statements. Copies of the
financial statements described in this Section 4.6 have been provided to the
Existing Shareholders or their representatives. Except for the assets and
liabilities reflected on the unaudited consolidated balance sheet of HDA and its
subsidiaries at October 31, 1998, Holdings has no material assets or
liabilities.
4.7 Stock. The shares of Common Stock and Series A Preferred Stock to
-----
be issued to the Existing Shareholders pursuant to this Agreement are duly
authorized and, when paid
30
for in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable.
4.8 Investment. Holdings and HDA (a) understand that the Tisco
----------
Shares and the Redding Shares have not been, and will not be as of the Closing
Date, registered under the Securities Act, or under any state securities laws,
and are being offered and sold in reliance upon federal and state exemptions
from transactions not involving any public offering, (b) are acquiring the Tisco
Shares and the Redding Shares solely for their own account for investment
purposes and not with a view to distribution thereof, (c) are each an
"accredited investor" (as defined under the federal securities laws), (d) have
received information concerning the Companies and have had the opportunity to
obtain additional information as desired in order to evaluate the merits and
risks inherent in holding the Tisco Shares and the Redding Shares and (e) are
able to bear the economic risk and lack of liquidity inherent in holding the
Tisco Shares and the Redding Shares.
4.9 Sufficient Funds. Either HDA or Holdings has sufficient funds
----------------
available (through existing credit arrangements or otherwise) to pay the cash
portion of the Purchase Price pursuant to this Agreement and to pay all fees and
expenses related to the transactions contemplated by this Agreement for which
HDA or Holdings is responsible.
ARTICLE V.
POST-CLOSING COVENANTS
The Existing Shareholders and HDA each covenant with the others as
follows:
5.1 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, the Parties agree, after the Closing, (a) to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement or the Ancillary
Agreements, (b) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (c) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the Parties agree
to use their respective best efforts (i) to obtain all necessary waivers,
consents and approvals from other parties (including, without limitation,
governmental entities) to the consummation of the transactions contemplated by
this Agreement; (ii) to obtain all necessary Permits as are required to be
obtained under any regulations; (iii) to defend all Actions challenging this
Agreement or the consummation of the transactions contemplated hereby; (iv) to
lift or rescind any injunction or restraining order or other court order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby; (v) to give all notices to, and make all registrations and
filings with third parties, including, without limitation, submissions of
information requested by governmental authorities; and (vi) to fulfill all
conditions to this Agreement.
31
5.2 Tax Matters.
-----------
(a) Each Company and each of the Existing Shareholders will join with
HDA in making an election under Section 338(h)(10) of the Code (and any
corresponding election under state, local and foreign tax law) with respect to
the purchase and sale of the stock of the Companies hereunder (a "Section
338(h)(10) Election"). HDA shall be responsible for the preparation and filing
of all Section 338 Forms (as hereinafter defined) in accordance with the
applicable tax laws and terms of this Agreement and the Existing Shareholders
shall cooperate fully in the preparation and filing of such Section 338(h)(10)
Elections.
(b) "Section 338 Forms" means all returns, documents, statements, and
other forms that are required to be submitted to any federal, state, county or
other local Tax authority in connection with a Section 338(h)(10) Election.
Section 338 Forms shall include, without limitation, any "statement of section
338 election" and IRS Form 8023-A (together with any schedules or attachments
thereto) that are required pursuant to Treas. Reg. section 1.338-1 or any
successor provisions.
(c) The Existing Shareholders will pay any income taxes attributable
to the Section 338(h)(10) Election and will include any income, gain, loss,
deduction, or other tax item resulting from the Section 338(h)(10) Election on
their Tax Returns to the extent required by applicable law; provided, however,
--------- -------
that HDA shall pay any Tax imposed on the Companies pursuant to Section 1374 of
the Code and any Tax imposed on the Companies pursuant to the California Revenue
and Taxation Code Section 23151, Section 23501 or Section 23802 in connection
with the consummation of the transactions contemplated by this Agreement.
(d) HDA and the Existing Shareholders agree that the Purchase Price
and the liabilities of the Companies (plus other relevant items) will be
allocated to the assets of the Companies for all purposes. The Parties agree to
cooperate fully in connection with the preparation of an allocation schedule and
to share such schedule in a manner that permits the timely filing of any
applicable Tax Returns. HDA, Tisco, Redding and the Existing Shareholders will
file all Tax Returns in a manner consistent with such allocation.
(e) (i) Tisco and the Existing Tisco Shareholder will not revoke
Tisco's election to be taxed as an S corporation within the meaning of Sections
1361 and 1362 of the Code. Tisco and the Existing Tisco Shareholder will not
take or allow any action, other than the sale of Tisco's stock pursuant to this
Agreement, that would result in the termination of Tisco's status as a validly
electing S corporation within the meaning of Sections 1361 and 1362 of the Code.
(ii) Redding and the Existing Redding Shareholders will not revoke
Redding's election to be taxed as an S corporation within the meaning of
Sections 1361 and 1362 of the Code. Redding and the Existing Redding
Shareholders will not take or allow any action, other than the sale of Redding's
stock pursuant to this Agreement, that would result in the termination of
Redding's status as a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code.
(f) (i) The Existing Tisco Shareholder shall timely prepare and file,
or cause to be prepared and filed, Internal Revenue Service Form 1120S (and any
analogous state or local Tax Returns) for Tisco in accordance with Section
1362(e) of the Code for the year ending September 30, 1998 and for the period
October 1, 1998 through the Closing Date (the "S Short Year") and Internal
32
Revenue Service Schedules K-1 for the tax year ending September 30, 1998 and for
the S Short Year. Such Tax Returns shall be prepared or completed by the
Existing Tisco Shareholder in a manner consistent with the prior practice of
Tisco (including elections and accounting methods and conventions) and in a
manner that does not distort taxable income. The Existing Tisco Shareholder
shall permit HDA to review and comment on such Tax Returns prior to filing and
shall obtain HDA's consent prior to filing such Tax Return, which consent shall
not be unreasonably withheld or delayed, prior to the filing thereof. The
Existing Tisco Shareholder shall include any income, gain, loss, deduction or
other tax items for such periods on their Tax Returns in a manner consistent
with the Schedules K-1 and timely pay, or cause to be paid, when due all
individual Taxes relating to the periods covered by such Tax Returns.
(ii) The Existing Redding Shareholders shall timely prepare and file,
or cause to be prepared and filed, Internal Revenue Service Form 1120S (and any
analogous state or local Tax Returns) for Redding in accordance with Section
1362(e) of the Code for the year ending September 30, 1998 and for the period
October 1, 1998 through the Closing Date (the "S Short Year") and Internal
Revenue Service Schedules K-1 for the tax year ending September 30, 1998 and for
the S Short Year. Such Tax Returns shall be prepared or completed by the
Existing Redding Shareholders in a manner consistent with the prior practice of
Redding (including elections and accounting methods and conventions) and in a
manner that does not distort taxable income. The Existing Redding Shareholders
shall permit HDA to review and comment on such Tax Returns prior to filing and
shall obtain HDA's consent prior to filing such Tax Return, which consent shall
not be unreasonably withheld or delayed, prior to the filing thereof. The
Existing Redding Shareholders shall include any income, gain, loss, deduction or
other tax items for such periods on their Tax Returns in a manner consistent
with the Schedules K-1 and timely pay, or cause to be paid, when due all
individual Taxes relating to the periods covered by such Tax Returns.
(g) HDA shall prepare or complete, or cause to be prepared or
completed, and timely filed, or cause to be timely filed, all Tax Returns of the
Companies required to be filed after the Closing Date (other than the Tax
Returns specified in Section 5.2(f) hereof) and, subject to Section 5.2(g)
hereof, shall timely pay, or cause to be timely paid, when due, all Taxes
relating to such Tax Returns. With respect to Tax Returns of the Companies not
filed prior to the Closing Date (other than the Tax Returns specified in Section
5.2(f) hereof) that relate to a taxable period that ends on or prior to or
includes the Closing Date, such Tax Returns shall be prepared or completed by
HDA in a manner consistent with the prior practice of Tisco or Redding, as the
case may be.
(h) Subject to Section 5.2(c), the Existing Tisco Shareholder shall
indemnify, defend, and hold HDA and Tisco harmless from and against: any and all
liabilities for Taxes of Tisco for all taxable periods ending on or before the
Closing Date (the "Pre-Closing Tax Period") and for the portion of any Taxes of
Tisco for any Straddle Period (as hereinafter defined) that is allocated
(pursuant to Section 5.2(j)) to the Pre-Closing Tax Period (such liabilities
collectively, "Pre-Closing Tax Liabilities"); provided, however, that the amount
of the Exiting Tisco Shareholder's indemnity obligation for Taxes pursuant to
this Section 5.2(h) shall be reduced to the extent that the aggregate reserves
for Taxes reflected on Tisco's balance sheet at November 30, 1998 exceeds the
aggregate liability for Taxes for the Pre-Closing Tax Period and not paid prior
to the close thereof.
(i) Subject to Section 5.2(c), the Existing Redding Shareholders
shall indemnify, defend, and hold HDA and Redding harmless from and against: any
and all liabilities for Taxes of
33
Redding for all taxable periods ending on or before the Closing Date (the "Pre-
Closing Tax Period") and for the portion of any Taxes of Redding for any
Straddle Period (as hereinafter defined) that is allocated (pursuant to Section
5.2(j)) to the Pre-Closing Tax Period (such liabilities collectively, "Pre-
Closing Tax Liabilities"); provided, however, that the amount of the Exiting
Redding Shareholders' indemnity obligation for Taxes pursuant to this Section
5.2(i) shall be reduced to the extent that the aggregate reserves for Taxes
reflected on Redding's balance sheet at November 30, 1998 exceeds the aggregate
liability for Taxes for the Pre-Closing Tax Period and not paid prior to the
close thereof.
(j) In the case of any taxable period that includes but does not end
on the Closing Date (a "Straddle Period"), Taxes of the Companies for the
Straddle Period shall be allocated to the Pre-Closing Tax Period using an
interim-closing-of-the-books method assuming that such taxable period ended at
the close of the Closing Date, except that (i) exemptions, allowances or
deductions that are calculated on an annual basis (such as the deduction for
depreciation) shall be apportioned on a per-diem basis and (ii) real property,
personal property, intangibles and other similar Taxes shall be allocated in
accordance with the principles of Section 164(d) of the Code.
(k) Any gains, transfer, sales, use, bulk sales, recording,
registration, documentary, stamp and other Taxes that may result from or be
incurred in connection with the transactions contemplated by this Agreement
("Conveyance Taxes") shall be paid by the Party liable therefor under applicable
law. Such Party shall indemnify, defend, and hold the other Party harmless from
and against any and all liabilities for Conveyance Taxes.
(1) The Existing Tisco Shareholder with respect to Tisco and the
Existing Redding Shareholders, severally but not jointly with respect to
Redding, shall indemnify, defend and hold HDA, Tisco and Redding harmless from
and against any and all liability for Taxes or other Losses arising out of a
breach or inaccuracy of any representation or warranty contained in Section
3.11. HDA shall provide the Existing Shareholders with a statement calculating
in reasonable detail the Existing Shareholders' indemnification obligation.
(m) HDA shall promptly notify the Existing Shareholders in writing
upon receipt by HDA or any affiliate of HDA of notice of any pending or
threatened proceeding relating to Taxes for which the Existing Shareholders may
be liable under a Tax proceeding ("Tax Proceeding"). The Existing Tisco
Shareholder or the Existing Redding Shareholder, as the case may be, shall have
the sole right to control, conduct, and otherwise represent the interests of
Tisco or Redding in any such Tax Proceeding; provided, however, that without the
-------- -------
prior written approval of HDA, which approval shall not be unreasonably withheld
or delayed, no Existing Shareholders shall agree or consent to compromise or
settle any issue or claim arising in any such Tax Proceeding to the extent that
any such compromise, settlement, consent or agreement could have an adverse
effect on HDA for any period ending after the Closing Date.
(n) Neither HDA nor any affiliate of HDA shall, without the prior
written consent of the Existing Tisco Shareholder or the Existing Redding
Shareholders, as the case may be, which consent shall not be unreasonably
withheld or delayed, file or cause to be filed, any amended Tax Return or claim
for Tax refund with respect to Tisco or Redding relating to Taxes for which any
Existing Shareholder may be liable hereunder. Promptly after the reasonable
request of an Existing Shareholder, at the sole expense of the Existing Tisco
Shareholder or the Existing Redding Shareholder, as the case may be, HDA shall,
or cause Tisco or Redding to, file any amended Tax
34
Return or claim for Tax refund relating to Taxes for which any Existing
Shareholder may be liable hereunder, provided that such amended Tax Returns or
--------
claims shall be prepared in a manner consistent with the prior practice of Tisco
or Redding (including elections and accounting methods and conventions) and, in
the reasonable determination of HDA, shall conform to applicable laws and
regulations. If HDA or any affiliate of HDA shall receive a Tax refund relating
to a period or transaction for which any Existing Shareholder is liable
hereunder, HDA shall, within 30 days after receipt of such Tax refund, remit
such Tax refund (including any interest received on such Tax refund and net of
(i) any Tax cost relating to the receipt of such Tax refund and (ii) any
unreimbursed cost or expense incurred in obtaining such Tax refund), to the
Existing Shareholders. For purposes of this Section 5.2 the term "Tax refund"
shall include a reduction in Tax or the use of an overpayment as a credit or
oilier Tax offset, and the receipt of a refund shall be deemed to be realized
upon the earliest to occur of(i) the date on which HDA has actual knowledge that
a payment due to the relevant taxing authority (for which HDA would be
responsible under this Agreement) has been offset by such a refund and (ii) the
receipt of cash.
(o) After the date hereof, HDA and the Existing Shareholders shall
provide each other with such cooperation and information relating to the
Companies as either party reasonably may request in (i) filing any Tax Return,
amended Tax Return or claim for Tax refund, (ii) determining any Tax liability
or a right to a Tax refund, (iii) conducting or defending any proceeding in
respect of Taxes or (iv) effectuating the terms of this Agreement. The Parties
shall retain all Tax Returns, schedules and work papers, and all material
records and other documents relating thereto, until the expiration of the
statute of limitations (and, to the extent notified by any party, any extensions
thereof) of the taxable years to which such Tax Returns and other documents
relate and until the final determination of any Tax in respect of such years.
Any information obtained under this Section 5.2 shall be kept confidential,
except as may be otherwise necessary in connection with filing any Tax Return,
amended Tax Return, or claim for Tax refund, determining any Tax liability or
right to a Tax refund, or in conducting or defending any proceedings in respect
of Taxes.
(P) The obligations of the Parties set forth in this Section 5.2 shall
be unconditional and absolute and shall remain in effect until the date that is
90 days after the expiration of the relevant statute of limitations applicable
to the Taxes at issue, giving effect to all valid waivers or extensions thereof
Claims for indemnification arising under or with respect to Section 3.11 or
this Section 5.2 may not be made unless notice of such claims has been given on
or prior to the date that is 90 days after the expiration of the relevant
statute of limitations applicable to the Taxes at issue, giving effect to all
valid waivers or extensions thereof.
(q) All rights and obligations of the parties hereto with respect to
Taxes, including all rights or either party to indemnification with respect to
Taxes, shall be governed exclusively by the provisions of this Section 5.2 and
3.11, and in particular, the provisions of Article VIII shall not apply to
obligations arising under this Section 5.2.
35
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
BY HOLDINGS AND HDA
The obligations of Holdings and HDA under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions, any
one or more of which may be waived by Holdings and HDA.
6.1 No Injunctive Proceedings. No preliminary or permanent injunction
-------------------------
or other order (including a temporary restraining order) of any state or federal
court or other governmental agency which prevents the consummation of the
transactions that are the subject of this Agreement shall have been issued and
remain in effect.
6.2 Representations and Warranties. All representations and
------------------------------
warranties of the Existing Shareholders contained in this Agreement shall be
true and correct as of the Closing Date, except as otherwise contemplated by
this Agreement.
6.3 Performance of Agreements. The Existing Shareholders shall have
------------------------
performed in all material respects all obligations, agreements and commitments
required to be fulfilled by them pursuant to the terms hereof on or prior to the
Closing Date.
6.4 Compliance Certificate. The Existing Shareholders shall have
----------------------
delivered to HDA or its representatives, their respective certificates, dated
the Closing Date, executed on its behalf by its respective duly authorized
representatives, as to the fulfillment of the conditions set forth in Sections
6.2 and 6.3 hereof.
6.5 Stock Certificates. The Existing Stockholders shall deliver to
------------------
HDA certificates representing all of the Tisco Shares and Redding Shares,
together with duly executed stock transfer powers in favor of HDA.
6.6 Stock Books. HDA shall have received the stock books, stock
-----------
ledgers, minute books and corporate seals (if any) of the Companies.
6.7 Officers and Directors. HDA shall have received the written
----------------------
resignation of all officers and directors of the Companies in office immediately
prior to the Closing.
6.8 Opinion of Counsel. HDA shall have received the opinion of
------------------
O'Brien Watters & Davis, LLP, counsel for the Companies and the Existing
Shareholders, in the form set forth in Schedule 6.8 hereto.
6.9 Consents, Etc. All authorizations, consents or approvals of any
-------------
and all third parties and governmental regulatory authorities necessary in
connection with the consummation of the Closing shall have been obtained and be
in full force and effect. Copies of all such authorizations, consents or
approvals shall have been delivered to HDA or its representatives.
6.10 Ancillary Agreements. The following agreements (the "Ancillary
--------------------
Agreements") shall have been duly executed and delivered by all parties thereto
other than HDA; (a) non-competition agreements by and between HDA and each of
Gregory D. Mathis and
36
Ernie Linton, substantially in the form attached hereto as Exhibit A; (b)
Joinders to a Stockholders' Agreement for Holdings substantially in the form
attached hereto as Exhibit B; (c) an escrow agreement (the "Escrow Agreement")
by and among Holdings, HDA, the Existing Shareholders and Chase Manhattan Bank
and Trust Company, National Association, as "Escrow Agent," substantially in the
form attached hereto as Exhibit C; (d) leases between HDA and the owner of the
Tisco Real Property, substantially in the form attached hereto as Exhibit D; and
(e) a lease between HDA and the owner of the Redding Real Property,
substantially in the form attached hereto as Exhibit E.
6.11 Nonforeign Affidavit. Each Existing Shareholder shall furnish to
--------------------
HDA an affidavit, stating, under penalty of perjury, its United States taxpayer
identification number and that it is not a foreign person, pursuant to Section
1445(b)(2) of the Code.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
BY THE EXISTING SHAREHOLDERS
The obligations of the Existing Shareholders under this Agreement are
subject to the fulfillment prior to the Closing of each of the following
conditions, any one or more of which may be waived by the Existing Shareholders:
7.1 No Injunctive Proceedings. No preliminary or permanent injunction
-------------------------
or other order (including a temporary restraining order) of any state or federal
court or other governmental agency which prevents the consummation of the
transactions which are the subject of this Agreement shall have been issued and
remain in effect.
7.2 Representations and Warranties. All representations and
------------------------------
warranties of Holdings and HDA contained in this Agreement shall be true and
correct as of the Closing Date, except as otherwise contemplated by this
Agreement.
7.3 Performance of Agreements; Instruments of Transfer. Holdings and
--------------------------------------------------
HDA shall have performed in all material respects all obligations, agreements
and commitments required to be fulfilled by Holdings and HDA pursuant to the
terms hereof on or prior to the Closing Date.
7.4 Compliance Certificates. Each of Holdings and HDA shall have
-----------------------
delivered to the Existing Shareholders a certificate, dated the Closing Date,
executed on its behalf by its President or a Vice President, as to the
fulfillment of the conditions set forth in Sections 7.2 and 7.3 hereof.
7.5 Ancillary Agreements. The Ancillary Agreements shall have been
--------------------
executed and delivered by all parties thereto other than the Existing
Shareholders or affiliates of them.
7.6. Releases from Guaranties. Each party listed as a guarantor on
------------------------
Schedule 7.6 shall have been released from all of its obligations as a guarantor
of the Contractual Obligation of Tisco or Redding, as applicable, identified on
Schedule 7.6.
37
ARTICLE VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING
8.1 Indemnification by the Existing Shareholders. (a) Subject to the
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provisions of this Article VIII, the Existing Tisco Shareholder will indemnify,
defend and hold harmless HDA and its stockholders, subsidiaries, affiliates,
officers, directors, employees, agents, successors and assigns, (such
indemnified persons are collectively hereinafter referred to as "HDA's
Indemnified Persons") from and against any and all loss, liability, damage
(excluding consequential, indirect special, exemplary and punitive damages) or
deficiency (including interest, penalties, judgments, costs of preparation and
investigation, and reasonable attorneys' fees) (collectively, "Losses") that
HDA's Indemnified Persons may suffer, sustain, incur or become subject to
arising out of or due to: (i) any inaccuracy of any representation of any
Existing Tisco Shareholder in this Agreement or in any Schedule hereto; (ii) the
breach of any warranty of any Existing Tisco Shareholder in this Agreement or
any Schedule hereto; (iii) environmental liabilities; (iv) the nonfulfillment of
any covenant, undertaking, agreement or other obligation of any Existing Tisco
Shareholder under this Agreement or any Schedule hereto, not otherwise waived by
HDA; or (v) Tisco's participation in and/or withdrawal from the Commonwealth
Benefit Plan and Associated Trusts or any successor arrangement or trust
(including without limitation any election to withdrawal in the one-time exit
strategy pursuant to the terms of a settlement approved by the court in the
matter of Williams v. Evans & Sons. Inc., Case No. CV95-8360 DT (RMCx) and
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consolidated cases). "Losses" as used herein is not limited to matters asserted
by third parties, but includes Losses incurred or sustained in the absence of
third party claims. Payment is not a condition precedent to recovery of
indemnification for Losses.
(b) Subject to the provisions of this Article VIII, the Existing
Redding Shareholders will jointly and severally indemnify, defend and hold
harmless HDA's Indemnified Persons from and against any and all Losses that
HDA's Indemnified Persons may suffer, sustain, incur or become subject to
arising out of or due to: (i) any inaccuracy of any representation of any
Existing Redding Shareholder in this Agreement or in any Schedule hereto; (ii)
the breach of any warranty of any Existing Redding Shareholder in this Agreement
or any Schedule hereto; (iii) environmental liabilities; or (iv) the
nonfulfillment of any covenant, undertaking, agreement or other obligation of
any Existing Redding Shareholder under this Agreement or any Schedule hereto,
not otherwise waived by HDA. Payment is not a condition precedent to recovery of
indemnification for Losses. In no event, however, shall the liability of Ernie
Linton for indemnification under this Section 8.1(b) exceed the proceeds
received by him from the sale of Redding Shares under this Agreement.
8.2 Indemnification by Holdings and HDA. Subject to the provisions of
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this Article VIII, Holdings and HDA agree to indemnified, defend and hold the
Existing Shareholders and their respective heirs, representatives, successors
and assigns (such persons are hereinafter collectively referred to as the
"Existing Shareholders' indemnified Persons"), harmless from and against any
and all Losses that the Existing Shareholders' Indemnified Persons may suffer,
sustain, incur or become subject to arising out of or due to: (a) any inaccuracy
of any representation of Holdings or HDA in this Agreement or in any Schedule
hereto; (b) the breach of any warranty of Holdings or HDA in this Agreement or
any Schedule hereto; and (c) the nonfulfillment of any covenant, undertaking,
agreement or other Obligation of Holdings or HDA under this Agreement or any
Schedule hereto, not otherwise waived by the Existing Shareholders.
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8.3 Survival of Representations. Warranties and Covenants The several
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representations, warranties, covenants of the Parties contained in this
Agreement or in any document delivered pursuant hereto and the Parties' right to
indemnity in accordance with this Article VIII shall survive the Closing Date
and shall remain in full force and effect for 18 months thereafter whereupon
they will terminate and have no further force or effect; provided, however, that
the representations and warranties set forth in Section 3.11 relating to tax
matters and Section 3.18 relating to employee benefits matters shall survive for
the length of the applicable statute of limitations; provided further that the
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representations and warranties set forth in Sections 3.4, 3.5, 4.4 and 4.7 shall
survive indefinitely.
8.4 Threshold. No HDA's Indemnified Person or Existing Shareholders'
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Indemnified Person shall be entitled to any recovery in accordance with this
Article VIII (except with respect to Section 8.1 (a)(v))unless and until the
amount of such Losses suffered, sustained or incurred by such party, or to which
such party becomes subject, by reason of such inaccuracy, breach or
nonfulfillment exceeds $75,000 in the aggregate, whereupon HDA's Indemnified
Persons or the Existing Shareholders' Indemnified Persons, as the case may be,
shall be entitled to indemnification under this Article VIII (subject to the
provisions of Section 8.1(b)) only for the amount of Losses in excess of such
amount up to a maximum amount of $6,500,000.
8.5 Notice and Opportunity to Defend. If a claim for Losses (a
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"Claim") is to be made by a party seeking indemnification hereunder, such party
seeking indemnification (the "Indemnitee") shall notify the party obligated to
provide indemnification (the "Indemnitor") promptly. If such event involves (a)
any claim or (b) the commencement of any action or proceeding by a third person,
the Indemnitee shall give the Indemnitor written notice of such claim or the
commencement of such action or proceeding. Delay or failure to so notify the
Indemnitor shall only relieve the Indemnitor of its obligations to the extent,
if at all, that it is prejudiced by reasons of such delay or failure. The
Indemnitor shall have a period of 30 days within which to respond thereto. If
the Indemnitor accepts responsibility or does not respond within such 30-day
period, then the Indemnitor shall be obligated to compromise or defend, at its
own expense and by counsel chosen by the Indemnitor, such matter, and the
Indemnitor shall provide the Indemnitee with such assurances as may be
reasonably required by the Indemnitee to assure that the Indemnitor will assume
and be responsible for the entire liability at issue, subject to the limitations
set forth in Sections 8.3 and 8.4 hereof. If the Indemnitor fails to assume the
defense of such matter within said 30-day period, the Indemnitee against which
such matter has been asserted will (upon delivering notice to such effect to the
Indemnitor) have the right to undertake, at the Indemniter's cost and expense,
the defense, compromise or settlement of such matter on behalf of the
Indemnitee. The Indemnitee agrees to cooperate fully with the Indemnitor and
its counsel in the defense against any such asserted liability. In any event,
the Indemnitee shall have the right to participate at its own expense in the
defense of such asserted liability. Any compromise of such asserted liability by
the Indemnitor shall require the prior written consent of the Indemnitee, which
consent will not be unreasonably withheld and in the event the Indemnitee
defends any such asserted liability, then any compromise of such asserted
liability by the Indemnitee shall require the prior written consent of the
Indemnitor, which consent shall not be unreasonably withheld.
8.6 Indemnification Payments. At the Closing, HDA will deliver by
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wire transfer of immediately available funds $500,000 (Five Hundred Thousand
Dollars) of the Cash Purchase Price to the Escrow Agent to be held by the Escrow
Agent for 18 months pursuant to the terms of the Escrow Agreement and to serve
as partial security for the indemnification obligations of the
39
Existing Shareholders under this Agreement. Any indemnification obligations of
the Existing Shareholders under this Article VIII shall be first satisfied by
amounts held by the Escrow Agent pursuant to the terms of the Escrow Agreement.
8.7 Tax Effect. The calculation of any amounts payable pursuant to
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Sections 8.1 and 8.2 shall take into account any actual decrease in the
liability of the indemnified party for income taxes arising as a result of
reporting the Loss on any income tax return for the taxable period in which such
Loss is incurred or paid. To the extent such Loss does not result in an actual
decrease in the liability of the indemnified party for income taxes in the
taxable period in which such Loss is incurred or paid but the indemnified party
reasonably believes will result in such a decrease in any of the two subsequent
taxable year following the taxable period in which such Loss was incurred or
paid, the indemnifying party shall promptly transfer to the indemnified party
the entire amount of such decrease at the time such decrease is in fact
realized, whether by paying less income taxes or receiving a refund. If any
decrease in the income tax liability of such indemnified party that is taken
into account in computing the indemnification obligations of an indemnifying
party is subsequently disallowed in a determination (as defined in Section
1313(a) of the Code), the additional income taxes then payable by the
indemnified party as a result of such disallowance shall be a Loss giving rise
to an indemnification payment hereunder. Any payments made pursuant to Sections
8.1 or 8.2 will be treated by HDA and the Existing Shareholders as an adjustment
to the Purchase Price for United States federal income tax purposes.
ARTICLE IX.
MISCELLANEOUS
9.1 Expenses. Except as otherwise set forth in this Agreement, HDA or
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Holdings shall pay all costs and expenses incurred by them or on their behalf,
and the Existing Shareholders shall pay all costs and expenses incurred by any
Existing Shareholder or either Company on such Existing Shareholder's or
Company's behalf, in connection with this Agreement and the transactions
contemplated hereby, including fees and expenses of their financial consultants,
accountants and legal counsel.
9.2 Notices. All notices, requests, demands and other communications
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given hereunder (collectively, "Notices") shall be in writing and delivered
personally or by overnight courier to the Parties at the following addresses or
sent by telecopier or telex, with confirmation received, to the telecopy
specified below:
If to any Existing Shareholder, at the address or telecopier number of
such Existing Shareholder set forth on Annex A or B hereto.
With a Copy to:
O'Brien Watters & Davis, LLP
P.O. BOX 3759
Santa Rosa, California 95402
Attn.: Daniel E. Davis
Telecopy No.: (707) 544-2861
40
If to Holdings or HDA:
HDA Parts System, Inc.
520 Lake Cook Road
Deerfield, Illinois 60015
Attn.: John J. Greisch
Telecopy No.: (847) 444-1096
With a Copy to:
Brentwood Associates
11150 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90025
Attn.: Christopher A. Laurence
Telecopy No.: (310) 477-1011
And:
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
Attn.: Timothy J. Melton
Telecopy No.: (312) 782-8585
All Notices shall be deemed delivered when actually received if
delivered personally or by overnight courier, sent by telecopier or telex
(promptly confirmed in writing), addressed as set forth above. Each of the
Parties shall hereafter notify the other in accordance with this Section 9.2 of
any change of address or telecopy number to which notice is required to be
mailed.
9.3 Counterparts. This Agreement may be executed simultaneously
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in one or more counterparts, and by different parties hereto in separate
counterparts, each of which when executed shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
9.4 Entire Agreement. This Agreement and the other written agreements
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entered into on the date hereof constitute the entire agreement of the Parties
with respect to the subject matter hereof and thereof and supersede all prior
negotiations, agreements and understandings, whether written or oral, of the
Parties.
9.5 Headings. The headings contained in this Agreement and in the
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Schedules and Exhibits hereto are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
9.6 Assignment: Amendment of Agreement. This Agreement shall be
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binding upon the respective successors and assigns of the Parties hereto. This
Agreement may not be assigned by any Party hereto without the prior written
consent of all other Parties hereto. This
41
Agreement may be amended only by written agreement of the Parties hereto, duly
executed and delivered by an authorized representative of each of the Parties
hereto.
9.7 Governing Law. This Agreement shall be governed by and construed
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and enforced in accordance with the internal laws of the State of Delaware
applicable to contracts made in that State, without giving effect to the
conflicts of laws principles thereof.
9.8 Further Assurances. Each Party agrees that it will execute and
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deliver, or cause to be executed and delivered, on or after the date of this
Agreement, all such other instruments and will take all reasonable actions as
may be necessary in order to consummate the transactions contemplated hereby,
and to effectuate the provisions and purposes hereof.
9.9 No Third-Party Rights. This Agreement is not intended, and shall
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not be construed, to create any rights in any parties other than Holdings, HDA,
the Companies and the Existing Shareholders, and no person shall assert any
rights as third-party beneficiary hereunder.
9.10 Non-Waiver. The failure in any one or more instances of a Party
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hereto to insist upon performance of any of the terms, covenants or conditions
of this Agreement, to exercise any right or privilege in this Agreement
conferred, or the waiver by said Party of any breach of any of the terms,
covenants or conditions of this Agreement shall not be construed as a subsequent
waiver of any such terms, covenants, conditions, rights or privileges, but the
same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
9.11 Severability. If any term or other provision of this Agreement
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is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties hereto shall negotiate in
good faith to modify this Agreement so as to affect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
9.12 Incorporation of Exhibits and Schedules. (a) The Exhibits and
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Schedules hereto are incorporated into this Agreement and shall be deemed a part
hereof as if set forth herein in full. References herein to "this Agreement" and
the words "herein," "hereof" and words of similar import refer to this Agreement
(including its Exhibits and Schedules) as an entirety. In the event of any
conflict between the provisions of this Agreement and any such Exhibit or
Schedule, the provisions of this Agreement shall control.
(b) Disclosure of an item on one Schedule shall be deemed to be
disclosure on any other Schedule, or with regard to any other representation or
warranty, to which such disclosure relates with reasonable obviousness.
9.13 Knowledge. As used herein, to the "knowledge" or "best
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knowledge" or similar phrase includes actual knowledge, after reasonable
inquiry, of any officer, director or shareholder of Tisco or Redding, as the
case may be, and any employee of Tisco or Redding, as the case may be, whose job
duties include the subject matter in question.
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(Signature Page Follows)
43
IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement as of the day and year first above written.
CITY TRUCK HOLDINGS, INC.
BY: /s/ John P. Miller
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Name: John P. Miller
Title: Vice President of Finance,
Chief Financial Officer and
Secretary
HDA PARTS SYSTEM, INC.
By: /s/ John P. Miller
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Name: John P. Miller
Title: Vice President of Finance,
Chief Financial Officer and
Secretary
THE MATHIS FAMILY REVOCABLE LIVING TRUST
/s/ Gregory D. Mathis
BY: ---------------------------------
GREGORY D. MATHIS, TRUSTEE
/s/ Susan M. Mathis
BY: ---------------------------------
SUSAN M. MATHIS, TRUSTEE
/s/ Ernie Linton
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ERNIE LINTON
S-1
ANNEX A
THE EXISTING TISCO SHAREHOLDER
Name Shares
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The Mathis Family Revocable Living Trust 25,000
A-1
ANNEX B
THE EXISTING REDDING SHAREHOLDERS
Name Shares
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The Mathis Family Revocable Living Trust 100
Ernis Linton 27
B-1