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EXHIBIT ___
Execution Copy
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STOCK PURCHASE AGREEMENT
AMONG
CHARLESBANK EQUITY FUND IV, LIMITED PARTNERSHIP
AND
THE STOCKHOLDERS
OF
THE J. H. HEAFNER COMPANY, INC.
SIGNATORIES HERETO
DATED AS OF APRIL 21, 1999
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TABLE OF CONTENTS
Introduction......................................................................................................1
ARTICLE I
Purchase and Sale of Shares
SECTION 1.1. The Shares and the Additional Shares.................................................................1
SECTION 1.2. Purchase Price and Additional Purchase Price.........................................................1
SECTION 1.3. Closing..............................................................................................2
ARTICLE II
Representations and Warranties
SECTION 2.1. Representations and Warranties of the Stockholders...................................................2
(a) Organization, Standing and Power................................................................2
(b) Authority; Binding Agreement....................................................................3
(c) Capitalization; Equity Interests................................................................3
(d) Conflicts; Consents.............................................................................4
(e) Financial Information and SEC Reports...........................................................5
(f) Absence of Changes..............................................................................6
(g) Assets and Properties...........................................................................7
(h) Intellectual Property...........................................................................8
(i) Year 2000.......................................................................................9
(j) Agreements......................................................................................9
(k) Litigation.....................................................................................10
(l) Compliance; Licenses and Permits...............................................................10
(m) Environmental Matters..........................................................................10
(n) Labor Relations; Employees.....................................................................11
(o) Potential Conflicts of Interest................................................................14
(p) Tax Matters....................................................................................14
(q) Inventory......................................................................................15
(r) Trade Relations................................................................................15
(s) Insurance......................................................................................15
(t) Brokers........................................................................................16
(u) Full Disclosure................................................................................16
SECTION 2.2. Representations and Warranties of Each Stockholder........................................16
(a) Authority; Binding Agreement; Title to Shares..................................................16
(b) Conflicts; Consents............................................................................17
(c) Brokers........................................................................................17
(d) Litigation.....................................................................................17
SECTION 2.3. Representations and Warranties of the Purchaser...........................................17
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(a) Organization; Power and Authority..............................................................17
(b) Binding Agreement..............................................................................18
(c) Conflicts; Consents............................................................................18
(d) Investment Representation......................................................................18
(e) Brokers........................................................................................18
(f) Litigation.....................................................................................18
(g) Funds Available................................................................................19
ARTICLE III
Additional Agreements
SECTION 3.1. Expenses............................................................................................19
SECTION 3.2. Conduct of Business.................................................................................19
(a) In General.....................................................................................19
(b) Employees......................................................................................20
(c) Taxes..........................................................................................20
SECTION 3.3. Reasonable Efforts; Further Assurances..............................................................20
SECTION 3.4. No Shopping.........................................................................................20
SECTION 3.5. Access and Information..............................................................................21
SECTION 3.6. Confidentiality; Restrictive Covenants..............................................................21
(a) Confidential Information.......................................................................21
(b) Acknowledgments by Controlling Stockholders....................................................22
(c) Non-Competition; Non-Solicitation..............................................................22
(d) Enforceability.................................................................................22
SECTION 3.7. Public Announcements................................................................................23
SECTION 3.7. Indemnification of Directors and Officers...........................................................23
SECTION 3.9. Stockholder Representative..........................................................................23
(a) Appointment....................................................................................23
(b) Successor Representatives......................................................................24
SECTION 3.10. Escrow Agreement...................................................................................24
SECTION 3.11. Release............................................................................................24
SECTION 3.12. Joinder............................................................................................25
SECTION 3.13. Termination of Guarantees..........................................................................25
SECTION 3.14. Merger Transaction.................................................................................25
ARTICLE IV
Conditions Precedent
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SECTION 4.1. Conditions to Obligations of the Purchaser..........................................................25
(a) Representations, Warranties and Covenants......................................................25
(b) Certificates...................................................................................26
(c) Legal Opinions.................................................................................26
(d) HSR Act........................................................................................26
(e) No Legal Bar...................................................................................26
(f) Consents, Amendments and Terminations..........................................................26
(g) Company Directors..............................................................................27
(h) Share Certificates.............................................................................27
(i) Consulting Agreement...........................................................................27
(j) Management.....................................................................................27
(k) No Material Adverse Change.....................................................................27
(l) Other Deliveries...............................................................................27
SECTION 4.2. Conditions to Obligations of the Stockholders.......................................................27
(a) Representations, Warranties and Covenants......................................................27
(b) Certificate....................................................................................27
(c) Legal Opinion..................................................................................27
(d) HSR Act........................................................................................28
(e) No Legal Bar...................................................................................28
(f) Other Deliveries...............................................................................28
ARTICLE V
Indemnity
SECTION 5.1. Indemnification.....................................................................................28
(a) Indemnification by Stockholders................................................................28
(b) Indemnification by Purchaser...................................................................29
(c) Indemnification Procedures.....................................................................30
(d) Company Participation..........................................................................30
(e) Asserted Liabilities Involving the Company.....................................................30
(f) Treatment of Payments..........................................................................31
SECTION 5.2. Limitations.........................................................................................31
(a) Expiration Date................................................................................31
(b) Caps...........................................................................................31
(c) Threshold; Minimum Claim Amount................................................................31
(d) Tax Benefits...................................................................................32
(e) Insurance Proceeds.............................................................................32
(f) Additional Exclusions..........................................................................33
(g) Remedy.........................................................................................33
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ARTICLE VI
Miscellaneous
SECTION 6.1. Entire Agreement....................................................................................33
SECTION 6.2. Termination.........................................................................................33
SECTION 6.3. Descriptive Headings; Certain Interpretations.......................................................34
SECTION 6.4. Notices.............................................................................................34
SECTION 6.5. Counterparts........................................................................................36
SECTION 6.6. Survival............................................................................................36
SECTION 6.7. Benefits of Agreement...............................................................................36
SECTION 6.8. Amendments and Waivers..............................................................................36
SECTION 6.9. Assignment..........................................................................................36
SECTION 6.10. Enforceability; Equitable Relief...................................................................37
SECTION 6.11. Arbitration; Consent to Jurisdiction; Waiver of Jury Trial.........................................37
SECTION 6.12. Governing Law......................................................................................38
ANNEXES
A Dispute Resolution Procedures
SCHEDULES
Disclosure Schedule
2.2(b) Stockholder Consents
3.2 Conduct of Business
3.11 Exceptions to Stockholder Release
4.1(f) Consents
EXHIBITS
A-1 Form of Officers' Certificate
A-2 Form of Stockholder's Certificate
B Form of Consulting Agreement
C Form of Purchaser's Certificate
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STOCK PURCHASE AGREEMENT, dated as of April 21, 1999
(the "Agreement"), among Charlesbank Equity Fund IV,
Limited Partnership, a Massachusetts limited
partnership (the "Purchaser"), each of the
stockholders of The J.H. Heafner Company, Inc., a
North Carolina corporation (the "Company") signing
this Agreement on the date first written above (the
"Principal Stockholders"), each other stockholder of
the Company who joins in this Agreement pursuant to
Section 3.12 (the "Other Stockholders" and, together
with the Principal Stockholders, the "Stockholders"),
and, from and after such time as it may elect to join
in this Agreement pursuant to Section 3.12, the
Company.
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INTRODUCTION
The Company owns and operates a nationwide wholesale and
retail tire and automotive parts business. Each Stockholder desires to sell the
number of shares (the "Shares") of Class A Common Stock, $.01 par value (the
"Class A Common Stock"), of the Company set forth opposite such Stockholder's
name on the signature page to this Agreement to the Purchaser, and the Purchaser
desires to purchase the Shares, together with any additional shares of common
stock of the Company (the "Additional Shares") to be sold by the Other
Stockholders, on the terms and conditions set forth in this Agreement.
The parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. The Shares and the Additional Shares. Upon the terms
and subject to the conditions set forth in this Agreement, at the Closing
(defined below), (i) each Principal Stockholder shall sell, convey, assign,
transfer and deliver to the Purchaser, and the Purchaser shall purchase, acquire
and accept from each Principal Stockholder, the Shares owned by such Principal
Stockholder and set forth opposite such Principal Stockholder's name on the
signature pages to this Agreement, free and clear of all security interests,
liens, pledges, charges, escrows, options, rights of first refusal, mortgages,
indentures, security agreements or other claims, encumbrances, agreements,
arrangements or commitments of any kind or character, whether written or oral
and whether or not relating in any way to credit or the borrowing of money
(collectively, "Claims") and (ii) each Other Stockholder shall sell, convey,
assign, transfer and deliver to the Purchaser, and the Purchaser shall purchase,
acquire and accept from each Other Stockholder, the Additional Shares owned by
such Other Stockholder and set forth opposite such Other Stockholder's name on
the signature pages to this Agreement, free and clear of all Claims.
SECTION 1.2. Purchase Price and Additional Purchase Price. The
purchase price for the Shares and the Additional Shares shall be cash in the
amount of $9.00 per share. At the Closing, the Purchaser shall pay an aggregate
amount equal to the sum of (i) $9.00 multiplied by
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the total number of Shares being sold by the Principal Stockholders as set forth
on the signature pages to this Agreement (the "Purchase Price") and (ii) $9.00
multiplied by the number of Additional Shares being sold by the Other
Stockholders as set forth on the signature pages to this Agreement (the
"Additional Purchase Price" and, together with the Purchase Price, the
"Aggregate Purchase Price"), in each case, by wire transfer of immediately
available funds to accounts designated by William H. Gaither (the "Stockholder
Representative") or, if applicable, the stockholder representatives designated
by the Other Stockholders pursuant to Section 3.9, in writing no later than two
business days prior to the Closing Date. The provisions of Sections 1.1 and 1.2
notwithstanding, The 1818 Mezzanine Fund, L. P. shall be entitled to transfer
the warrants held by it to the Purchaser, rather than the Additional Shares
underlying the warrants, for the Additional Purchase Price per share for which
the warrants are exercisable less the $.01 per Additional Share exercise price
and, in such event, the representations and warranties made by The 1818
Mezzanine Fund, L. P. shall apply to the warrants and the shares of Class A
Common Stock issuable upon exercise thereunder (assuming the Purchaser were to
exercise the warrants immediately following the Closing). The Purchaser shall
convert any warrants acquired pursuant to the foregoing sentence into Class A
Common Stock on or promptly after the Closing Date.
SECTION 1.3. Closing. The closing (the "Closing") for the
consummation of the transactions contemplated by this Agreement shall take place
at the offices of Howard, Smith & Levin LLP, 1330 Avenue of the Americas, New
York, New York 10019, or such other place or places as the Stockholders and the
Purchaser shall agree, at 10:00 a.m. (New York time) on the later of May 21,
1999 and four business days following the date on which all conditions set forth
in Article IV shall have been satisfied or waived, or such other date and time
agreed to by the Stockholders and the Purchaser (such date, the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the Stockholders.
The Stockholders severally and not jointly represent and warrant to the
Purchaser as follows:
(a) Organization, Standing and Power. Each of the Company and its
Subsidiaries 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, lease and operate its properties
and to carry on its business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified to do business and is in good standing in each
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by it or because of the nature of its business as now
being conducted, except for any failure so to qualify or be in good standing
which, individually, would not have a material adverse effect on the business,
assets, condition (financial or otherwise), financial position, results of
operations or prospects of the Company and its Subsidiaries, taken as a whole (a
"Material Adverse Effect"). Section 2.1(a) of the disclosure schedule being
delivered to the Purchaser simultaneously with the execution of this Agreement
(the "Disclosure Schedule") lists the jurisdictions of
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incorporation and foreign qualification of the Company and each of its
Subsidiaries (as defined below). The Company has delivered to the Purchaser
complete and correct copies of the constitutive documents of each of the Company
and its Subsidiaries, in each case as amended to the date of this Agreement, and
has made available to the Purchaser each such entity's minute books and stock
records. Section 2.1(a) of the Disclosure Schedule contains a true and correct
list of the directors and officers of each of the Company and its Subsidiaries
as of the date of this Agreement and at all times since the last action of their
respective boards of directors and stockholders. For purposes of this Agreement,
a "Subsidiary" of any person means another person under the control of such
person (where "control" means the direct or indirect possession of the power to
elect at least a majority of the board of directors or other governing body of a
Person through the ownership of voting securities, ownership or partnership
interests, by contract or otherwise or, if no such governing body exists, the
direct or indirect ownership of 50% or more of the equity interests of a
Person); and a "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity (governmental or private).
(b) Authority; Binding Agreement. The execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby are within its corporate powers and, when
executed and delivered by the Company in accordance with Section 3.12, will have
been duly and validly authorized by all necessary corporate action on the part
of the Company. When executed and delivered by the Company in accordance with
Section 3.12, this Agreement will have been duly executed and delivered by the
Company, and will constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(c) Capitalization; Equity Interests.
(i) Company. The authorized capital stock of the Company consists
of 30,000,000 shares of Common Stock (as defined below) and 11,500 shares of
Preferred Stock, $.01 par value (the "Preferred Stock"). At the time of
execution of this Agreement, 3,697,000 shares of Class A Common Stock, 1,400,667
shares of Class B Common Stock, $.01 par value (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock"), and 11,500 shares
of Preferred Stock were issued and outstanding. The outstanding capital stock of
the Company is owned of record as set forth in Section 2.1(c)(i) of the
Disclosure Schedule.
(ii) Subsidiaries. Section 2.1(c)(ii) of the Disclosure Schedule
sets forth a complete list of all of the Company's Subsidiaries as of the date
of this Agreement, together with their respective jurisdictions of
incorporation, authorized capital stock, number of shares issued and outstanding
and record ownership of such shares. Except as set forth in Section 2.1(c)(ii)
of the Disclosure Schedule, the Company does not have any Subsidiaries or own or
hold any equity or other security interest in any other Person. All issued and
outstanding shares of capital stock of the Company's Subsidiaries have been duly
authorized, were validly issued, are fully paid and non-assessable and subject
to no preemptive rights and are directly or indirectly owned beneficially and of
record by the Company, free and clear of all Claims, and free of any other
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limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock).
(iii) Other Equity Interests. Except as set forth in Section
2.1(c)(iii) of the Disclosure Schedule, at the time of execution of this
Agreement, no shares of capital stock or other voting securities of the Company
or any of its Subsidiaries are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company and its Subsidiaries were
duly authorized and validly issued and are fully paid and nonassessable subject
to no preemptive rights. Except as set forth in Section 2.1(c)(iii) of the
Disclosure Schedule, there are no bonds, debentures, notes or other indebtedness
or securities of the Company or any of its Subsidiaries having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company or such Subsidiary may vote.
Except as set forth in Section 2.1(c)(iii) of the Disclosure Schedule, there are
no securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Subsidiaries is a party or by which any such Person is bound obligating such
Person to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of such Person or
obligating such Person to issue, grant, extend or enter into any such security,
option, warrant, call right, commitment, agreement, arrangement or undertaking.
Except as set forth in Section 2.1(c)(iii) of the Disclosure Schedule, there are
no outstanding rights, commitments, agreements, arrangements or undertakings of
any kind obligating the Company or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock or other voting securities of
the Company or any of its Subsidiaries or any securities of the type described
in the two immediately preceding sentences. Except as set forth on Section
2.1(c)(iii) of the Disclosure Schedule, no former holder of a security of the
Company or any of its Subsidiaries is, or will become, entitled to any payment
with respect to such security. Set forth in Section 2.1(c)(iii) of the
Disclosure Schedule is a list of each option or Warrant outstanding, the
exercise price thereof and the holder of such option or Warrant.
(d) Conflicts; Consents. The execution, delivery and performance
by the Principal Stockholders and, when executed and delivered by the Company
and the Other Stockholders in accordance with Section 3.12, by the Company and
the Other Stockholders of this Agreement and the consummation of the
transactions contemplated hereby do not (in the case of the Principal
Stockholders) and will not (in the case of the Stockholders and the Company) (i)
except as specifically set forth in Section 2.1(d) of the Disclosure Schedule,
conflict with or result in a breach of the articles of incorporation, by-laws or
other constitutive documents of the Company or any of its Subsidiaries, (ii)
except as set forth in Section 2.1(d) of the Disclosure Schedule, conflict with,
breach or result (with or without due notice, the passage of time or both) in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the provisions of any note, bond, lease, mortgage, indenture, or
any license, franchise, permit, agreement or other instrument or obligation to
which any of the Company or its Subsidiaries is a party, or by which any such
Person or its properties or assets are bound, except for such conflicts,
breaches or defaults (x) as to which requisite waivers or consents have been
obtained before the Closing (which waivers or consents are set forth in Section
4.1(f) of the Disclosure Schedule) or (y) which individually or in the aggregate
could not reasonably be expected to have a Material
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Adverse Effect, (iii) violate any law, statute, rule or regulation or judgment,
order, writ, injunction or decree applicable to the Company or any of its
Subsidiaries or any such Person's properties or assets or (iv) result in the
creation or imposition of any Claim upon any property or assets used or held by
the Company or any of its Subsidiaries. Except for the filing of a premerger
notification and report form under the Hart-Scott-Rodino Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act")
and the expiration or early termination of the applicable waiting period
thereunder, no consent or approval by, or notification of or registration or
filing with, any Person will be required in connection with the execution,
delivery and performance by the Company of this Agreement or the consummation of
the transactions contemplated hereby except as set forth in Section 2.1(d) of
the Disclosure Schedule.
(e) Financial Information and SEC Reports.
(i) SEC Reports. The Company has previously furnished or made
available to the Purchaser true and complete copies of all reports (the "SEC
Reports") filed by the Company and its Subsidiaries with the Securities and
Exchange Commission (the "SEC") through and including the date of this
Agreement. Each of the balance sheets (including the related notes) included in
the Company SEC Reports presents fairly, in all material respects, the
consolidated financial position of the Person (consolidated with its
Subsidiaries, as applicable) to which it relates as of the date thereof, and
each of the other related statements (including the related notes) included in
the Company SEC Reports presents fairly, in all material respects, the results
of operations and changes in financial position of the Person (consolidated with
its Subsidiaries, as applicable) to which it relates for the period or as of the
date set forth therein, all in conformity with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein. Each Company SEC Report, as of its date (as amended through the date of
this Agreement), complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
applicable rules and regulations thereunder.
(ii) Undisclosed Liabilities. Except as set forth in Section
2(e)(ii) of the Disclosure Schedule or as reflected in the consolidated balance
sheets of the Company and its Subsidiaries at December 31, 1998 (the "Balance
Sheet") and the related consolidated statements of operations, stockholders'
equity and cash flows for the fiscal year then ended with the opinion of Arthur
Andersen LLP thereon (the "1998 Financials"), true and complete copies of which
are attached as part of Section 2.1(e)(ii) of the Disclosure Schedule, which
financial statements were filed with the SEC by the Company on March 31, 1999 in
its Annual Report on Form 10-K (as amended by the Company's Annual Report on
Form 10-K/A-1 filed with the SEC on April 5, 1999) and furnished to the
Purchaser, the Company and its Subsidiaries do not have, and as a result of the
transactions contemplated by this Agreement, will not have, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise, and whether due
or to become due), except for liabilities and obligations (1) incurred in the
ordinary course of business consistent with past practice since December 31,
1998 or (2) which individually do not exceed $250,000 or $1,000,000 in the
aggregate.
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(iii) Books and Records. The books of account, minute books, stock
record books and other records of the Company and its Subsidiaries are complete
and correct in all material respects. True and complete copies of all minute
books and all stock record books of the Company and each of its Subsidiaries
have heretofore been made available to Purchaser.
(f) Absence of Changes. Except in each case as set forth in
Section 2.1(f) of the Disclosure Schedule, since December 31, 1998, the Company
and its Subsidiaries have been operated in the ordinary course consistent with
past practice and there has not been:
(i) any material adverse change in the business, assets,
condition (financial or otherwise), financial position, results of
operations or prospects (other than changes resulting from general
economic or market conditions) of the Company and its Subsidiaries, taken
as a whole;
(ii) any material obligation or liability (whether absolute,
accrued, contingent or otherwise, and whether due or to become due)
incurred by the Company or any of its Subsidiaries, other than
obligations under customer contracts, current obligations and other
liabilities incurred in the ordinary course of business and consistent
with past practice;
(iii) any payment, discharge, satisfaction or settlement of
any material claim or obligation of the Company or any of its
Subsidiaries, except in the ordinary course of business and consistent
with past practice;
(iv) other than regularly scheduled dividends on the
Preferred Stock, any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital
stock of the Company or any of its Subsidiaries or any direct or indirect
redemption, purchase or other acquisition of any such shares;
(v) any issuance or sale, or any contract entered into for
the issuance or sale, of any shares of capital stock or securities
convertible into or exercisable for shares of capital stock of the
Company or any of its Subsidiaries;
(vi) any sale, assignment, pledge, encumbrance, transfer or
other disposition of any material asset of the Company or any of its
Subsidiaries (excluding in all events sales of assets no longer useful in
the operation of the business and sales of inventory to customers in the
ordinary course of business consistent with past practice), or any sale,
assignment, transfer or other disposition of any patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, know-how or
any other intangible assets of the Company or any of its Subsidiaries;
(vii) any creation of any Claim on any property of the
Company or any of its Subsidiaries, except for Claims created in the
ordinary course of business consistent with past practice or which
individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect;
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(viii) any write-down of the value of any asset of the
Company or any of its Subsidiaries or any write-off as uncollectible of
any accounts or notes receivable or any portion thereof, other than
write-downs or write-offs which do not exceed $250,000, in the aggregate,
as of the date of this Agreement;
(ix) any cancellation of any material debts or claims or any
amendment, termination or waiver of any rights of material value to the
Company or any of its Subsidiaries;
(x) any material capital expenditures or commitments or
additions to property, plant or equipment of the Company and its
Subsidiaries other than in the ordinary course of business and consistent
with the Company's capital expenditure plan;
(xi) except in each case for regular annual increases, any
material or general increase in the compensation of employees of the
Company or any of its Subsidiaries (including any increase pursuant to
any written bonus, pension, profit-sharing or other benefit or
compensation plan, policy or arrangement or commitment), or any increase
in any such compensation or bonus payable to any officer, stockholder,
director, consultant or agent of the Company or any of its Subsidiaries
having an annual salary or remuneration in excess of $150,000;
(xii) any damage, destruction or loss not covered by
insurance affecting any asset or property of the Company or any of its
Subsidiaries resulting in liability or loss in excess of $250,000;
(xiii) any change in the independent public accountants of
the Company and its Subsidiaries or any material change in the accounting
methods or accounting practices followed by the Company or any material
change in depreciation or amortization policies or rates; or
(xiv) any agreement, whether in writing or otherwise, to
take any of the actions specified in the foregoing items (i) through
(xiii), subject to any dollar thresholds set forth in items (i) through
(xiii) above.
(g) Assets and Properties. Section 2.1(g) of the Disclosure
Schedule sets forth a true and complete list of all real property owned or
leased by the Company or any of its Subsidiaries. Except as set forth in Section
2.1(g) of the Disclosure Schedule, each of the Company and its Subsidiaries has
good record and marketable title to, or a valid leasehold interest in, as
applicable, all of its owned or leased real property, except for defects in
title or failures to be in full force and effect which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
Each of the Company and its Subsidiaries has good title to, or a valid leasehold
interest in, as applicable, all personal property used in their respective
businesses, except for defects in title or failures to be in full force and
effect which individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. Such personal property (taken as a whole) is
in good operating condition and repair, ordinary wear and tear and deferred
maintenance excepted.
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(h) Intellectual Property.
(i) Intellectual Property Rights. Section 2.1(h) sets forth a true
and complete list of all Intellectual Property described in clauses (A), (B) and
(C) of the definition thereof. Except as set forth in Section 2.1(h) of the
Disclosure Schedule, the Company and its Subsidiaries own or have licensed or
otherwise have the right to use all Intellectual Property, free and clear of all
liens, charges or encumbrances. Except as set forth in Section 2.1(h) of the
Disclosure Schedule, any Intellectual Property owned or, to the knowledge of the
Company, used by the Company or any Subsidiary is valid and subsisting in full
force and effect and has not been canceled, expired or abandoned, and neither
the Company nor any Subsidiary has received any notice to the contrary.
(ii) Infringement by Company. Except as set forth in Section
2.1(h) of the Disclosure Schedule, to the knowledge of the Company, no
Intellectual Property owned, sold, licensed or employed by the Company or any of
its Subsidiaries, or which the Company or any of its Subsidiaries contemplates
owning, selling, licensing or employing, infringes upon intellectual property
that is owned or licensed by others.
(iii) Third Party Claims. Except as set forth in Section 2.1(h) of
the Disclosure Schedule, there is no pending or, to the knowledge of the
Company, threatened claim, action or proceeding against the Company or any of
its Subsidiaries contesting the right of the Company or any of its Subsidiaries
to own, sell, license or use any Intellectual Property owned, sold, licensed or
employed by the Company or any of its Subsidiaries. There is no pending claim,
action or proceeding initiated by the Company or any of its Subsidiaries against
a third party alleging any infringement, misappropriation, dilution or violation
of any Intellectual Property, and, to the knowledge of the Company, there is no
basis for such a claim, action or proceeding, in each case, which infringement,
misappropriation, dilution or violation could reasonably be expected to have a
Material Adverse Effect.
(iv) Confidential Information. The Company and each Subsidiary
take reasonable measures to protect their confidential information.
(v) License Agreements. Except as set forth in Section 2.1(h) of
the Disclosure Schedule, the License Agreements are in full force and effect,
and neither the Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any other party to any of the License Agreements is in breach of or
default under any obligation thereunder or has given notice of default to any
other party thereunder and, to the knowledge of the Company, no condition exists
that with notice or lapse of time would constitute a material default
thereunder.
(vi) Effect of Transaction. Except as set forth in Section 2.1(h)
of the Disclosure Schedule, the execution, delivery and performance by the
Stockholders and, when executed and delivered by the Company in accordance with
Section 3.12, by the Company of this Agreement and the consummation of the
transactions contemplated hereby do not (in the case of the Stockholders) and
will not (x) result in the loss or impairment of the Company's or any
Subsidiary's rights to own or use any of the Intellectual Property or (y)
require the consent of any third party, including for the avoidance of doubt any
governmental authority, in respect of any
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Intellectual Property, except for such losses or impairments as, or consents the
failure to obtain which, individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect.
(vi) Definitions. When used in this Agreement: "Intellectual
Property" means any and all (A) trademarks, service marks, trade names and
Internet domain names, together with all registrations thereof and applications
therefor, (B) patents, (C) registered and unregistered copyrights, (D) the
software identified in Section 2.1(h)(vi) of the Disclosure Schedule, (E)
confidential information and (F) other intellectual property rights that in each
case are used in, and material to, the operation of the business of the Company
and its Subsidiaries (taken as a whole), together with any licenses to use any
of the foregoing. "License Agreements" means agreements granting or obtaining
any right to use or practice any rights under any Intellectual Property, to
which the Company or any Subsidiary is a party or otherwise bound as licensee or
licensor thereunder.
(i) Year 2000. Except as set forth in Section 2.1(i) of the
Disclosure Schedule, the Company has (i) undertaken a detailed inventory, review
and assessment of all areas within the business and operations of the Company
and its Subsidiaries that could be materially and adversely affected by the
failure of any such entity to be Year 2000 Compliant on a timely basis, (ii)
developed a detailed plan and time schedule for becoming Year 2000 Compliant on
a timely basis, and (iii) has implemented such plan in accordance with such time
schedule in all material respects, such that the Company anticipates that it and
its Subsidiaries will be Year 2000 Compliant on a timely basis. "Year 2000
Compliant" as to the Company and its Subsidiaries means that all software,
embedded microchips and other processing capabilities utilized by, and material
to the business, operations or financial condition of, the Company and its
Subsidiaries are able to interpret and manipulate data on and involving all
calendar dates correctly, including without limitation in relation to dates in
and after the calendar year 2000, and will do so after the calendar year 2000
without any material loss of functionality.
(j) Agreements. Section 2.1(j) of the Disclosure Schedule lists as
of the date of this Agreement each contract (other than purchase orders and
standard sales contracts in the ordinary course of business), agreement,
commitment or lease of the Company and its Subsidiaries currently in effect
which by its terms (i) is not terminable at will within 12 months and requires
future expenditures or receipts or other performance with respect to goods or
services having an annual value in excess of $500,000, (ii) is with any officer
or employee and provides for annual compensation of $150,000 or more, (iii) is
with any officer or key employee and contains any severance or termination or
change in control pay liability or obligation, (iv) involves indebtedness for
borrowed money and (v) expressly limits, in any material respect, the ability of
the Company or any of its Subsidiaries to compete in any line of business or
restricts, in any material respect, the geographic area in which the Company or
any of its Subsidiaries may conduct its business, or (vi) is material to
business, assets, condition (financial or otherwise), financial position,
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole. Copies of all such documents have previously been made available to the
Purchaser. All of such contracts, agreements, commitments and leases are in full
force and effect. Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any other party
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to such contracts, agreements, commitments and leases is in breach of or default
under any obligation thereunder or has given notice of default to any other
party thereunder and, to the knowledge of the Company, no condition exists that
with notice or lapse of time would constitute a material default thereunder.
(k) Litigation. Except as set forth in Section 2.1(k) of the
Disclosure Schedule, there are no actions, suits, proceedings, claims or
disputes pending or, to the knowledge of the Company, threatened by or before
any court or governmental authority or agency against the Company or any of its
Subsidiaries which (i) bring into question the validity of this Agreement, (ii)
seek damages in excess of $250,000 or (iii) individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order, decree or any order of any nature has been
issued by any court or governmental authority or agency seeking or purporting to
enjoin or restrain the execution, delivery and performance by the Stockholders
of this Agreement or the consummation by the Stockholders of the transactions
contemplated hereby.
(l) Compliance; License and Permits. Except as set forth in
Section 2.1(l) of the Disclosure Schedule, each of the Company and its
Subsidiaries has complied and is in compliance in all material respects with all
Federal, state, local and foreign laws, ordinances, rules, regulations and
orders applicable to the Company, any of its Subsidiaries or their respective
businesses. There are no conditions relating to the Company or any of its
Subsidiaries, or relating to any real property owned or leased by the Company or
any of its Subsidiaries (each, a "Company Property") or any appurtenances
thereto or improvements thereon, that could reasonably be expected to lead to
any material liability against the Company or any of its Subsidiaries for
violation of any health or safety laws. Each of the Company and its Subsidiaries
holds all Federal, state, local and foreign governmental licenses, approvals and
permits that are necessary to conduct their respective businesses as presently
being conducted, except for such licenses, approvals and permits the failure to
hold which could not reasonably be expected to have a Material Adverse Effect.
Except as set forth in Section 2.1(l) of the Disclosure Schedule and except for
breaches, violations, revocations, limitations, non-renewals and failures to be
in full force and effect which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect, (i) such licenses,
approvals and permits are in full force and effect, (ii) no violations are or
have been recorded in respect of any thereof, (iii) no proceeding is pending or,
to the knowledge of the Company, threatened, to revoke or limit any thereof and
(iv) the consummation of the transactions contemplated by this Agreement will
not result in the non-renewal, revocation or termination of any such license,
approval or permit.
(m) Environmental Matters.
(i) Environmental Permits and Compliance. Each of the Company and
its Subsidiaries holds all licenses, permits and other governmental
authorizations (A) required under all applicable Federal, state, county or local
laws, ordinances, regulations, official interpretations and orders relating to
the handling, storage or disposal of materials or the discharge of chemicals,
gases or other substances or Hazardous Materials (defined below) into the
environment or to the
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safety or protection of the environment ("Environmental Laws", which definition
shall include as hereinafter used common law duties) and (B) which are material
to the conduct of their respective businesses as presently being conducted.
Except as set forth in Section 2.1(m) of the Disclosure Schedule, none of the
Company or any of its Subsidiaries is in violation in any material respects of
any requirements of any Environmental Laws in connection with the conduct of its
business or in connection with the use, maintenance or operation of any Company
Property. Except as set forth in Section 2.1(m) of the Disclosure Schedule,
there are no conditions relating to the Company or any of its Subsidiaries or
relating to any Company Property that in any such case could reasonably be
expected to lead to any material liability of the Company or any of its
Subsidiaries under any Environmental Law.
(ii) Notices of Non-Compliance. Except as set forth in Section
2.1(m) of the Disclosure Schedule, or except as any of the matters set forth in
this sentence have been fully resolved with no remaining obligation on the
behalf of the Company or any of its Subsidiaries, neither the Company nor any of
its Subsidiaries has received a notice of claim or potential liability or
administrative or judicial proceeding or written request for information, or is
subject to an administrative or judicial order, decree, or other enforceable
agreement, under any Environmental Law, including, but not limited to, claims,
proceedings or inquiries relating to potential violations of Environmental Law
or the disposal or release (as such term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act) of Hazardous Materials
on Company Property or any other property (including property formerly owned or
operated by the Company or its subsidiaries or by any third-party). Except as
set forth on Schedule 2.1(m), the Company is not aware of any property to which
Hazardous Materials generated by the Company or any of its Subsidiaries have
been transported (for any purpose) that is currently listed on the federal
National Priorities List or an analogous state list or that is currently under
investigation or remediation by a federal or state environmental agency.
(iii) Environmental Reports. The Company has made available to the
Purchaser copies of all environmental studies, investigations, reports, audits,
and assessments known by the Company to be in the possession of the Company or
its Subsidiaries related to the operations of the Company, its Subsidiaries, or
any current or former properties owned, leased or otherwise operated by the
Company or its Subsidiaries.
(iv) "Hazardous Materials" means (A) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; (B) any "hazardous waste" or "petroleum," as defined by
the Resource Conservation and Recovery Act, as amended; (C) any petroleum
product; (D) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other Environmental
Law, as amended or hereafter amended; or (E) any radioactive material, including
any source, special nuclear or by-product material as defined at 42 U.S.C. ss.
2011 et seq., as amended or hereafter amended.
(n) Labor Relations; Employees.
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(i) Labor Relations. Except as set forth in Section 2.1(n)(i) of
the Disclosure Schedule, (A) there is no labor strike, dispute, slowdown,
stoppage or lockout pending, affecting, or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries; (B) there are no
union claims to represent the employees of the Company or any of its
Subsidiaries; (C) neither the Company nor any of its Subsidiaries is a party to
or bound by any collective bargaining or similar agreement; (D) there is no
representation of the employees of the Company or any of its Subsidiaries by any
labor organization and, to the knowledge of the Company, there are no union
organizing activities among the employees of the Company or any of its
Subsidiaries; (E) Section 2.1(n)(i) of the Disclosure Schedule sets forth all
written personnel policies, rules or procedures applicable to employees of the
Company or any of its Subsidiaries, and the Company has delivered to the Company
complete and accurate copies of all such written policies, rules or procedures;
(F) neither the Company nor any of its Subsidiaries has engaged in any act or
practice which could reasonably be expected to constitute an unfair labor
practice as defined in the National Labor Relations Act or other applicable law,
ordinance, regulation, interpretation or order and each of the Company and its
Subsidiaries is in compliance in all material respects with all applicable laws,
ordinances, regulations, interpretations or orders respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health; (G) there is no unfair labor practice charge
or complaint against the Company or any of its Subsidiaries pending or, to the
knowledge of the Company, threatened before the National Labor Relations Board
or any similar state or foreign agency; (H) there are no charges with respect to
or relating to the Company or any of its Subsidiaries pending or, to the
knowledge of the Company, threatened before the Equal Employment Opportunity
Commission or any other governmental entity responsible for the prevention of
unlawful employment practices; (I) neither the Company nor any of its
Subsidiaries has received notice of the intent of any governmental entity
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
Subsidiaries and no such investigation is in progress; (J) no complaints,
lawsuits or other proceedings are pending or, to the knowledge of the Company,
threatened in any forum by or on behalf of any present or former employee of the
Company or any of its Subsidiaries, any applicant for employment or classes of
the foregoing alleging breach of any express or implied contract, commitment,
agreement, understanding or other arrangement for employment, any law governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with any employment relationship; and (K) since
the enactment of the Worker Adjustment and Retraining Notification Act (the
"WARN Act"), neither the Company nor any of its Subsidiaries has effectuated (1)
a "plant closing" (as defined in the WARN Act) affecting any site of employment
or one or more facilities or operating units within any site of employment or
facility of the Company or any of its Subsidiaries; or (2) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of the
Company or any of its Subsidiaries; nor has the Company or its Subsidiaries been
affected by any transaction or engaged in layoffs or employment terminations
sufficient in number to trigger application of any similar state, local or
foreign law or regulation; and (L) none of the employees of the Company or any
of its Subsidiaries has suffered an "employment loss" (as defined in the WARN
Act) during the 180-day period prior to the date of this Agreement.
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(ii) Plans. Section 2.1(n)(ii) of the Disclosure Schedule contains
a list of each pension, retirement, savings, deferred compensation, and
profit-sharing plan and each stock option, stock appreciation, stock purchase,
performance share, bonus or other incentive plan, employment or severance plan,
health, group insurance or other welfare plan, or other similar plan and any
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), under which the
Company or any of its Subsidiaries has or may have any current or future
obligation or liability (including any potential, contingent or secondary
liability under Title IV of ERISA) or under which any employee or former
employee (or beneficiary of any employee or former employee) of the Company or
any of its Subsidiaries has or may have any current or future right to benefits
(the term "plan" shall include any contract, agreement, policy or understanding,
each such plan being hereinafter referred to in this Agreement individually as a
"Plan"). The Company has delivered to the Purchaser true and complete copies of
(A) each Plan, (B) the summary plan description for each Plan for which a
summary plan description is required, (C) the latest annual report, if any,
which has been filed with the IRS for each Plan, and (D) the most recent IRS
determination letter for each Plan that is a pension plan (as defined in ERISA)
intended to be qualified under Code Section 401(a). Except as set forth in
Section 2.1(n)(ii) of the Disclosure Schedule, each Plan intended to be tax
qualified under Sections 401(a) and 501(a) of the Code is and has been
determined by the IRS to be tax qualified under Sections 401(a) and 501(a) of
the Code and, since such determination, no amendment to or failure to amend any
such Plan (other than a failure to amend for which the remedial amendment period
has not expired) and, to the knowledge of the Company, no other event or
circumstance has occurred that could reasonably be expected to adversely affect
its tax qualified status. There has been no prohibited transaction within the
meaning of Section 4975 of the Code and Section 406 of Title I of ERISA with
respect to any Plan.
(iii) ERISA. Except as set forth in Section 2.1(n)(iii) of the
Disclosure Schedule, no Plan is subject to the provisions of Section 412 of the
Code or Part 3 of Subtitle B of Title I of ERISA, no Plan is subject to Title IV
of ERISA and no liability under Title IV or Section 302 of ERISA has been
incurred by the Company or by any trade or business that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA.
(iv) Compliance. There are no actions, claims, lawsuits or
arbitrations (other than routine claims for benefits) pending, or, to the
knowledge of the Company, threatened, with respect to any Plan or the assets of
any Plan. Each Plan has been administered in all respects accordance with its
terms and with all applicable laws (including without limitation ERISA), except
for failures to be so administered which individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
(v) Scope of Coverage. Except as set forth in Section 2.1(n)(v) of
the Disclosure Schedule, no Plan provides or is required to provide, now or in
the future, health, medical, dental, accident, disability, death or survivor
benefits to or in respect of any person beyond termination of employment, except
to the extent required under any state insurance law or under Part 6 of Subtitle
B of Title I of ERISA and under Section 4980(B) of the Code. Except as set forth
in
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Section 2.1(n)(v) of the Disclosure Schedule, no Plan covers any individual
other than employees of the Company or one or more of its Subsidiaries, other
than spouses and dependents of employees under health and child care policies
listed in Section 2.1(n)(ii) of the Disclosure Schedule, true and complete
copies of which have been delivered to the Purchaser.
(vi) Severance; Accelerated Vesting. Except as set forth in
Section 2.1(n)(vi) of the Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement either alone or in combination with
another event will not (A) entitle any employee of the Company or any of its
Subsidiaries to severance pay or termination benefits and (B) accelerate the
time of payment or vesting, or increase the amount of compensation due to any
such employee or former employee.
(vii) Stock Appreciation Rights. Section 2.1(n)(vii) of the
Disclosure Schedule describes the material terms of any stock appreciation
rights with respect to the capital stock of the Company or any of its
Subsidiaries which are currently outstanding, as well as the numbers and holders
thereof and the total amount that would be payable with respect to the stock
appreciation rights if such rights were exercised upon the Closing.
(o) Potential Conflicts of Interest. To the knowledge of the
Company, except as set forth in Section 2.1(o) of the Disclosure Schedule, no
executive officer, director or affiliate of the Company or any of its
Subsidiaries, and no relative or spouse of any such officer, director or
affiliate: (i) owns, directly or indirectly, any interest in (excepting less
than 1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant of,
any Person which is a competitor, lessor, lessee, supplier, distributor, sales
agent or customer of, or lender to or borrower from, the Company or any of its
Subsidiaries; (ii) owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Company or any of its Subsidiaries uses
in the conduct of its business; or (iii) has any cause of action or other claim
whatsoever against, or owes any amount to, the Company or any of its
Subsidiaries, except for claims in the ordinary course of business such as for
accrued vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements arising in the ordinary course of business.
(p) Tax Matters. Except as set forth in Section 2.1(p) of the
Disclosure Schedule:
(i) Returns. All Federal, state, local and foreign tax returns and
tax reports required to be filed on or prior to the Closing Date by the Company
or any of its Subsidiaries have been or will be filed or a valid request for
extension has been or will be filed with respect thereto, on a timely basis
(including any extensions) with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed. All
such returns and reports were or will be prepared in the manner required by
applicable law, and reflect or will reflect the liability for Taxes (as defined
below) of the Company and its Subsidiaries in all material respects. All
Federal, state, local and foreign income, profits, franchise, sales, use,
occupation, property, excise, employment and other Taxes (including interest,
penalties and withholdings of Tax) (collectively, "Taxes") due from and payable
by the Company or any of its Subsidiaries on or prior to the Closing Date have
been or will be fully paid on a timely basis or
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will be adequately reserved for on the Company's financial statements. There are
no liens for Taxes upon the assets of the Company or any of its Subsidiaries
except for statutory liens for current Taxes not yet due. The Company has filed,
as a common parent corporation of an affiliated group (within the meaning of
Section 1504(a) of the Code), a consolidated return for Federal income tax
purposes on behalf of such affiliated group.
(ii) Compliance. Each of the Company and its Subsidiaries has
complied in all material respects with all applicable laws relating to the
payment and withholding of Taxes (including withholding and reporting
requirements under Section 1441 through 1464, 3401 through 3406, 6041 and 6049
of the Code and similar provisions under any other laws) and, within the time
and in the manner prescribed by law, has withheld from wages, fees and other
payments and paid over to the proper governmental or regulatory authorities all
amounts required.
(iii) Certain Arrangements. Neither the Company nor any of its
Subsidiaries is a party to any Tax sharing agreement or any other agreement of a
similar nature that remains in effect.
(iv) Audit Matters. No material deficiencies for any Taxes have
been threatened, proposed, asserted or assessed (either in writing or orally) to
the knowledge of the Company against the Company or any of its Subsidiaries
which have not been fully paid or finally settled. No governmental entity is
conducting or has proposed in writing to conduct an audit with respect to Taxes
or any Tax returns of the Company or any of its Subsidiaries.
(v) Validity of Subchapter S Election. The Company was a valid S
corporation for federal and state income tax purposes for all years in which it
submitted tax returns as an S corporation.
(vi) Deductibility of Payments. No amounts payable under the Plans
(as defined in Section 2.1(n)) will fail to be deductible for federal income tax
purposes by reason of Section 162(a), 162(m) or 280G of the Code.
(q) Inventory. The inventory described in the 1998 Financials is
the only inventory used or held for use in the business of the Company and its
Subsidiaries, is valued for financial statement purposes at the lower of cost or
market value.
(r) Trade Relations. Except as set forth in Section 2.1(r) of the
Disclosure Schedule, the Company has received no oral or written notice from any
material supplier or vendor of products to the Company or any of its
Subsidiaries informing the Company (i) that it intends to terminate its business
relationship with the Company or such Subsidiary or (ii) that it intends to
modify its business relationship with the Company or such Subsidiary in such a
way as could reasonably be expected to have a Material Adverse Effect.
(s) Insurance. Section 2.1(s) of the Disclosure Schedule sets
forth all policies of fire, liability, workman's compensation, vehicular, life
or other insurance held by or on behalf of the Company and its Subsidiaries
(specifying the insurer, the coverage amounts and describing
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each pending claim thereunder of more than $100,000). Such policies and binders
are in full force and effect. Neither the Company nor any of its Subsidiaries is
in default under any material provision contained in any such policy or binder
and, to the knowledge of the Company, none of them has failed to give any notice
or present any claim under such policy or binder in due and timely fashion. In
addition, (i) neither the Company nor any of its Subsidiaries has received any
written notice of cancellation or non-renewal of any such material policy or
arrangement nor to the knowledge of the Company is the termination of any such
material policies or arrangements threatened, (ii) there is no material claim
pending under any of such policies or arrangements as to which coverage has been
questioned, denied or disputed in writing by the underwriters of such policies
or arrangements, and (iii) neither the Company nor any of its Subsidiaries has
received any written notice from any of its insurance carriers that any material
insurance coverage presently provided for will not be available to the Company
or any of its Subsidiaries in the future on substantially the same terms (other
than premium) as are now in effect.
(t) Brokers. Except as set forth in Section 2.1(t) of the
Disclosure Schedule, no agent, broker, investment banker, person or firm acting
on behalf of the Company or any of its Subsidiaries or under the authority of
the Company or any of its Subsidiaries is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly from
any of the parties hereto in connection with any of the transactions
contemplated hereby.
(u) Full Disclosure. Neither any representation or warranty
contained in this Section 2.1 nor any statement contained in the Disclosure
Schedule or the Company's Annual Report on Form 10-K filed with the SEC on March
31, 1999 (as amended by the Company's Annual Report on Form 10-K/A-1 filed with
the SEC on April 5, 1999) contains any untrue statement of material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which it was made, not misleading.
SECTION 2.2. Representations and Warranties of Each Stockholder.
Each Stockholder severally and not jointly represents and warrants to the
Purchaser as follows:
(a) Authority; Binding Agreement; Title to Shares. Such
Stockholder has all requisite authority (or legal capacity, as the case may be)
to enter into this Agreement, and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by such
Stockholder (if not a natural person) and the consummation of the transactions
contemplated hereby are within its corporate or other powers and have been duly
and validly authorized by all necessary corporate or other action on the part of
such Stockholder (if not a natural person). This Agreement has been duly
executed and delivered by such Stockholder, and constitutes the valid and
binding obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms. Such Stockholder is the lawful owner of record and
beneficially (or has the right to acquire pursuant to the exercise of warrants
or conversion rights) of the number of Shares or Additional Shares set forth
opposite such Stockholder's name on the signature pages to this Agreement, and
such Stockholder has, and will transfer to the Purchaser at the Closing, good
and marketable title to such number of Shares or Additional Shares, free and
clear of all Claims and free of any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of such capital
stock).
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Section 2.1(c)(ii) of the Disclosure Schedule sets forth the number of Shares or
Additional Shares, as the case may be, owned by such Stockholder, identifying
those which are currently outstanding and those which are issuable upon the
exercise of warrants, conversion rights or options.
(b) Conflicts; Consents. The execution and delivery and
performance by such Stockholder of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) if applicable, conflict
with or result (with or without due notice, the passage of time or both) in a
breach of any articles of incorporation, by-laws or other constitutive documents
of such Stockholder, (ii) conflict with, breach or result in a default (or give
rise to any right of termination, cancellation or acceleration) under any
material provision of any material note, bond, lease, mortgage, indenture, or
any license, franchise, permit, agreement or other instrument or obligation to
which such Stockholder is a party, or by which such Stockholder or its
properties or assets are bound, or (iii) violate any law, statute, rule or
regulation or judgment, order, writ, injunction or decree applicable to such
Stockholder or its properties or assets, except for violations which
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on such Stockholder's ability to execute, deliver and
perform this Agreement or consummate the transactions contemplated hereby. No
consent or approval by, or notification of or registration or filing with, any
Person is required in connection with the execution, delivery and performance by
such Stockholder of this Agreement and the consummation of the transactions
contemplated hereby, except, if applicable, for the filing of a premerger
notification and report form by such Stockholder under the HSR Act and the
expiration or early termination of the applicable waiting period thereunder.
(c) Brokers. Except as set forth in Section 2.1(t) of the
Disclosure Schedule, no agent, broker, investment banker, person or firm acting
on behalf of such Stockholder or under the authority of such Stockholder is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from any of the parties hereto in connection
with any of the transactions contemplated hereby.
(d) Litigation. There are no actions, suits, proceedings, claims
or disputes pending or, to the knowledge of such Stockholder, threatened by or
before any court or governmental authority or agency against such Stockholder or
any of its affiliates which bring into question the validity of this Agreement
or could reasonably be expected to affect such Stockholder's ability to
consummate the transactions contemplated hereby. No injunction, writ, temporary
restraining order, decree or any order of any nature has been issued by any
court or governmental authority or agency seeking or purporting to enjoin or
restrain the execution, delivery and performance by such Stockholder of this
Agreement or the consummation by such Stockholder of the transactions
contemplated hereby.
SECTION 2.3. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to the Stockholders and the Company as
follows:
(a) Organization; Power and Authority. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of
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Delaware. The execution, delivery and performance of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby are
within its corporate or other powers and have been duly and validly authorized
by all necessary corporate or other action on the part of the Purchaser.
(b) Binding Agreement. This Agreement has been duly executed and
delivered by the Purchaser, and constitutes the valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms.
(c) Conflicts; Consents. The execution and delivery and
performance by the Purchaser of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) conflict with or result
in a breach of the articles of incorporation, by-laws or other constitutive
documents of the Purchaser, (ii) conflict with, breach or result (with or
without due notice, the passage of time or both) in a default (or give rise to
any right of termination, cancellation or acceleration) under any material
provision of any material note, bond, lease, mortgage, indenture, or any
license, franchise, permit, agreement or other instrument or obligation to which
the Purchaser is a party, or by which the Purchaser or its properties or assets
are bound, or (iii) violate any law, statute, rule or regulation or judgment,
order, writ, injunction or decree applicable to the Purchaser or its properties
or assets, except for violations which individually or in the aggregate could
not reasonably be expected to have a material adverse effect on the Purchaser's
ability to execute, deliver and perform this Agreement or consummate the
transactions contemplated hereby. No consent or approval by, or notification of
or registration or filing with, any Person is required in connection with the
execution, delivery and performance by the Purchaser of this Agreement and the
consummation of the transactions contemplated hereby, except for the filing of a
premerger notification and report form by the Purchaser under the HSR Act and
the expiration or early termination of the applicable waiting period thereunder.
(d) Investment Representation. The Purchaser is acquiring the
Shares for its own account and not with a view to distribution within the
meaning of the applicable Federal securities laws.
(e) Brokers. No agent, broker, investment banker, person or firm
acting on behalf of the Purchaser or under the authority of the Purchaser is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from any of the parties hereto in connection
with any of the transactions contemplated hereby.
(f) Litigation. There are no actions, suits, proceedings, claims
or disputes pending or, to the knowledge of the Purchaser, threatened by or
before any court or governmental authority or agency against the Purchaser or
any of its affiliates which bring into question the validity of this Agreement
or could reasonably be expected to adversely affect the Purchaser's ability to
consummate the transactions contemplated hereby. No injunction, writ, temporary
restraining order, decree or any order of any nature has been issued by any
court or governmental authority or agency seeking or purporting to enjoin or
restrain the execution,
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delivery and performance by the Purchaser of this Agreement or the consummation
by the Purchaser of the transactions contemplated hereby.
(g) Funds Available. The Purchaser will at the Closing have
sufficient funds available (either cash on hand or pursuant to current capital
commitments) to pay the Aggregate Purchase Price and satisfy all of its other
obligations under this Agreement.
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.1. Expenses. If the Closing occurs, the Company shall be
responsible for the fees, costs and expenses incurred by the Purchaser in the
pursuit of the transactions contemplated by this Agreement, including the fees
and expenses of its counsel, financial advisors and accountants, and the Company
shall in any event be responsible for all such fees, costs and expenses incurred
by the Stockholders and the Company. Each Stockholder shall pay and be
responsible for all Taxes on income payable by such Person arising out of the
sale of the Shares to the Purchaser and the transactions contemplated by this
Agreement. Neither any Stockholder nor the Company will incur any such fees,
costs or expenses in connection with obtaining the consents set forth on
Schedule 4.1(f) without the approval of the Purchaser; provided, that if the
Purchaser unreasonably withholds such approval, the relevant consent shall be
deemed deleted from Schedule 4.1(f) for all purposes under this Agreement,
including the satisfaction of the condition set forth in Section 4.1(f).
SECTION 3.2. Conduct of Business.
(a) In General. From the date of this Agreement until the Closing
Date, except as set forth on Schedule 3.2 or as contemplated by this Agreement
or otherwise consented to by the Purchaser in writing, the Company shall operate
its business only in the ordinary course of business consistent with past
practice. The Company shall preserve intact the present organization of the
Company and its Subsidiaries; keep available the services of the present
officers and employees of the Company; preserve the Company's goodwill and
relationships with customers, suppliers, licensors, licensees, contractors,
distributors, lenders and other persons having significant business dealings
with the Company and its Subsidiaries; continue all current sales, marketing and
other promotional policies, programs and activities; maintain the assets of the
Company and its Subsidiaries in good repair, order and condition; and maintain
the Company's insurance policies and risk management programs and in the event
of casualty, loss or damage to any assets of the Company or any of its
Subsidiaries, repair or replace such assets with assets of comparable quality,
as the case may be. Without limiting the generality of the foregoing, the
Company shall not, without the prior written consent of the Purchaser, directly
or indirectly (i) cause or permit any state of affairs, action or omission
described in clauses (i) through (xiv) of Section 2.1(f) or (ii) take or agree
in writing or otherwise to take, any action which could reasonably be expected
to make any representation or warranty contained in Section 2.1 untrue or
incorrect as of the date when made or as of any future date or which could
reasonably be expected to prevent the satisfaction of any condition to closing
set forth in Article IV.
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(b) Employees. Prior to the Closing Date, the Company shall take
all actions that are necessary and appropriate (including, without limitation,
obtaining the consent of each option holder to the amendment described in this
sentence, in a form reasonably satisfactory to Purchaser) so that each option to
acquire Common Stock which is outstanding as of the Closing Date is amended to
provide that the expiration date of such option shall be extended to a date to
be mutually agreed upon by Purchaser and the Company (with such adjustment
provisions as appropriate in the event of a merger or other extraordinary
transaction ). Except as required by applicable law, as contemplated in
connection with the transactions contemplated by this Agreement or as required
to maintain qualification pursuant to the Code, the Company shall not (A) adopt,
amend, or terminate (i) any employee benefit plan or any agreement, arrangement,
plan or policy or (ii) any agreement or arrangement between the Company and one
or more of its current or former directors, officers or employees, or (iii) any
collective bargaining, bonus, profit sharing, compensation, stock option,
pension, retirement, employee stock ownership, deferred compensation, employment
termination, severance or other plan, agreement, trust, fund, policy or
arrangement or (B) increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
employee benefit plan or agreement as in effect as of the date of this Agreement
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares) except in each case for regular annual increases.
(c) Taxes. From the date of this Agreement until the Closing Date,
the Company shall not make any Tax elections or settle or compromise any Tax
liability or, except as required by law, change any tax accounting policies or
procedures.
SECTION 3.3. Reasonable Efforts; Further Assurances. The
Purchaser, the Company and the Stockholders each agree to use all commercially
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 under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as practicable and to ensure
that the conditions set forth in Article IV are satisfied, insofar as such
matters are within the control of any of them. Each Stockholder hereby assigns,
effective upon the Closing, any and all rights such Person may have to register
any securities of the Company under the Securities Act of 1933, as amended,
under any agreement currently in effect, and the Company shall acknowledge and
accept such assignment (such acknowledgment and acceptance to be conclusively
evidenced by the Company's execution and delivery of this Agreement pursuant to
Section 3.12). In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
parties to this Agreement shall take or cause to be taken all such necessary
action, including the execution and delivery of such further instruments and
documents, as may be reasonably requested by any party for such purposes or
otherwise to complete or perfect the transactions contemplated by this
Agreement.
SECTION 3.4. No Shopping. From the date of this Agreement (or, in
the case of the Company or any Other Stockholder, the date the Company or such
Other Stockholder joins this Agreement in accordance with Section 3.12) until
the earlier of (i) the Closing Date and (ii) the date this Agreement is
terminated in accordance with Section 6.2, none of the Stockholders shall, and
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the Company shall not and shall not cause or allow any partner, director,
officer or agent of the Company to, directly or indirectly, solicit or initiate,
enter into or conduct, discussions concerning, or exchange information
(including by way of furnishing information concerning the Company or its
business) or enter into any negotiations concerning, or respond to any inquiries
or solicit, receive, entertain or agree to or vote for any proposals for, the
acquisition of the assets of, or any substantial part thereof, or a merger,
tender offer, share exchange offer or similar type of transaction involving, the
Company or the transfer of such Stockholder's Shares or Additional Shares, as
the case may be, or all or a substantial part of the capital stock of the
Company to any person other than the Purchaser or one of its affiliates. In
addition, during such time period, the Company shall not authorize, direct or
knowingly permit any employee or agent of the Company to do any of the
foregoing, and each of the Company and the Stockholders shall notify the
Purchaser of the identity of any person who approaches the Company or such
Stockholder with respect to any of the foregoing.
SECTION 3.5. Access and Information. (a) From the date of this
Agreement until the first to occur (i) of the Closing Date and (ii) the
termination of this Agreement in accordance with Section 6.2, the Company shall
allow the Purchaser and its financing parties and their respective
representatives to make such investigation of the business, operations and
properties of the Company as the Purchaser deems necessary or desirable in
connection with the transactions contemplated by this Agreement, including any
environmental testing that the Purchaser in its reasonable business judgment
deems necessary. Such investigation shall include access to the respective
directors, officers, employees, agents and representatives (including legal
counsel and independent accountants) of the Company and the properties, books,
records and commitments of the Company. The Company shall furnish the Purchaser
and its representatives with such financial, operating and other data and
information and copies of documents with respect to the Company or any of the
transactions contemplated by this Agreement as the Purchaser shall from time to
time request. All access and investigation pursuant to this Section 3.5 shall be
coordinated through representatives of the Company designated by the
Stockholders and shall occur only upon reasonable notice and during normal
business hours.
SECTION 3.6. Confidentiality; Restrictive Covenants.
(a) Confidential Information. Each of the parties to this
Agreement agrees that all financial or other information about any party or
other information of a confidential or proprietary nature disclosed to another
party at any time in connection with transactions contemplated by this Agreement
shall be kept confidential by the party receiving such information and shall not
be disclosed to any person or used by the receiving party (other than to its
agents or employees, and, in the case of the Purchaser, its financing parties,
in connection with the transactions contemplated by this Agreement) except with
the prior written consent of the disclosing party or as may be required by
applicable law or court process. This Section 3.6(a) shall not apply to
information which may have been acquired or obtained by the receiving party
other than through disclosure by the other party in connection with the
transaction contemplated by this Agreement or which is or becomes generally
available to the public other than as a result of a violation of this Section
3.6.
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(b) Acknowledgments by Controlling Stockholders. Each of Ann H.
Gaither and William H. Gaither (each, a "Controlling Stockholder") acknowledges
and recognizes that such Controlling Stockholder, as a result of such
Controlling Stockholder's longstanding service to the Company in a fiduciary
capacity, has learned of and been exposed to confidential and proprietary
information (including information concerning the customers and clients and
prospective customers and clients of the Company and its Subsidiaries) that is
of unique value to the Company. Each Controlling Stockholder further
acknowledges that, should such Controlling Stockholder seek to divert, take
away, or solicit any of the customers or clients or prospective customers or
clients of the Company or its Subsidiaries, such Controlling Stockholder will of
necessity make use of or disclose such confidential and proprietary information,
to the irreparable detriment of the Company. Each Controlling Stockholder
further acknowledges that the Company and its Subsidiaries have each
expended large sums in the recruitment, training and development of their
respective employees, that the continued employment of such individuals by the
Company and its Subsidiaries constitutes a substantial benefit to the Company,
and that the business of the Company would be severely disrupted and injured in
the event that another person, firm, company or corporation were to attempt to
induce any or all of their respective employees to terminate their employment
with the Company or its Subsidiaries.
(c) Non-Competition; Non-Solicitation. In recognition of the
Section 3.6(b) and the highly competitive nature of the business of the Company
and its Subsidiaries, each Controlling Stockholder agrees that such Controlling
Stockholder will not, from and after the Closing Date until the later of the
second anniversary of (x) the Closing Date and (y) the date on which such
Controlling Stockholder is no longer paid a salary or consulting fee by the
Company, either individually or as an officer, director, member, stockholder,
partner, agent or principal of another business firm, directly or indirectly (i)
engage in any location where the Company or its Subsidiaries is presently
engaged or proposes to engage in business and in North America in any
competitive business, (ii) assist others in engaging in any competitive business
in the manner described in clause (i), (iii) divert, take away or solicit, or
attempt to divert, take away or solicit, any customers or clients or prospective
customers or clients of the Company or its Subsidiaries or (iv) induce any
employee of the Company or any of its Subsidiaries to terminate such person's
employment with the Company or such Subsidiary or hire any employee of the
Company or such Subsidiary to work with any businesses affiliated with the
Controlling Stockholder. A Controlling Stockholder's ownership of not more than
5% of the outstanding capital stock of any public corporation shall not in
itself be deemed to be engaging in any competitive business for purposes of this
Section 3.6(c). Each Controlling Stockholder acknowledges that it is entering
into the covenants contained in this Section 3.6(c), inter alia, as a seller of
Shares under this Agreement. Each party acknowledges and agrees that the
obligations of each Controlling Stockholder under this Section 3.6(c) are for
the benefit of, and shall be enforceable by, the Purchaser and the Company.
(d) Enforceability. It is expressly understood and agreed that
although the parties to this Agreement consider the restrictions contained in
Section 3.6(c) to be reasonable, if a final determination is made by a court of
competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is unenforceable against a Controlling Stockholder,
the provisions of this Agreement shall be deemed amended to apply as to such
maximum time
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and territory and to such maximum extent as such court may judicially determine
or indicate to be enforceable with respect to such Controlling Stockholder.
SECTION 3.7. Public Announcements. The parties agree to consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
SECTION 3.8. Indemnification of Directors and Officers. For six
years from and after the Closing Date, the Company and its successors shall
indemnify and hold harmless the present and former officers, directors,
employees and agents of the Company and its Subsidiaries in respect of acts or
omissions occurring on or prior to the Closing Date to the extent provided under
the Company's certificate of incorporation and bylaws in effect on the date of
this Agreement; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. For three years from
and after the Closing Date, the Company and its successors shall maintain
officers' and directors' liability insurance in respect of acts or omissions
occurring on or prior to the Closing Date covering each Person currently covered
by the Company's officers' and directors' liability insurance policy on terms
and in amounts comparable to those currently maintained by the Company or, at
the Purchaser's election, those maintained with respect to officers, agents,
employees, members, partners or representatives of the Purchaser nominated by
the Purchaser to serve as directors of the Company.
SECTION 3.9. Stockholder Representative.
(a) Appointment. Each Principal Stockholder constitutes and
appoints the Stockholder Representative to act as such Principal Stockholder's
representative under this Agreement, with full authority to act on behalf of,
and to bind, each Principal Stockholder for purposes of this Agreement, and the
Stockholder Representative agrees to accept such appointment. Without limiting
the generality of the foregoing, each Principal Stockholder hereby irrevocably
constitutes and appoints, with full power of substitution, the Stockholder
Representative as its true and lawful attorney-in-fact, with full power and
authority in such Principal Stockholder's name, place and stead (i) to determine
whether any condition to Closing contained in Section 4.2 has been satisfied or
to waive any such condition, (ii) to terminate this Agreement pursuant to
Section 6.2, (iii) to execute, certify, acknowledge, deliver and release any
document, certificate or instrument required to be delivered by the Principal
Stockholder at the Closing, including without limitation such Principal
Stockholder's Shares, (iv) to take all actions or execute, certify, acknowledge,
deliver, file and record all agreements, certificates, instruments and other
documents and any amendment thereto which the Stockholder Representative deems
necessary or appropriate in connection with such Principal Stockholder's
obligations under Article V, (v) to execute and deliver any consents,
amendments, waivers, modifications or supplements required under this Agreement
or which the Stockholder Representative deems necessary or appropriate in
connection with such Principal Stockholder's obligations under this Agreement
and (vi) to give and receive all notices, requests and other communications to
or from such Principal Stockholder's under this Agreement. Each Principal
Stockholder's appointment
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of the Stockholder Representative as its attorney-in-fact shall be deemed to be
a power coupled with an interest and still survive the death, incapacity,
bankruptcy or dissolution of the Principal Stockholder giving such power. Each
Other Stockholder shall, when joining in this Agreement pursuant to Section
3.12, constitute and appoint a stockholder representative to act as its
representative under this Agreement; provided, that the parties to this
Agreement shall be obligated to recognize no more than one additional
stockholder representative for each of (i) the Other Stockholders holding Class
B Common Stock of the Company and (ii) the Other Stockholders holding warrants
to acquire Class A Common Stock of the Company (or Additional Shares for which
such warrants are exercisable); and, provided that the Stockholder
Representative shall serve as the stockholder representative for any other
holders of Class A Common Stock and, if holders of less than a majority of Class
B Common Stock join the Agreement, the holders of Class B Common Stock who join
in the Agreement.
(b) Successor Representatives. The Stockholder Representative
shall designate one or more Persons to serve as successor Stockholder
Representative in the event of his death or incapacity, which Person or Persons
shall in such event succeed to and become vested with all the rights, powers,
privileges and duties of the Stockholder Representative under this Agreement.
Each successor Stockholder Representative shall designate one or more successors
to serve as Stockholder Representative in the event of such successor
Stockholder Representative's death, incapacity, bankruptcy or dissolution. In
the event that the Stockholder Representative dies or becomes incapacitated
without having designated a successor Stockholder Representative, his executors,
administrators or personal representatives shall succeed to and become vested
with all the rights, powers, privileges and duties of the Stockholder
Representative under this Agreement.
SECTION 3.10. Escrow Agreement. At the Closing, the Purchaser, the
Stockholders, and the Escrow Agent (as defined in the Indemnity Escrow
Agreement) shall enter into an escrow agreement substantially in the form of
Exhibit C hereto (the "Indemnity Escrow Agreement"). At the Closing, the
Purchaser will deliver an amount equal to seven and one-half percent (7.5%) of
the Aggregate Purchase Price (the "Escrow Fund") to the Escrow Agent in
accordance with the terms of the Indemnity Escrow Agreement to secure certain
obligations of the Sellers pursuant to this Agreement. Pursuant to the Indemnity
Escrow Agreement, the Escrow Agent shall hold the Escrow Fund for a period of
eighteen months following the Closing subject to asserted claims for
indemnification.
SECTION 3.11. Release. Each Stockholder, by executing this
Agreement, hereby, effective as of the Closing, (i) acknowledges and agrees that
the portion of the Aggregate Purchase Price paid to such Stockholder pursuant to
the terms of this Agreement is in full satisfaction of any rights of such
Stockholder in respect of such Stockholder's Shares or Additional Shares, as the
case may be, and (ii) releases, remises, acquits and forever discharges each of
the Company, any of its Subsidiaries, the Purchaser, and each of their
respective affiliates, officers, directors, employees and agents from any and
all actions, liabilities, charges, complaints, causes of action, suits,
proceedings, demands, costs, losses, damages, expenses and all other claims
whatsoever (whether in contract, tort, pursuant to statute, known or unknown) of
whatever nature and kind arising against such party by such Stockholder solely
in such Stockholder's capacity as a stockholder of the Company; provided,
however, that the release
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given in this Section 3.11 shall not operate to release or discharge the Company
or any of its Subsidiaries or the Purchaser from claims (w) for compensation
earned and not yet received or benefits under any Plans to which such
Stockholder may be entitled, (x) arising under any contractual obligation
identified on Schedule 3.11 and in effect on the date hereof and not otherwise
terminated, released, waived or discharged on or prior to the Closing Date, (y)
for indemnification pursuant to this Agreement or the constitutive documents of
the Company or any of its Subsidiaries or (z) for reimbursement for taxes due
(up to $200,000 in the aggregate for all Stockholders) relating to the Company's
1997 final Subchapter S Federal Tax Return. Each party acknowledges and agrees
that this Section 3.11 is for the benefit of, and enforceable by, Purchaser
and/or the Company.
SECTION 3.12. Joinder. Each of the Company and each Other
Stockholder may, at any time prior to May 7, 1999 (and thereafter with the
consent of the Purchaser), join in and become a party to this Agreement by
executing and delivering a counterpart copy of the signature page hereto, and
such execution and delivery by such Person shall conclusively evidence such
Person's agreement to be legally bound by all of the terms and provisions of
this Agreement applicable to such party from and after the date of such
execution and delivery. Notwithstanding any contrary provision of this
Agreement, neither the Company nor any Other Stockholder shall have any rights
or obligations under any provision of this Agreement (including without
limitation Section 3.4) unless and until such Person has joined in this
Agreement in accordance with this Section 3.12.
SECTION 3.13. Termination of Guarantees. Each Stockholder will
take all actions necessary to release the Company on or prior to the Closing
from any guarantee given by the Company for personal indebtedness of such
Stockholder or otherwise provide appropriate assurances that such guarantee will
be released as soon as reasonably practicable after the Closing.
SECTION 3.14. Merger Transaction. If requested by the Purchaser,
the parties to this Agreement shall negotiate appropriate modifications to this
Agreement so that the transactions contemplated hereby may be effected by means
of a merger transaction.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of each of the following conditions
unless waived on or prior to the Closing Date by the Purchaser:
(a) Representations, Warranties and Covenants. The representations
and warranties in Section 2.1 (other than those made in the first sentence of
Section 2.1(a) and in Sections 2.1(b) and 2.1(c)) shall be true and correct in
all material respects as of the date of this Agreement and as
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of the Closing Date as if made on and as of the Closing Date (except for those
representations and warranties expressly made as of a particular date, which
shall be true and correct only as of such date); provided that the foregoing
condition shall be deemed satisfied if the facts, events or circumstances
underlying any inaccuracies in any such representations and warranties (without
regard to any materiality or Material Adverse Effect limitation) as of the
Closing Date, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect. The representations and warranties in the
first sentence of Section 2.1(a) and in Sections 2.1(b) and 2.1(c) shall be true
and correct in all respects as of the Closing Date as if made on and as of the
Closing Date (except for those representations and warranties expressly made as
of a particular date, which shall be true and correct only as of such date). The
representations and warranties in Section 2.2 shall be true and correct in all
material respects (other than those made in Section 2.2(a), which shall be true
and correct in all respects) as of the Closing Date as if made on and as of the
Closing Date. The Company and each Stockholder shall have performed and complied
with in all material respects all covenants and agreements required to be
performed or complied with on or prior to the Closing Date.
(b) Certificates. The Purchaser shall have received a certificate
of the chief executive officer and chief financial officer of the Company and a
certificate of each Stockholder, each dated the Closing Date, substantially in
the forms attached as Exhibit A-1 and Exhibit A-2, respectively.
(c) Legal Opinions. The Purchaser shall have received opinions of
counsel to the Company and the Stockholders, dated the Closing Date, in form and
substance reasonably satisfactory to the Purchaser.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the transactions contemplated by this Agreement under the HSR Act
shall have been terminated or shall have expired.
(e) No Legal Bar. No action or proceeding by or before any
governmental authority or agency shall be pending or threatened challenging or
seeking to restrain or prohibit the transactions contemplated by this Agreement.
No statute, rule, regulation, executive order, decree, temporary restraining
order, preliminary injunction, permanent injunction or other order enacted,
entered, promulgated, enforced or issued by any governmental authority or agency
or other legal restraint or prohibition preventing the transactions contemplated
by this Agreement shall be in effect.
(f) Consents, Amendments and Terminations. The Purchaser shall
have received duly executed and delivered copies of all waivers, consents,
terminations and approvals listed in Schedule 2.2(b) and (subject to Section
3.1) Schedule 4.1(f) (as well as all other waivers, consents, terminations and
approvals (i) discovered after the date of this Agreement by the parties to be
necessary in connection with the transactions contemplated hereunder and (ii)
the failure of which to obtain, either individually or in the aggregate, (when
taken together with those identified in Section 2.1(d) of the Disclosure
Schedule and not listed on Schedule 4.1(f)) could reasonably be expected to have
a Material Adverse Effect), all in form and substance reasonably satisfactory to
the Purchaser.
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(g) Company Directors. At the request of the Purchaser, the
Purchaser shall have received the resignations (effective upon Closing) of the
directors of the Company (subject to any contractual rights) so requested to
resign, and the Board of Directors shall have been reconstituted so that a
majority of the directors are persons designated by Purchaser.
(h) Share Certificates . The Purchaser shall have received
certificates representing all of the Shares and the Additional Shares, together
with stock powers duly endorsed in blank.
(i) Consulting Agreement. A consulting agreement dated on or prior
to the Closing Date between the Company and William H. Gaither in the form
attached as Exhibit B shall have been executed and delivered by the parties
thereto.
(j) Management. Arrangements concerning the compensation of senior
members of management and their participation in the transactions contemplated
by this Agreement shall have been entered into (and to the extent necessary
approved by the Board of Directors of the Company) on terms reasonably
satisfactory to the Purchaser.
(k) No Material Adverse Change. Since the date of this Agreement,
there shall have been no material adverse change in the business, assets,
condition (financial or otherwise), financial position, results of operations or
prospects (other than changes resulting from general economic or market
conditions) of the Company and its Subsidiaries, taken as a whole.
(l) Other Deliveries. The Purchaser shall have received such other
documents, certificates or instruments or customary closing deliveries as it may
reasonably request.
SECTION 4.2. Conditions to Obligations of the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of each of the following
conditions unless waived on or prior to the Closing Date by the Stockholder
Representative:
(a) Representations, Warranties and Covenants. The representations
and warranties in Section 2.3 shall be true and correct in all material respects
(other than those made in Sections 2.3(a) and 2.3(b), which shall be true and
correct in all respects) as of the Closing Date as if made on and as of the
Closing Date. The Purchaser shall have performed and complied with in all
material respects all covenants and agreements required to be performed or
complied with on or prior to the Closing Date.
(b) Certificate. The Stockholder Representative shall have
received a certificate of the chief executive officer of the Purchaser, dated
the Closing Date, substantially in the form attached as Exhibit C.
(c) Legal Opinion. The Stockholder Representative shall have
received an opinion of counsel to the Purchaser, dated the Closing Date, in form
and substance reasonably satisfactory to the Stockholder Representative.
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(d) HSR Act. The waiting period (and any extension thereof)
applicable to the transactions contemplated by this Agreement under the HSR Act
shall have been terminated or shall have expired.
(e) No Legal Bar. No action or proceeding by or before any
governmental authority or agency shall be pending or threatened challenging or
seeking to restrain or prohibit the transactions contemplated by this Agreement.
No statute, rule, regulation, executive order, decree, temporary restraining
order, preliminary injunction, permanent injunction or other order enacted,
entered, promulgated, enforced or issued by any governmental authority or agency
or other legal restraint or prohibition preventing the transactions contemplated
by this Agreement shall be in effect.
(f) Other Deliveries. The Stockholders shall have received such
other documents, certificates or instruments or customary closing deliveries as
any of them may reasonably request.
ARTICLE V
INDEMNITY
SECTION 5.1. Indemnification.
(a) Indemnification by Stockholders. Each Stockholder, severally
and not jointly, and limited to and in proportion to such Stockholder's
aggregate percentage ownership of Shares and Additional Shares (which percentage
shall be 100% for matters set forth in Section 2.1(c)(i) (as it relates to such
Stockholder) and Section 2.2 or for a breach of a covenant of such Stockholder),
indemnifies and holds harmless the Purchaser and its affiliates, directors,
officers, employees and other agents and representatives from and against any
and all losses, liabilities, judgments, claims, settlements, damages, fees,
liens, Taxes, penalties, obligations and expenses (including without limitation
reasonable attorneys' fees and disbursements and Defense Costs incurred by the
Company pursuant to Section 5.1(e)) (collectively, "Losses") incurred or
suffered by any such Person arising from, by reason of or in connection with:
(i) any misrepresentation by, or breach of any
representation or warranty of, the Company or such Stockholder contained
in this Agreement or any certificate or other document delivered by the
Company or such Stockholder under this Agreement;
(ii) any breach or non-performance by the Company or such
Stockholder of any covenant or agreement made by the Company or such
Stockholder in this Agreement;
(iii) (A) any payment required to be made by the Company as
a result of Taxes paid by any third party pursuant to any agreement
entered into between January 1, 1997 and June 30, 1998 pursuant to which
the Company acquired stock of a Subsidiary (other than Itco Logistics
Corporation) or (B) any disallowance of a deduction by the Company for
any payments made by the Company other than as purchase price in
connection with any such acquisition (collectively, the "Surviving Tax
Matters"); or
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(iv) any action, suit, proceeding or demand incident to any
of the matters referred to in the foregoing clauses (i) through (iii).
Notwithstanding the foregoing, and except as provided in Section 6.10, no
Stockholder shall be liable under any provision of this Agreement for Losses
arising from, by reason of or in connection with any misrepresentation by
another Stockholder or breach or non-performance by another Stockholder of a
representation, warranty, covenant or agreement made by such other Stockholder
in this Agreement or any certificate or other document delivered by such other
Stockholder under this Agreement, it being understood that, for these purposes,
covenants of the Company shall not be deemed to be covenants of any particular
Stockholder. With respect to breaches of representations and warranties set
forth in Section 2.1 causing the Company to incur Losses, the Purchaser's Losses
shall be deemed to be the Company's Losses multiplied by a fraction, the
numerator of which is the number of Shares and Additional Shares acquired by the
Purchaser at the Closing and the denominator of which is the total number of
shares of Common Stock outstanding as of the Closing Date. For the purposes of
clarification, the parties acknowledge that the several liability of each
Stockholder shall under this Section 5.1 equal the Purchaser's Losses multiplied
by the Stockholder's ownership percentage as determined in accordance with
Section 5.2(b) (except in the limited circumstances where a Stockholder is
expressly obligated for 100% of the Purchaser's Losses as set forth above),
subject to the limitations set forth in Section 5.2(b). For purposes of this
Agreement, a breach of the representations and warranties contained in Section
2.1 shall be deemed to be a breach by all Stockholders rather than a breach of a
particular Stockholder (except for the provisions of Section 2.1(c) which relate
specifically to such Stockholder, which shall be deemed to be a breach only by
such Stockholder), but shall nevertheless be subject to all of the limitations
contained in Section 5.2. For purposes of Article V, shares issuable upon
exercise of any Warrant held by The 1818 Mezzanine Fund, L. P. shall be treated
as outstanding. For purposes of this Section 5.1, a Stockholder's ownership
percentage will be determined in accordance with Section 5.2(b). The parties
acknowledge and agree that the Company shall have the same rights as the
Purchaser under this Section 5.1(a) (subject to the limitations, if any, set
forth in this Article V) to be indemnified by each Controlling Stockholder from
and against any and all Losses that arise from, by reason of or in connection
with such Controlling Stockholder's breach of Section 3.6(c).
(b) Indemnification by Purchaser. The Purchaser indemnifies and
holds harmless the Stockholders and their respective affiliates, directors,
officers, employees and other agents and representatives from and against any
and all Losses incurred or suffered by any such Person arising from, by reason
of or in connection with:
(i) any misrepresentation by, or breach of any
representation or warranty of, the Purchaser contained in this Agreement
or any certificate or other document delivered by the Purchaser under
this Agreement;
(ii) any breach or non-performance by the Purchaser of any
covenant or agreement made by the Purchaser in this Agreement; or
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(iii) any action, suit, proceeding or demand incident to any
of the matters referred to in the foregoing clauses (i) and (ii).
(c) Indemnification Procedures. In case any claim or litigation
which might give rise to any indemnification obligation (an "Asserted
Liability") of a party under this Article V (each an "Indemnifying Party") shall
come to the attention of the party seeking indemnification hereunder (the
"Indemnified Party"), the Indemnified Party shall promptly notify the
Indemnifying Party (in the case of a claim for indemnification pursuant to
Section 5.1(a), by notice to the Stockholder Representative) in writing of the
existence, nature and amount of the potential Loss for which indemnification may
be sought. Failure to give such notice shall not prejudice the rights of the
Indemnified Party, except to the extent that the Indemnifying Party shall have
been materially prejudiced by such failure. With respect to claims or litigation
concerning third parties, the Indemnifying Party may defend against an Asserted
Liability on behalf of the Indemnified Party utilizing counsel reasonably
acceptable to the Indemnified Party, unless (i) the Indemnified Party reasonably
objects to such assumption of the defense on the ground that counsel for such
Indemnifying Party cannot represent both the Indemnified Party and the
Indemnifying Party because such representation would be reasonably likely to
result in a conflict of interest or because there may be defenses available to
the Indemnified Party that are not available to such Indemnifying Party or (ii)
the action or proceeding seeks injunctive or other equitable relief against the
Indemnified Party that would materially affect, restrain or interfere with the
business of the Indemnified Party. If the Indemnifying Party defends an Asserted
Liability, it shall do so at its own expense and shall not be responsible for
the costs of defense, investigative costs, attorney's fees or other expenses
incurred to defend the Asserted Liability (collectively, "Defense Costs") of the
Indemnified Party (which may continue to defend, at its own expense). If the
Indemnified Party assumes or maintains the defense of an Asserted Liability by
reason of clause (i) or (ii) above, or because the Indemnifying Party has not
elected to assume the defense, then such Indemnifying Party shall indemnify the
Indemnified Party for its reasonable Defense Costs. The Indemnifying Party may
settle any Asserted Liability only with the consent of the Indemnified Party,
which consent shall not be unreasonably withheld. If the Indemnifying Party
assumes or maintains the defense of an Asserted Liability as set forth above,
then the Indemnified Party may settle such Asserted Liability only with the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(d) Company Participation. The Company shall be entitled to
participate in the defense of any claim or litigation concerning third parties
for which indemnification may be sought pursuant to this Article V to the extent
that the Company or one of its Subsidiaries is not a party to such claim or
litigation, provided that such claim or litigation could in the Company's sole
determination result in an adverse effect on the business, assets, condition
(financial or otherwise), financial position, results of operations or prospects
of the Company or any of its Subsidiaries. Each party shall cooperate in all
reasonable respects with the Company and furnish or make available to the
Company and its legal counsel all access and information reasonably necessary to
give effect to the Company's rights under this Section 5.1(d).
(e) Asserted Liabilities Involving the Company. Notwithstanding
Sections 5.1(c) and 5.1(d), if an Asserted Liability relates to a third party
claim involving the Company, the
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Company shall be entitled to defend or assume the defense of such Asserted
Liability using counsel of its own choosing. If the Company chooses to defend an
Asserted Liability, the Indemnified Party and Indemnifying Party shall be
entitled to participate or continue to participate at its own expense in the
defense of such Asserted Liability except to the extent that the Company
reasonably determines that such participation could materially and adversely
affect the ability of the Company or its counsel to conduct such defense. If the
Company chooses to defend an Asserted Liability, the Company shall be entitled,
in its sole discretion, to settle or resolve the Asserted Liability. If the
Company settles or resolves an Asserted Liability or chooses counsel to defend
an Asserted Liability without the approval of the Indemnifying Party, then the
Indemnified Party shall not be entitled to indemnification under Article V
unless the approval of the Indemnifying Party has been unreasonably withheld.
(f) Treatment of Payments. Any payment made pursuant to this
Section 5.1 shall be treated as an adjustment to the Aggregate Purchase Price
for all Tax purposes.
SECTION 5.2. Limitations.
(a) Expiration Date. The indemnification and reimbursement
obligations under Section 5.1 shall expire on the date that is 18 months from
and after the Closing Date (the "Expiration Date"), except (i) as to any claims
for, or any claims that may result in, any Loss for which indemnity may be
sought hereunder of which the Indemnifying Party has received written notice
from the Indemnified Party on or before the Expiration Date or (ii) as to any
representations, warranties, covenants or agreements expressly surviving such
18-month period as set forth in Section 6.6.
(b) Caps. The total indemnification obligations of the
Stockholders (other than for claims relating to or arising out of Sections
2.1(b), 2.1(c), 2.1(t), 2.2(a), 2.2(b), 2.2(c) or 3.6 (collectively, the
"Excluded Claims")) pursuant to this Article V shall not exceed (i) for all
Stockholders in the aggregate an amount equal to 15% of the Aggregate Purchase
Price and (ii) for each Stockholder an amount equal to the product of (x) 15% of
the Aggregate Purchase Price and (y) the quotient obtained by dividing (1) the
number of Shares and Additional Shares owned by such Stockholder as specified on
the signature pages to this Agreement by (2) total number of Shares and
Additional Shares acquired by the Purchaser at the Closing. Notwithstanding
anything to the contrary set forth in this Agreement, the indemnification
obligations of the Stockholders with respect to Excluded Claims shall not count
towards, or be subject to, the limitations set forth in the first sentence of
this Section 5.2(b) or in Section 5.2(c), provided that the total
indemnification obligations of each Stockholder pursuant to this Article V shall
not exceed the amount of the Aggregate Purchase Price allocated to such
Stockholder's Shares or Additional Shares, as the case may be. Excluded Claims
for which a Stockholder is 100% responsible shall be satisfied personally by
such Stockholder and not from amounts held in escrow pursuant to the Indemnity
Escrow Agreement.
(c) Threshold; Minimum Claim Amount. The Purchaser shall not be
entitled to indemnification pursuant to this Article V with respect to any claim
for indemnification (other than an Excluded Claim) unless the aggregate Losses
for which the Purchaser would be entitled
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to indemnification pursuant to this Article V exceed $425,000 (after which the
Stockholders shall be obligated, subject to the limitations set forth in Section
5.2(b), to indemnify the Purchaser for amounts in excess of such $425,000).
(d) Tax Benefits. The amount of any and all Losses for which
indemnification is provided pursuant to this Article V shall be (i) increased to
take account of any net Tax cost incurred by the Indemnified Party arising from
the receipt of indemnity payments hereunder ("grossed-up" for taxes on such
increase), provided that any net tax cost incurred shall not include any
increase in Tax resulting from decrease in the Purchase Price of the Shares or
Additional Purchase Price of the Additional Shares as the case may be and (ii)
reduced to take account of any net Tax benefit realized by the Indemnified Party
arising from the incurrence or payment of any such Losses; provided that any net
Tax cost incurred and any net Tax benefit realized shall be attributable to
those Losses taken into account on a Tax return for a year not later than the
year in which the indemnity payment is made. In computing the amount of any such
Tax cost or Tax benefit, the Indemnified Party shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any and all Losses.
(e) Insurance Proceeds. The amount of any and all Losses for which
indemnification is provided pursuant to this Article V shall be net of any
amounts actually received by the Indemnified Party (or the Company, if
applicable) under insurance policies in effect at the Closing (other than self
insurance, retrospective or similar insurance) with respect to such Losses. In
the event that any claim for indemnification asserted under this Article V is,
or may be, the subject of insurance coverages of the Company or any other party
to this Agreement or other right to indemnification or contribution from any
third party (a "Third Party Contributor"), each of the Company and the
Indemnified Party agrees to promptly notify the applicable insurance carrier of
such claim and tender defense thereof to such carrier, and shall also promptly
notify any potential Third Party Contributor. Each of the Company and each
Indemnified Party agrees to pursue, at the sole cost and expense of the
Indemnifying Party, such claims diligently and to reasonably cooperate, at the
sole cost and expense of the Indemnifying Party, with each such insurance
carrier and Third Party Contributor, and the Indemnified Party agrees to make no
claim for indemnification under this Article V for a period of 180 days after
such claim for insurance or contribution is made. If insurance coverage or
contribution is denied (in whole or in part), or if no resolution of an
insurance or contribution claim shall have occurred within such 180 days, the
Indemnified Party may proceed for indemnification under this Article V, and such
Indemnifying Party shall be surrogated to the rights of the Indemnified Party
against such insurance carrier or Third Party Contributor.
(f) Additional Exclusions. Notwithstanding any contrary provision
of this Agreement, no Stockholder shall have any liability to any Person under
this Article V or otherwise for any of the matters described in Item 14 of
Section 2.1(e)(ii) of the Disclosure Schedule, including without limitation
Losses arising from Riggs v. Winston Tire or Losses arising from any other facts
or circumstances described in Item 14 of Section 2.1(e)(ii) of the Disclosure
Schedule except to the extent there is an inaccuracy in the last sentence
thereof.
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(g) Remedy. Upon and after the Closing, and subject to the
parties' rights to seek equitable relief pursuant to Section 6.10 for breaches
of Section 3.6 or 3.7, the provisions of this Article V represent the sole and
exclusive remedy available to any party to this Agreement for any breach by any
other party of any representation, warranty, covenant or agreement contained
herein. Notwithstanding any contrary provision of this Agreement, if the Closing
occurs, the Stockholders shall have no liability for indemnification pursuant to
this Article V for any breach or non-performance of any representation,
warranty, covenant or agreement that was within the Purchaser's knowledge at the
time of the Closing.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement. This Agreement and the annexes,
schedules and exhibits hereto contain the entire agreement among the parties
with respect to the transactions contemplated by this Agreement and supersede
all prior agreements or understandings among the parties with respect to the
subject matter hereof.
SECTION 6.2. Termination. (a) This Agreement shall terminate on
the first to occur of any of the following events:
(i) the mutual written agreement of the Purchaser and the
Stockholder Representative;
(ii) written notice from the Purchaser, on the one hand, or
the Stockholder Representative, on the other hand, to the other, if the
Closing shall not have occurred prior to the close of business on June
30, 1999; provided, that, if the Closing shall not have occurred prior to
such time as a result of the failure to obtain the consents of holders of
the Company's 10% Senior Notes Due 2008 as described on Schedule 4.1(f),
such date shall be extended to the earlier of four business days
following the date on which the consent has been obtained or a date to be
mutually agreed by the Purchaser and the Stockholder Representative, but
in no event later than October 31, 1999;
(iii) written notice from the Purchaser to the Stockholders,
in the event that the Company shall not have joined in this Agreement in
accordance with Section 3.12 on or before the 10th business day after the
date of this Agreement, provided, that this termination right shall not
be exercisable by the Purchaser if such joinder shall have occurred prior
to a termination pursuant to this clause (iii);
(iv) written notice from the Purchaser to the Stockholders,
in the event that (x) the Company or any Stockholder shall have
materially breached any representations, warranties, covenants or
agreements contained in this Agreement if not cured within 15 business
days following written notice from the Purchaser specifying such breach
or (y) the satisfaction of any condition to the Purchaser's obligations
under this Agreement becomes impossible or impracticable with the use of
commercially reasonable efforts if the failure of such condition to be
satisfied is not caused by a breach of this Agreement by the Purchaser;
or
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(v) written notice from the Stockholder Representative to
the Purchaser, in the event that (x) the Purchaser shall have materially
breached any representations, warranties, covenants or agreements
contained in this Agreement if not cured within 15 business days
following written notice from the Stockholder Representative specifying
such breach or (y) the satisfaction of any condition to the Stockholders'
obligations under this Agreement becomes impossible or impracticable with
the use of commercially reasonable efforts if the failure of such
condition to be satisfied is not caused by a breach of this Agreement by
the Stockholders.
(b) The sole remedy of any party for a breach by the other party
of this Agreement prior to the Closing shall be to terminate this Agreement in
accordance with the applicable provision of Section 6.2(a). Upon the termination
of this Agreement, all rights and obligations of the parties under this
Agreement shall terminate, except their obligations under Sections 3.1, 3.6(a),
3.7, 6.4, 6.9, 6.11 and 6.12, and no party shall have any further liability
hereunder.
SECTION 6.3. Descriptive Headings; Certain Interpretations.
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement. Except as
otherwise expressly provided in this Agreement, the following rules of
interpretation apply to this Agreement: (i) the singular includes the plural and
the plural includes the singular; (ii) "or" and "any" are not exclusive and
"include" and "including" are not limiting; (iii) a reference to any agreement
or other contract includes permitted supplements and amendments; (iv) a
reference to a law includes any amendment or modification to such law and any
rules or regulations issued thereunder; (v) a reference to a person or legal
entity includes its permitted successors and assigns; (vi) a reference to
generally accepted accounting principles refers to United States generally
accepted accounting principles; and (vii) a reference in this Agreement to an
Article, Section, Annex, Exhibit or Schedule is to the Article, Section, Annex,
Exhibit or Schedule of this Agreement.
SECTION 6.4. Notices. All notices, requests and other
communications to any party under this Agreement shall be in writing and
sufficient if delivered personally or sent by facsimile (with confirmation of
receipt) or by guaranteed overnight courier, addressed as follows:
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If to the Company or the Principal Stockholders, to:
William H. Gaither
c/o The J. H. Heafner Company, Inc.
2105 Water Ridge Parkway, Suite 500
Charlotte, NC 28217
Facsimile: (704) 423-8987
with copies to:
The J.H. Heafner Company, Inc.
2105 Water Ridge Parkway, Suite 500
Charlotte, NC 28217
Facsimile: (704) 423-8987
Attention: J. Michael Gaither
Howard, Smith & Levin LLP
1330 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 841-1010
Attention: Scott F. Smith
and
Moore & Van Allen PLLC
100 North Tryon Street, 47th Floor
Charlotte, NC 28202
Facsimile: (704) 331-1159
Attention: Hal Levinson, Esq.
If to the Purchaser, to:
Charlesbank Capital Partners, LLC
600 Atlantic Avenue
Boston, Massachusetts 02210-2203
Facsimile: (617) 619-5402
Attention: Mark A. Rosen and
Tami E. Nason
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Facsimile: (212) 735-2000
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Attention: David J. Friedman
and, if to any Other Stockholder, to the address or facsimile number furnished
by such Other Stockholder in writing upon joining this Agreement, or to such
other address or facsimile number as the party to whom notice is to be given may
have furnished to the other parties in writing in accordance herewith. Each such
notice, request or communication shall be effective when received or, if given
by guaranteed overnight courier, when delivered at the address specified in this
Section or on the second business day following the date on which such
communication is delivered to such courier, whichever occurs first.
SECTION 6.5. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
SECTION 6.6. Survival. All representations, warranties, agreements
and covenants contained in this Agreement or in any document delivered pursuant
to this Agreement or in connection with this Agreement (unless otherwise
expressly provided therein) shall survive the Closing and shall remain in full
force and effect until the Expiration Date; provided that the representations
and warranties in Sections 2.1(b), 2.1(c), 2.1(t), 2.2(a), 2.2(b), 2.2(c),
2.3(a), 2.3(b), 2.3(d) and 2.3(e), the covenants and agreements in Sections 3.3,
3.6, 3.8, 3.9, 3.10 and 3.11 and claims in respect of any Surviving Tax Matters
(as defined in this Section 6.6) shall not expire on the Expiration Date and
shall survive for the duration specified in such Sections or, if no duration is
specified, forever or until the expiration of the applicable statute of
limitations; and provided further, that the Surviving Tax Matters as defined in
Section 5.1(a)(iii) shall not expire on the Expiration Date and shall survive
until the expiration of the statute of limitations applicable to the federal
income tax return to be filed by the Company in connection with its 1998 fiscal
year.
SECTION 6.7. Benefits of Agreement. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
Agreement is for the sole benefit of the parties hereto and not for the benefit
of any third person.
SECTION 6.8. Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
SECTION 6.9. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable by any party hereto without the
prior written consent of the other parties. Notwithstanding the foregoing, the
Purchaser may assign this Agreement and all of its rights and obligations to an
affiliate of the Purchaser, provided that no such assignment shall relieve the
Purchaser of any of its obligations under this Agreement. Any instrument
purporting to make an assignment in violation of this Section shall be null and
void.
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SECTION 6.10. Enforceability; Equitable Relief. It is the desire
and intent of the parties hereto that the provisions of this Agreement shall be
enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. Accordingly, if any
particular provision of this Agreement shall be adjudicated to be invalid or
unenforceable, such provision shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. The parties acknowledge that
damages at law would be an inadequate remedy for the breach by any party of
Sections 3.6 or 3.7 and agree in the event of such breach that the non-breaching
party may obtain temporary and permanent injunctive relief restraining the
breaching party from such breach, and, to the extent permissible under
applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained in
the foregoing sentence shall be construed as prohibiting the non-breaching party
from pursuing any other remedies available at law or equity for such breach or
threatened breach of this Agreement nor limiting the amount of damages
recoverable in the event of a breach or threatened breach by any party of such
provisions.
SECTION 6.11. ARBITRATION; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT AGREES TO BE BOUND BY THE
ARBITRATION AND DISPUTE RESOLUTION PROVISIONS SET FORTH IN ANNEX A. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN
DISTRICT OF NORTH CAROLINA OR THE COURTS OF THE STATE OF NORTH CAROLINA, SITTING
IN MECKLENBURG COUNTY, FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS ARBITRATION AGREEMENT INCLUDING ACTIONS FOR TEMPORARY
INJUNCTIVE RELIEF IN AID OF ARBITRATION OR TO COMPEL ARBITRATION, AND AGREES NOT
TO COMMENCE ANY LEGAL PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS AND
EXCEPT FOR ANY ACTION TO ENFORCE AN ARBITRAL AWARD. EACH OF THE PARTIES TO THIS
AGREEMENT IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURTS AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY CONSENTS TO SERVICE OF PROCESS BY
NOTICE IN THE MANNER SPECIFIED IN SECTION 6.4 AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION SUCH PARTY MAY NOW OR HEREAFTER
HAVE TO SERVICE OF PROCESS IN SUCH MANNER. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL
BY JURY IN ANY SUCH PROCEEDING.
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SECTION 6.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
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IN WITNESS WHEREOF, each of the Principal Stockholders, the
Stockholder Representative and the Purchaser has caused this Agreement to be
duly executed and delivered as of the day and year first above written.
PRINCIPAL STOCKHOLDERS:
Number of Shares:
1,992,293 shares of Class A Common Stock /s/ Ann H. Gaither
-----------------------------------
ANN H. GAITHER
Number of Shares:
1,060,288 shares of Class A Common Stock /s/ William H. Gaither
-----------------------------------
WILLIAM H. GAITHER
Number of Shares:
462,790 shares of Class A Common Stock /s/ Susan Gaither Jones
-----------------------------------
SUSAN GAITHER JONES
Number of Shares:
13,129 shares of Class A Common Stock /s/ Thomas R. Jones
-----------------------------------
THOMAS R. JONES
STOCKHOLDER REPRESENTATIVE: /s/ William H. Gaither
-----------------------------------
WILLIAM H. GAITHER,
as Stockholder Representative
PURCHASER: CHARLESBANK EQUITY FUND IV,
LIMITED PARTNERSHIP
By: Charlesbank Equity Fund IV GP,
Limited Partnership, its general
partner
By: Charlesbank Capital Partners,
LLC
Its general partner
By: /s/ Mark A. Rosen
--------------------------------
MARK A. ROSEN
MANAGING DIRECTOR
By: /s/ Kim G. Davis
--------------------------------
KIM G. DAVIS
MANAGING DIRECTOR
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IN WITNESS WHEREOF, each of the Company and the Other Stockholders
has caused this Agreement to be duly executed and delivered as of the day and
year set forth opposite such Person's name below.
COMPANY: THE J. H. HEAFNER COMPANY, INC.
By: /s/ Donald C. Roof
----------------------------
Name: Donald C. Roof
Title: Sr. Vice President, Chief
Financial Officer & Treasurer
Date: April 27, 1999
OTHER STOCKHOLDERS: THE 1818 MEZZANINE FUND, L.P.
Number of Additional Shares: By:______________________________
Name:
1,034,000 shares of Class A Common Stock Title:
Date:
WINGATE PARTNERS II, L.P.
By: WINGATE MANAGEMENT COMPANY II,
L.P., its General Partner
By: WINGATE MANAGEMENT LIMITED,
L.L.C., its sole general partner
Number of Additional Shares: By: /s/ V. Edward Easterling, Jr.
----------------------------
Name: V. Edward Easterling, Jr.
1,277,167 shares of Class B Common Stock Title: Principal
Date:
WINGATE AFFILIATES II, L.P.
By: WINGATE MANAGEMENT LIMITED,
L.L.C., its sole general partner
Number of Additional Shares: By: /s/ V. Edward Easterling, Jr.
----------------------------
Name: V. Edward Easterling, Jr.
24,097 shares of Class B Common Stock Title: Principal
Date:
CALLIER INVESTMENT COMPANY
Number of Additional Shares: By: /s/ James T. Callier, Jr.
----------------------------
Name: James T. Callier, Jr.
9,037 shares of Class B Common Stock Title: G.P.
Date: May 7, 1999
40
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Number of Additional Shares: /s/ Armistead Burwell, Jr.
--------------------------------
ARMISTEAD BURWELL, JR.
27,110 shares of Class B Common Stock Date: May 5, 1999
Number of Additional Shares: /s/ Leon R. Ellin
--------------------------------
LEON R. ELLIN
18,073 shares of Class B Common Stock Date: May 20, 1999
41
47
ANNEX A
TO STOCK PURCHASE AGREEMENT
DISPUTE RESOLUTION PROCEDURE
The parties to the Agreement submit to final and binding arbitration as the sole
and exclusive remedy for all disputes, controversies or claims for damages
arising out of, involving, or relating to (a) the Agreement or any amendment
thereto or (b) the events giving rise to the Agreement, including any and all
non-contractual claims for damages related to the Agreement or the events giving
rise to it (including claims for fraudulent inducement of contract) ("Dispute").
The arbitration shall be held in accordance with the Commercial Arbitration
Rules of The American Arbitration Association then in effect except as modified
herein ("Rules"). Any arbitration under this Agreement shall be decided by a
panel of three arbitrators, one chosen by the Stockholders, one by the Purchaser
(in either instance within 20 days of the receipt by the respondent of a copy of
the demand for arbitration) and a third by the first two arbitrators chosen. The
three arbitrators shall determine all matters, including the panel's final
decision with respect to the claims presented in the arbitration, by majority
vote. If the two arbitrators selected by the parties are unable to agree upon
the appointment of the third arbitrator within seven days of appointment of the
second arbitrator, both shall give written notice of such failure to agree to
the parties, and if the parties fail to agree upon the selection of such third
arbitrator within five days thereafter, such third arbitrator shall be appointed
pursuant to the Rules. The arbitration shall be held in Charlotte, North
Carolina. The parties shall be entitled to have reasonable access (subject to
the confidentiality provisions in Section 3.6(b)) to information, documents and
other materials in the possession of the Company directly related to any dispute
arising from, relating to or in connection with the Company's business. Any
arbitration proceedings, decision or award rendered hereunder and the validity,
effect and interpretation of this arbitration agreement shall be governed by the
Federal Arbitration Act of the United States, 9 U.S.C. ss. 1 et seq. By agreeing
to arbitration, the parties do not intend to deprive any court of its
jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment or
other order in aid of arbitration proceedings and the enforcement of any award.
Without prejudice to such provisional remedies in aid of arbitration as may be
available under the jurisdiction of a court, the arbitral tribunal shall have
full authority to grant provisional remedies and to award damages for the
failure of any party to respect the arbitral tribunal's orders to that effect.
The arbitral award shall be final and binding on the parties and may be enforced
in any court having jurisdiction.