UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of The Securities Exchange Act Of 1934
Date of Report (Date of earliest event reported) February 11, 2000
LORACA INTERNATIONAL INC.
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(Exact name of registrant as specified in charter)
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Nevada 005-58227 87-0555751
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(State or other jurisdiction (Commission File Number) (IRS Employer Identification
of incorporation) No.)
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1601 Fifth Avenue, Suite 2320, Seattle, WA 98101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (206) 332-0400
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5600 Wyoming Blvd., N.E., Suite 150, Albuquerque, NM 87109
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(Former name or former address, if changed since last report)
ITEM 2. Acquisition Or Disposition Of Assets
On February 11, 2000, Loraca International, Inc. ("Loraca"), through its
subsidiary, entered into an agreement to acquire all of the outstanding shares
of The Lexus Companies, Inc. and its subsidiary, Calumet Securities Corporation
(collectively "Lexus") pursuant to the terms of an Agreement and Plan of Merger
(the "Agreement"). Loraca (through its subsidiary) shall pay to Lexus an
aggregate of (i) 377,778 shares of common stock, par value $0.001 per share, of
Loraca (the "Loraca Common Stock"), and (ii) floating rate convertible
subordinated notes in the principal amount of $2.3 million (the "Notes").
The value of the consideration paid by Loraca for the Lexus stock was based
on an arm's length negotiation between the parties after considering the
perceived value of the Lexus business and its assets, the liabilities of Lexus
that are to be assumed by the subsidiary of Loraca, and the market value of the
shares of Loraca Common Stock that will be delivered at Closing or that will be
issuable upon conversion of the Notes.
Loraca intends to continue operating the Calumet business in its growing
internet mortgage operations as a platform to fund and service the loans that
Loraca and its subsidiaries originate.
ITEM 7. Financial Statements And Exhibits
(a) Financial statements of business acquired.
To be filed by amendment within 60 days of this report.
(b) Pro forma financial information. To be filed by amendment within 60
days of this report.
(a) Exhibits.
Exhibit Description
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Exhibit 2.1* Agreement and Plan of Merger dated as of February 11, 2000 by and
among Loraca International, Inc., Loraca Acquisition Corp., The
Lexus Companies, Inc. and the Shareholders of The Lexus
Companies, Inc. Schedules and similar attachments to this Exhibit
have not been filed; upon request, Loraca will furnish
supplementally to the Commission a copy of any omitted schedule.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 28, 2000 LORACA INTERNATIONAL, INC.
By: /s/ Bernard A. Guy
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Bernard A. Guy
President
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INDEX OF EXHIBITS
Exhibit Description
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Exhibit 2.1* Agreement and Plan of Merger dated as of February 11, 2000 by
and among Loraca International, Inc., Loraca Acquisition Corp.,
The Lexus Companies, Inc. and the Shareholders of The Lexus
Companies, Inc. Schedules and similar attachments to this Exhibit
have not been filed; upon request, Loraca will furnish
supplementally to the Commission a copy of any omitted schedule.
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* Portions of Exhibit 2.1 are omitted pursuant to a request for confidential
treatment filed concurrently with this report. Such portions are indicated
with the text of the Exhibit by asterisks. Omitted portions will be filed
separately with the Securities and Exchange Commission.
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________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LORACA INTERNATIONAL, INC.,
LORACA ACQUISITION CORPORATION,
THE LEXUS COMPANIES, INC., AND
THE SHAREHOLDERS OF
THE LEXUS COMPANIES, INC.
February 11, 2000
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TABLE OF CONTENTS
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Section Page
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1. The Merger................................................................................................. 2
2. Conversion of Shares....................................................................................... 2
3. Closing; Obligations of the Parties........................................................................ 3
3.1 Closing; Closing Date 3
3.2 Obligations of the Parties at the Closing........................................................ 3
4. Several Representations of Shareholders.................................................................... 4
4.1 Ownership of Shares.............................................................................. 4
4.2 Investment Intent................................................................................ 5
5. Representations and Warranties by Individual Shareholders.................................................. 6
5.1 Organization, Good Standing and Qualification.................................................... 6
5.2 Subsidiaries..................................................................................... 7
5.3 No Violation..................................................................................... 7
5.4 Capitalization................................................................................... 7
5.5 Financial Statements............................................................................. 8
5.6 Assets........................................................................................... 9
5.7 Title to Properties; Encumbrances................................................................ 9
5.8 Trademarks, Patents, Etc......................................................................... 9
5.9 No Undisclosed Liability......................................................................... 10
5.10 Absence of Certain Changes...................................................................... 10
5.11 Tax Matters..................................................................................... 12
5.12 Compliance with Applicable Law.................................................................. 13
5.13 Absence of Questionable Payments................................................................ 13
5.14 Litigation...................................................................................... 13
5.15 Insurance....................................................................................... 14
5.16 Contract Service Warranties..................................................................... 15
5.17 Employees and Fringe Benefit Plans.............................................................. 15
5.18 Environmental Matters........................................................................... 17
5.19 Contracts and Commitments....................................................................... 18
5.20 Accounts Receivable............................................................................. 19
5.21 Labor Matters................................................................................... 20
5.22 No Breach....................................................................................... 20
5.23 Year 2000....................................................................................... 21
5.24 Professional Fees............................................................................... 21
5.25 Consents and Approvals.......................................................................... 21
5.26 Corporate Records............................................................................... 21
5.27 Inventories..................................................................................... 22
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TABLE OF CONTENTS
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Section Page
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5.28 Servicing Agreements............................................................................ 22
5.29 Mortgage Loans.................................................................................. 22
5.30 Definitions..................................................................................... 24
5.31 Full Disclosure................................................................................. 25
6. Representations and Warranties by Loraca and Merger Sub.................................................... 26
6.1 Organization and Good Standing................................................................... 26
6.2 Capitalization................................................................................... 26
6.3 Loraca Information............................................................................... 26
6.4 Loraca Financials................................................................................ 27
6.5 Condition of Loraca.............................................................................. 27
6.6 Compliance with Applicable Law................................................................... 27
6.7 Assets........................................................................................... 27
6.8 Authorization.................................................................................... 28
6.9 Valid and Binding Agreement...................................................................... 28
6.10 No Violation.................................................................................... 28
6.11 Professional Fees............................................................................... 28
6.12 Consents and Approvals.......................................................................... 29
6.13 Full Disclosure................................................................................. 29
7. Covenants and Agreements of the Parties.................................................................... 29
7.1 Operation of Business............................................................................ 29
7.2 Notice of Developments........................................................................... 31
7.3 Exclusivity...................................................................................... 31
7.4 Reorganization................................................................................... 31
7.5 Election of Shareholder to Loraca Board of Directors............................................. 32
7.6 Preservation of Existing Business................................................................ 32
7.7 Stock Pledge..................................................................................... 32
7.8 Registration Rights of Shareholders.............................................................. 32
8. Conditions To Closing...................................................................................... 32
8.1 Conditions to Obligations of Loraca.............................................................. 32
8.2 Conditions to Obligations of the Shareholders.................................................... 34
9. Termination................................................................................................ 35
9.1 Termination of Agreement......................................................................... 35
9.2 Effect of Termination............................................................................ 36
10. Indemnification........................................................................................... 36
10.1 Indemnification by Individual Shareholders...................................................... 36
10.2 Indemnification by Loraca....................................................................... 37
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TABLE OF CONTENTS
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Section Page
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10.3 Limitation on Individual Shareholder Indemnification............................................ 37
10.4 Limitation on Loraca Indemnification............................................................ 38
10.5 * * *........................................................................................... 39
10.6 Time Limitations................................................................................ 39
10.7 Indemnity Claims................................................................................ 39
11. Shareholders' Agent....................................................................................... 41
12. Mediation of Claims; Arbitration of Certain Claims........................................................ 42
12.1 Party Mediation of Claims....................................................................... 42
12.2 Structured Mediation of Claims.................................................................. 43
12.3 Arbitration of Certain Claims................................................................... 44
12.4 Exclusive Procedures............................................................................ 46
12.5 Tolling of Statutes of Limitation............................................................... 46
13. Miscellaneous............................................................................................. 46
13.1 Assignability; Parties in Interest.............................................................. 46
13.2 Entire Agreement; Amendments.................................................................... 46
13.3 Headings........................................................................................ 47
13.4 Severability.................................................................................... 47
13.5 Non-Competition; Non-Solicitation............................................................... 47
13.6 Notices......................................................................................... 48
13.7 Release by Shareholders......................................................................... 49
13.8 Survival of Representations..................................................................... 49
13.9 Governing Law................................................................................... 49
13.10 Expenses....................................................................................... 50
13.11 Knowledge...................................................................................... 50
13.12 Counterparts................................................................................... 50
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* Confidential Treatment Requested
EXHIBITS
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Exhibit Description Section
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A Convertible Note....................................................................................2
B Allocation of Merger Consideration..................................................................2
C Loraca's Guaranty..............................................................................3.2(a)
D Technology Security Agreement..................................................................3.2(a)
E Opinion of Stokes & Bartholomew, P.A...........................................................3.2(a)
F Opinion of Greenebaum Doll & McDonald PLLC.....................................................3.2(b)
G Ownership of Shares...............................................................................5.4
H Loan Balances.................................................................................5.29(a)
I Form 10 filed by Loraca...........................................................................6.3
J Loraca's Business Plan............................................................................6.3
K Pro Forma Financial Information...................................................................6.3
L Loraca 1999 Financials............................................................................6.4
M Indemnification Amount........................................................................10.3(b)
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SCHEDULES
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Description Schedule
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Subsidiaries....................................................................................................5.2
No Violation....................................................................................................5.3
Financial Statements............................................................................................5.5
Assets..........................................................................................................5.6
Title to Properties; Encumbrances...............................................................................5.7
Trademarks, Patents, Etc........................................................................................5.8
No Undisclosed Liability........................................................................................5.9
Absence of Certain Changes.....................................................................................5.10
Tax Matters....................................................................................................5.11
Compliance with Applicable Law.................................................................................5.12
Absence of Questionable Payments...............................................................................5.13
Litigation.....................................................................................................5.14
Insurance......................................................................................................5.15
Contract Service Warranties....................................................................................5.16
Employees and Fringe Benefit Plans.............................................................................5.17
Environmental Matters..........................................................................................5.18
Contracts and Commitments......................................................................................5.19
Accounts Receivable............................................................................................5.20
Labor Matters..................................................................................................5.21
Year 2000......................................................................................................5.23
Professional Fees..............................................................................................5.24
Consents and Approvals.........................................................................................5.25
Mortgage Loans.................................................................................................5.29
Full Disclosure................................................................................................5.31
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GLOSSARY OF DEFINED TERMS
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Defined Term Section
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AAA............................................................................................................12.2
Alford.................................................................................................Introduction
Bank One........................................................................................................7.7
Calumet...................................................................................................Recital B
Calumet Shares..................................................................................................5.4
Claim.......................................................................................................10.7(a)
Claims Notice...............................................................................................10.7(a)
Closing.........................................................................................................3.1
Closing Date....................................................................................................3.1
Code......................................................................................................Recital C
Consolidated %s.............................................................................................10.3(b)
Convertible Note..................................................................................................2
ERISA.......................................................................................................5.17(c)
Financial Statements............................................................................................5.5
Indemnitee..................................................................................................10.7(a)
Indemnifying Party..........................................................................................10.7(a)
Individual Shareholder.................................................................................Introduction
Individual Shareholders................................................................................Introduction
Initiating Party............................................................................................12.2(b)
Kirsch.................................................................................................Introduction
Laws...........................................................................................................5.12
Lexus..................................................................................................Introduction
Lexus Common Stock................................................................................................2
Lexus Preferred Stock.............................................................................................2
Loraca.................................................................................................Introduction
Loraca's Indemnified Persons...................................................................................10.1
Losses.........................................................................................................10.1
Merger............................................................................................................1
Merger Consideration..............................................................................................2
Merger Sub.............................................................................................Introduction
Oberle.................................................................................................Introduction
Recipient Party.............................................................................................12.2(b)
Shareholder............................................................................................Introduction
Shareholders...........................................................................................Introduction
Shareholders' Indemnified Persons..............................................................................10.2
Shares..........................................................................................................5.4
Sponsors....................................................................................................5.17(c)
Stilz..................................................................................................Introduction
Stilz Trustees.........................................................................................Introduction
Systems........................................................................................................5.23
TBCA......................................................................................................Recital A
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TCM Custodian..........................................................................................Introduction
Third Party Claim...........................................................................................10.7(b)
Trustee Shareholder....................................................................................Introduction
Trustee Shareholders...................................................................................Introduction
Vine Custodian.........................................................................................Introduction
Year 2000 Compliant............................................................................................5.23
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is executed as of the 11th day
of February, 2000, by and among Loraca International, Inc., a Nevada corporation
("Loraca"), Loraca Acquisition Corporation, a newly formed Washington
corporation and wholly owned subsidiary of Loraca ("Merger Sub"); The Lexus
Companies, Inc., a Texas corporation ("Lexus"); Robert C. Stilz, Jr. ("Stilz"),
William Van Meter Alford, Jr. ("Alford"), Lynn S. Kirsch ("Kirsch") and David M.
Oberle ("Oberle") (Stilz, Alford, Kirsch and Oberle are sometimes referred to
herein individually as an "Individual Shareholder" and collectively as the
"Individual Shareholders"); and Robert C. Stilz, Jr. and William K. Stilz, as
Co-Trustees of Mildred K. Stilz Children's Trust ("Stilz Trustees"), Trent
Capital Management Company, as Custodian for the Robert C. Stilz, Jr. IRA ("TCM
Custodian") and Vine Street Trust Company, as Custodian for the William Van
Meter Alford, Jr. IRA ("Vine Custodian") (Stilz Trustees, TCM Custodian and Vine
Custodian are sometimes referred to herein individually as a "Trustee
Shareholder" and collectively as the "Trustee Shareholders") (Individual
Shareholders and Trustee Shareholders are sometimes referred to herein
individually as a "Shareholder" and collectively as the "Shareholders").
Recitals:
A. The Boards of Directors of Loraca and Lexus each have determined that a
business combination between Loraca and Lexus is in the best interests of their
respective companies and shareholders and presents an opportunity for the
respective companies to enhance the service provided to consumers and achieve
long-term strategic and financial benefits, and accordingly have agreed to
effect the merger provided for herein upon the terms and subject to the
conditions set forth herein.
B. The Shareholders, being all of the shareholders of Lexus, have approved
the merger provided for herein in accordance with the requirements of the Texas
Business Corporation Act ("TBCA").
Lexus is the sole owner of all of the outstanding capital stock of Calumet
Securities Corporation, an Indiana corporation ("Calumet").
C. For federal income tax purposes, it is intended that the merger provided
for herein shall qualify as a reorganization within the meaning of section
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended ("Code").
D. Loraca, Merger Sub, Lexus and the Shareholders desire to make certain
representations, warranties and agreements in connection with the merger.
Agreement:
Now, Therefore, in consideration of the foregoing, and of the representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
1. The Merger. Subject to the terms and conditions of this Agreement, on the
"Closing Date" (as defined in Section 3.1), Lexus shall be merged with and into
Merger Sub in accordance with this Agreement and the separate corporate
existence of Lexus shall thereupon cease ("Merger"). Merger Sub shall be the
surviving corporation in the merger and shall remain a wholly-owned subsidiary
of Loraca. The Articles of Merger shall provide that the name of Merger Sub
shall be amended (effective simultaneously with the consummation of the Merger)
and changed to "The Lexus Companies, Inc." The Merger shall have the effects
specified in Article 5.06 of the TBCA.
2. Conversion of Shares. At the Closing, all of the issued and outstanding
shares of the common stock, $0.10 par value per share of Lexus ("Lexus Common
Stock"), and all of the issued and outstanding shares of the preferred stock,
$100.00 par value per share of Lexus ("Lexus Preferred Stock") shall be
converted, by virtue of the Merger and without any action on the part of the
holders thereof, into 377,778 shares of Loraca's $0.001 par value common stock
("Loraca Common Stock") and $2.3 million of Floating Rate Convertible
Subordinated Notes (in the form
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of the "Convertible Note" attached hereto as Exhibit A) and the Loraca Common
Stock and the Convertible Notes shall be issued to the Shareholders as set forth
on Exhibit B attached hereto, which is entitled Allocation of Merger
Consideration. After the Closing there shall be no further registration or
transfer on the records of Lexus of the "Shares" (as defined in Section 5.4).
For the purposes of this Agreement the parties agree that the value of the
Loraca Common Stock is $5.10 per share.
3. Closing; Obligations of the Parties.
3.1 Closing; Closing Date. The closing ("Closing") shall take place at
10:00 a.m., local time, on February 29, 2000 at the offices of Greenebaum Doll &
McDonald PLLC, 3300 National City Tower, Louisville, Kentucky ("Closing Date"),
if all of the conditions set forth in Section 8 have been fulfilled by such
date. If all of such conditions have not been fulfilled by such date, then the
Closing shall take place on (a) such other date which is five business days
after the party obligated to fulfill such conditions shall have notified the
other party that the last of such conditions has been satisfied or waived or (b)
on such other date as the parties may agree, provided that the Closing Date
shall in no event be later than March 15, 2000. The Closing shall be effective
for all purposes at the time of the acceptance for filing by the Texas Secretary
of State of the Articles of Merger and the Washington Secretary of State of the
Certificate of Merger.
3.2 Obligations of the Parties at the Closing.
(a) Deliveries by Loraca. At the Closing, Loraca shall deliver to the
Shareholders: (1) the Merger Consideration as specified in Section 2; (2) a copy
of resolutions of the Board of Directors of Loraca and Merger Sub, certified by
Loraca's and Merger Sub's Secretary, authorizing the execution, delivery and
performance of this Agreement and the other documents referred to herein to be
executed by Loraca and Merger Sub, and the consummation of the transactions
contemplated hereby; (3) a Certificate from Loraca, dated the Closing Date,
certifying to the fulfillment of the conditions specified in Section 8.2; (4)
the Guaranty for the Convertible Notes by
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Loraca in the form of Exhibit C attached hereto, (5) the Security Agreement in
the form of Exhibit D attached hereto, along with the UCC Form-1 and other
documents referred to in the Security Agreement, (6) the opinion of Stokes &
Bartholomew, P.A., in the form of Exhibit E attached hereto, (7) executed
documents to consummate the Merger; and (8) such other certificates and
documents as Shareholders or their counsel may reasonably request.
(b) Deliveries by Shareholders. At the Closing, Shareholders will
deliver to Loraca (1) certificates for the Shares, free and clear of all liens,
claims, charges, restrictions, security interests, proxies, pledges, equities or
encumbrances of any kind, which certificates shall be duly endorsed to Merger
Sub or accompanied by duly executed stock powers in form satisfactory to Loraca,
(2) all consents, approvals, permits, licenses and amendments of agreements
required of Lexus to carry out the transactions contemplated in this Agreement;
(3) a Certificate from the Individual Shareholders, dated the Closing Date,
certifying to the fulfillment of the conditions specified in Section 8.1; (4)
resignations of Paul K. Tufano and the Shareholders as officers and directors of
Lexus and Calumet, effective as of the Closing Date; (5) the opinion of
Greenebaum Doll & McDonald PLLC in the form of Exhibit F attached hereto, (6)
executed documents to consummate the Merger; and (7) such other certificates and
documents as Loraca or its counsel may reasonably request.
4. Several Representations of Shareholders.
4.1 Ownership of Shares. Each of the Shareholders severally and
individually, but not jointly, represents and warrants to Loraca that such
Shareholder is the record and beneficial owner of the number of Shares set forth
beside the Shareholder's name on Exhibit G attached hereto, free and clear of
all liens, claims, charges, restrictions, security interests, equities, proxies,
pledges or encumbrances of any kind; and that such Shareholder has the full
right, power, authority and capacity to transfer, pursuant to the Merger, the
respective Shares owned by such Shareholder. To the knowledge of each
Individual Shareholder, each Shareholder is the record and beneficial owner of
the number of Shares set forth beside each such other Shareholder's name on
Exhibit G, free and
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clear of all liens, claims, charges, restrictions, security interests, equities,
proxies, pledges, or encumbrances of any kind, and each Shareholder has full
right, power, authority, and capacity to transfer, pursuant to the Merger, the
respective Shares owned by such Shareholder. Each of the Shareholders represents
that this Agreement constitutes a legal, valid and binding agreement of the
Shareholder, enforceable in accordance with its terms. As of the Closing Date
and upon receipt of the Merger Consideration and the agreements and other
consideration for the, each Shareholder represents that the Shareholder has no
claims of any kind against Lexus.
4.2 Investment Intent. Each Shareholder hereby makes the representations
and warranties set forth below in this Section 4.2. Such Shareholder:
(a) acknowledges that the shares of Loraca Common Stock and
Convertible Note are being acquired by such Shareholder solely for the
Shareholder's own account for investment and not with a view to the distribution
thereof;
(b) confirms and acknowledges that Loraca has given the Shareholder
or the Shareholder's representatives the opportunity to ask questions of the
officers and directors and to acquire additional information about the shares of
Loraca Common Stock and the business and financial condition of Loraca as the
Shareholder has requested, which additional information has been received;
(c) in deciding to acquire the shares of Loraca Common Stock pursuant
to this Agreement, consulted with the Shareholder's legal, financial, and tax
advisors with respect to the contemplated transactions and the nature of the
investment together with any additional information provided under Section
4.2(b);
(d) has adequate means of providing for the Shareholder's current
needs and personal contingencies and has no need for liquidity in the
Shareholder's investment in Loraca and, either
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alone or with his representatives, has such knowledge and experience in
financial and business matters that the Shareholder is capable of evaluating the
merits and risks of an investment in Loraca;
(e) understands and acknowledges that (i) the investment in the
shares of Loraca Common Stock is a speculative investment which involves a high
degree of risks of loss of the Shareholder's investment therein; and (ii) there
are substantial restrictions on the transferability of the shares of Loraca
Common Stock and Convertible Notes under the applicable provisions of the
Securities Act of 1933, as amended ("Securities Act") and the rules and
regulations promulgated thereunder and applicable state securities laws; and,
accordingly, that it may not be possible to liquidate an investment in the
shares of Loraca Common Stock and the Convertible Note; and
(f) has been advised and understands that (i) the offer and sale of
the shares of Loraca Common Stock and the Convertible Note have not been
registered under the Securities Act; (ii) the Shareholder must continue to bear
the economic risks of the investment in the shares of Loraca Common Stock until
the offer and sale of the shares of Loraca Common Stock is subsequently
registered under the Securities Act or any state securities laws or an exemption
from such registration is available; and (iii) a notation shall be made in the
appropriate records of Loraca indicating that the shares of Loraca Common Stock
are subject to restrictions on transfer.
(g) Each certificate evidencing the shares of Loraca Common Stock
will be imprinted with a legend substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES ACT AND CANNOT BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER SUCH ACTS OR UNLESS EXEMPTIONS FROM
REGISTRATION ARE AVAILABLE.
5. Representations and Warranties by Individual Shareholders. The Individual
Shareholders, jointly and severally, hereby represent and warrant as follows
(for purposes of the
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below representations and warranties, where applicable, each reference to Lexus
shall also include Calumet and the representations made in Sections 5.27, 5.28
and 5.29 are made to the knowledge of the Individual Shareholders):
5.1 Organization, Good Standing and Qualification. Lexus is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Texas. Calumet is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Indiana. Each of Lexus and
Calumet has full corporate power and authority to carry on its business as now
conducted and possesses all governmental and other permits, licenses, and other
authorizations to own, lease, or operate its assets and properties as now owned,
leased, and operated and to carry on its business as presently conducted. Each
of Lexus and Calumet is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each state wherein the properties owned
or leased or the business transacted by it makes such licensing or qualification
to do business as a foreign corporation necessary, and no other jurisdiction has
demanded, requested, or otherwise indicated that (or inquired whether) Lexus or
Calumet is required so to qualify. Specifically, Calumet is duly qualified as a
foreign corporation and is in good standing in the States of Illinois, Michigan
and Kentucky and is presently doing business only in the States of Indiana,
Illinois, Michigan and Kentucky.
5.2 Subsidiaries. Lexus owns all of the outstanding capital stock of
Calumet. Neither Lexus nor Calumet owns or has any right to any equity or
ownership interest in any other corporation, partnership, joint venture, or
other business organization, except as disclosed in Schedule 5.2.
5.3 No Violation. The execution and delivery of this Agreement by Lexus
and by the Shareholders does not, and the consummation of the transactions
contemplated hereby will not, (a) violate any provision of, or result in the
creation of any lien or security interest under, any agreement, indenture,
instrument, lease, security agreement, mortgage or lien to which Lexus or any
Shareholder is a party or by which any of Lexus's or any Shareholder's assets or
properties are
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bound; (b) violate any provision of the Articles of Incorporation or Bylaws of
Lexus; (c) violate any order, arbitration award, judgment, writ, injunction,
decree, statute, rule, or regulation applicable to Lexus or any Shareholder; or
(d) violate any other contractual or legal obligation or restriction to which
Lexus or any Shareholder is subject, except as disclosed in Schedule 5.3.
5.4 Capitalization. The authorized capital stock of Lexus consists solely
of 10,000 shares of common stock, $0.10 par value per share, of which 4,900
shares are issued and 4,000 are outstanding, and 6,737 shares of preferred
stock, $100.00 par value per share, all of which are issued and outstanding
(collectively, the "Shares"). All of the Shares are duly authorized, validly
issued and outstanding and fully paid and nonassessable. Except for the Shares,
there are no shares of capital stock or other securities of Lexus issued or
outstanding. There are no outstanding options, warrants or rights to purchase
or acquire from Lexus or any of the Shareholders any securities of Lexus, and
there are no contracts, commitments, agreements, understandings, arrangements,
or restrictions as to which Lexus or any Shareholder is a party or by which any
of them is bound relating to any shares of capital stock or other securities of
Lexus (including the Shares), whether or not outstanding. The authorized
capital stock of Calumet consists solely of 20,000 shares of common stock, no
par value per share, of which 11,700 shares are issued and outstanding and 5,000
shares of preferred shares, $1,000 par value, of which 1,162 shares are issued
and outstanding, all of which are owned by Lexus.
5.5 Financial Statements. Shareholders have delivered to Loraca: (a) an
audited consolidated and consolidating balance sheet of Lexus and Calumet as at
December 31, 1998, and the related audited consolidated statement of operations,
shareholders' equity (deficit) and cash flows for that fiscal year, and (b) an
unaudited consolidated balance sheet of Lexus as at December 31, 1999 and the
related unaudited statements of operations for the 12 months then ended
("Financial Statements"). The Financial Statements present fairly, in all
material respects, the financial position of Lexus and Calumet as at the
respective dates thereof, and the results of their operations for the periods
therein referred to, all in accordance with generally accepted United States
accounting principles, subject, in the case of the December 31, 1999 Financial
Statements, to normal recurring
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year-end adjustments (the effect of which will not, individually or in the
aggregate, have a material adverse effect on the financial condition, results of
operations, cash flows or prospects of Lexus or Calumet, except as shown on
Schedule 5.5), a cash flow statement, lack of footnotes and a deferred tax
adjustment. The reserves reflected in the Financial Statements are appropriate
and reasonable in accordance with generally accepted accounting principles
applied on a consistent basis. The Financial Statements have been prepared from
the books and records of Lexus and Calumet which accurately and fairly reflect
the transactions and dispositions of the assets of Lexus and Calumet.
5.6 Assets. Schedule 5.6 hereto contains the Lexus fixed asset schedule,
which includes an accurate and complete description of all fixed and other
tangible assets owned, leased, or used by Lexus, including, without limitation,
improvements to leased property, equipment located therein, vehicles and all
personal property relating to Lexus and its business and properties. All of
Lexus's major equipment is in good working condition and repair, normal wear and
tear excepted, and is adequate for the uses for which it is intended. All of
Lexus's major equipment is, to the knowledge of the Individual Shareholders, in
material conformity with applicable health, sanitation, fire, environmental
(including air and water pollution laws and regulations), safety, labor, zoning
and building laws and ordinances; and neither Lexus nor the Shareholders have
received any notification within the last five years of any violation of any
applicable ordinance or regulation of building, zoning or other law, in respect
of its plants, structures, properties or operations.
5.7 Title to Properties; Encumbrances. Lexus has good, valid, and
marketable title to all properties and assets it purports to own, real, personal
and mixed, tangible and intangible, including, without limitation, the
properties and assets reflected in the Financial Statements (except for
inventory and other assets sold since the date thereof in the ordinary course of
business and consistent with past practice). None of such properties or assets
(or any other properties or assets used in the business of Lexus) are subject to
any mortgage, pledge, lien, security interest, conditional sale agreement,
encumbrance, or charge of any kind, except (a) liens shown on Schedule 5.7 (with
respect to which no default exists), (b) liens for current taxes not yet due,
and (c) minor imperfections of title and encumbrances, if any, which are not
substantial in amount, do not detract
-9-
from the value of the property subject thereto, and do not impair the use of the
property subject thereto or impair the operations of Lexus.
5.8 Trademarks, Patents, Etc. Schedule 5.8 is an accurate and complete
list of all patents, trademarks, tradenames, trademark registrations, service
names, service marks, copyrights, formulas and applications therefor owned by
Lexus or used or required by Lexus in the operation of Lexus's business, title
to each of which is, except as set forth in Schedule 5.8 or 5.7, held by Lexus
free and clear of all adverse claims, liens, security agreements, restrictions
or other encumbrances. There is no infringement action, lawsuit, claim or
complaint which asserts that Lexus's operations violate or infringe the rights
or the trade names, trademarks, trademark registration, service name, service
mark, or copyright of others with respect to any apparatus or method of Lexus or
any adversely held trademark, trade name, trademark registration, service name,
service mark or copyright, and Lexus is not in any way making use of any
confidential information (such as proprietary operating methods or handbooks) or
trade secrets of any person except with the consent of such person. All
computer software used or owned by Lexus and/or Calumet (a) was developed
entirely by the employees of Lexus and Calumet during the time they were
employees only of Lexus and/or Calumet, or (b) is being used in accordance with
license agreements and not in violation of the intellectual property rights of
any third party, except as set forth on Schedule 5.8.
5.9 No Undisclosed Liability. Except as and to the extent of the amounts
specifically reflected or reserved against in the Financial Statements or
disclosed in the notes thereto or set forth on Schedule 5.9, Lexus does not have
any liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due (including, without
limitation, liabilities for taxes and interest, penalties and other charges
payable with respect thereto). Furthermore, Individual Shareholders do not know
or have reason to know of any basis for the assertion against Lexus of any such
liability or obligation of any nature not fully reflected or reserved against in
the Financial Statements or disclosed in Schedule 5.9.
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5.10 Absence of Certain Changes. Except as and to the extent set forth on
Schedule 5.10, since December 31, 1999, Lexus has not:
(a) suffered any adverse change in its working capital, financial
condition, assets, liabilities, business or prospects, experienced any labor
difficulty, or suffered any material casualty loss (whether or not insured);
(b) made any change in its business or operations or in the manner
of conducting its business other than changes in the ordinary course of
business;
(c) incurred any obligations or liabilities (whether absolute,
accrued, contingent or otherwise and whether due or to become due), except items
incurred in the ordinary course of business and consistent with past practice,
or experienced any change in any assumptions underlying or methods of
calculating any bad debt, contingency or other reserves;
(d) paid, discharged or satisfied any claim, lien, encumbrance or
liability (whether absolute, accrued, contingent or otherwise and whether due or
to become due), other than claims, encumbrances or liabilities (i) which are
reflected or reserved against in the Financial Statements and which were paid,
discharged or satisfied since the date thereof in the ordinary course of
business and consistent with past practice, or (ii) which were incurred and
paid, discharged or satisfied since December 31, 1999 in the ordinary course of
business and consistent with past practice;
(e) written down the value of any inventory, or written off as
uncollectible any notes or accounts receivable or any portion thereof, except
for write-downs and write-offs made in the ordinary course of business,
consistent with past practice and at a rate no greater than during the 12 months
ended December 31, 1999;
(f) canceled any other debts or claims, or waived any rights, of
substantial value;
-11-
(g) sold, transferred or conveyed any of its properties or assets
(whether real, personal or mixed, tangible or intangible), except in the
ordinary course of business and consistent with past practice;
(h) disposed of or permitted to lapse, or otherwise failed to
preserve the exclusive rights of Lexus to use any patent, trademark, trade name,
logo or copyright or any such application, or disposed of or permitted to lapse
any license, permit or other form of authorization, or disposed of or disclosed
to any person any trade secret, formula, process or know-how;
(i) granted any increase in the compensation of any officer,
director, employee or agent (including, without limitation, any increase
pursuant to any bonus, pension, profit sharing or other plan or commitment), or
adopted any such plan or other arrangements; and no such increase, or the
adoption of any such plan or arrangement, is planned or required except in the
ordinary course of business;
(j) made any capital expenditures or commitments in excess of
$30,000 in the aggregate for replacements or additions to property, plant,
equipment or intangible capital assets;
(k) declared, paid or made or set aside for payment or making, any
dividend or other distribution in respect of its capital stock or other
securities, or directly or indirectly redeemed, purchased or otherwise acquired
any of its capital stock or other securities;
(l) made any change in any method of accounting or accounting
practice;
(m) paid, loaned or advanced any amount to or in respect of, or
sold, transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement, arrangement or
transaction with, any of the Shareholders or the officers or directors of Lexus,
any affiliates or associates of any Shareholder or Lexus or any of their
respective officers or directors, or any business or entity in which any of such
persons has any direct or material indirect
-12-
interest, except for compensation to the officers and employees of Lexus at
rates not exceeding the rates of compensation in effect at December 31, 1999,
and advances to employees in the ordinary course of business for travel and
expense disbursements in accordance with past practice, but not in excess of
$1,000 at any one time outstanding; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 5.10.
5.11 Tax Matters. Each of Lexus and Calumet has duly filed all tax
reports and returns required to be filed by it and has duly paid all taxes and
other charges due or claimed to be due from it by federal, state or local taxing
authorities (including without limitation, those due in respect of its
properties, income, franchises, licenses, sales and payrolls); and true and
correct copies of all tax reports and returns relating to such taxes and other
charges for the period since the date of Lexus' inception have been heretofore
delivered to Loraca. The reserves for taxes contained in the Financial
Statements and carried on the books of Lexus are adequate to cover all tax
liabilities as of December 31, 1999, except as set forth on Schedule 5.11.
Since December 31, 1999, neither Lexus nor Calumet has incurred any tax
liabilities other than in the ordinary course of business; there are no tax
liens (other than liens for current taxes not yet due) upon any properties or
assets of Lexus (whether real, personal or mixed, tangible or intangible), and,
except as reflected in the Financial Statements, there are no pending or
threatened questions or examinations relating to, or claims asserted for, taxes
or assessments against Lexus, and there is no basis for any such question or
claim. Lexus has not granted or been requested to grant any extension of the
limitation period applicable to any claim for taxes or assessments with respect
to taxes.
5.12 Compliance with Applicable Law. Each of Lexus and Calumet has in the
past duly complied and is presently duly complying, in all material respects, in
the conduct of its business and the ownership of its assets with all applicable
laws, whether statutory or otherwise, rules, regulations, orders, ordinances,
judgments and decrees of all governmental authorities (federal, state, local or
otherwise) (collectively, "Laws"), except as set forth on Schedule 5.12.
Neither Lexus nor any of
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the Individual Shareholders has received any notice of, or notice of any
investigation of, a possible violation of any applicable Laws, or any other Law
or requirement relating to or affecting the operations or properties of Lexus.
5.13 Absence of Questionable Payments. Neither Lexus, Calumet nor any of
their directors, officers, employees or affiliates, to the knowledge of the
Individual Shareholders, has at any time used funds for any illegal purpose,
including without limitation, the making of any improper political contribution,
bribe or kickback or otherwise agreed in any way to make an illegal bribe or
kickback in order to secure business, except as set forth on Schedule 5.13.
5.14 Litigation. Except as set forth in Schedule 5.14, there are no
claims, actions, suits, proceedings or investigations pending or, to the
knowledge of the Individual Shareholders, threatened by or against, or otherwise
affecting Lexus or Calumet at law or in equity or before or by any federal,
state, municipal or other governmental department, commission, board, agency,
instrumentality or authority. The Individual Shareholders do not know or have
any reason to know of any basis for any such claim, action, suit, proceeding or
investigation. No claim, action, suit, proceeding or investigation set forth in
Schedule 5.14 could, if adversely decided, have a material adverse effect on the
condition (financial or otherwise), assets, liabilities, earnings, prospects or
business of Lexus.
5.15 Insurance.
(a) Schedule 5.15 sets forth a complete and accurate list and brief
description (including policy numbers, deductibles, carriers and effective and
termination dates) of all policies of fire, liability, workmen's compensation,
health and other forms of insurance presently in effect with respect to Lexus
and Calumet. All such policies are valid, outstanding and enforceable policies;
and will remain in full force and effect at least through the respective dates
set forth in Schedule 5.15 without the payment of additional premiums; and will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Lexus has not been refused
-14-
any insurance, nor has its coverage been limited, by any insurance carrier to
which it has applied for insurance or with which it has carried insurance during
the last five years. Schedule 5.15 contains an accurate and complete description
of any provision contained in the policies identified on Schedule 5.15 which
provides for retrospective premium adjustment. Schedule 5.15 identifies all
risks which Lexus has designated as being self-insured and the amount of reserve
set aside by Lexus to cover such risks.
(b) To the knowledge of the Individual Shareholders, no event has
occurred and not been cured which would constitute an event of default under any
of the agency agreements with any Insurer relating to the Insurance Agency. As
used herein "Insurer" means (i) an entity or person who insures or guarantees
all or any portion of the risk of loss upon borrower default of any of the
Loans, without limitation the FHA, the Department of Veterans Affairs of the
United States of America ("VA"), and any private mortgage insurer, and (ii)
providers of life, hazard, disability, title or other insurance with respect to
any of the Loans. "Insurance Agency" means the all lines general insurance
agency licensed to do business in the State of Indiana.
5.16 Contract Service Warranties. Calumet has provided warranties to
third parties with respect to contract services performed by it, which
warranties are comparable to industry standards. Except as described on
Schedule 5.16, there have been no claims or investigations made with respect to
any contract service warranties which have not been fully settled and resolved
or any unresolved warranty claims which have not been adequately reserved
against on the Financial Statements. The Individual Shareholders do not know or
have any reason to know of any basis for any other claim or investigation.
-15-
5.17 Employees and Fringe Benefit Plans.
(a) Employees. Schedule 5.17 sets forth the names and titles of all
members of the Board of Directors and officers of Lexus and Calumet and all
employees of Lexus and Calumet earning in excess of $30,000 per annum, and the
annual rate of compensation (including bonuses) being paid to each such member
of the Board of Directors, officer and employee of Lexus as of the most recent
practicable date.
(b) Plans. Schedule 5.17 hereto contains a summary of the material
terms of each employment, bonus, deferred compensation, pension, stock option,
stock appreciation right, profit-sharing or retirement plan, arrangement or
practice, and each other agreement or fringe benefit plan, arrangement or
practice of Lexus, whether formal or informal, whether legally binding or not,
and whether affecting one or more of its employees. Copies of each such
agreement or plan have heretofore been delivered to Loraca. Lexus does not have
any commitment, whether formal or informal and whether legally binding or not,
(1) to create any additional such agreement, plan, arrangement or practice; (2)
to modify or change any such agreement, plan, arrangement or practice; or (3) to
maintain for any period any such agreement, plan, arrangement or practice,
except as described in Schedule 5.17.
(c) Compliance of Plans. Except as disclosed in Schedule 5.17, (1)
each employer who is participating (or has participated) in each plan
("Sponsors") is in material compliance with the requirements provided by any and
all statutes, orders or governmental rules or regulations currently in effect,
including without limitation the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Code; (2) each plan and its related trust,
if any, are qualified under section 401(a) and 501(a) of the Code and has been
determined by the IRS to qualify, and nothing has since occurred to cause the
loss of the plan's qualification; (3) all contributions for all periods ending
prior to Closing Date (including periods from the first day of the current plan
year to the Closing Date) will be made prior to the Closing by Lexus in
accordance with past practice; (4) all
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insurance premiums (including premiums to the Pension Benefit Guaranty
Corporation ("PBGC") have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to each plan for
policy years or other applicable policy periods ending on or before Closing; (5)
that no accumulated funding deficiency within the meaning of ERISA Section 302
or Code Section 412 has been incurred with respect to any plan, whether or not
waived; (6) neither the Sponsors nor any of their directors, officers, employees
or any other fiduciary has any liability for failure to comply with ERISA or the
Code for any action or failure to act in connection with the administration or
investment of the plan; (7) no plan subject to Tile IV of ERISA has been
completely or partially terminated; (8) the PBGC has not instituted or
threatened a proceeding to terminate any plan pursuant to Subtitle 1 of Title IV
of ERISA; (9) that there is no pending or threatened legal action, proceeding or
investigation against or involving any plan and there is no basis for any legal
action, proceeding or investigation; (10) Lexus does not have any liability for
the termination of any single employer plan under ERISA Section 4062 or any
multiple employer plan under ERISA Section 4063; (11) Lexus has not incurred,
nor expects to incur any withdrawal liability (either as a contributing employer
or as part of a controlled group which includes a contributing employer), which
has not been satisfied, to any multiemployer plan (as defined in ERISA Section
3(37) of ERISA 4001(a)(3)) in connection with any complete or partial withdrawal
from such plan occurring on or before the Closing; (12) Lexus has no unfunded
past service liability in respect of any of its employee benefit plans; (13) the
actuarially computed value of vested benefits under any employee benefit plan of
Lexus does not exceed the fair market value of the fund assets relating to such
plan; (14) neither Lexus nor any plan nor any trustee, administrator, fiduciary
or sponsor of any plan has engaged in any prohibited transactions as defined in
ERISA, or the Code; (15) all filings and reports as to such plans required to
have been made on or prior to the Closing Date to the Internal Revenue Service,
the United States Department of Labor or other governmental agencies have been
or will be made on or prior to the Closing Date; (16) there is no material
litigation, disputed claim, governmental proceeding or investigation pending or
threatened with respect to any of such plans, the related trusts, or any
fiduciary, trustee, administrator or sponsor of such plans; (17) such plans have
been established, maintained and administered in all material respects in
accordance with their governing documents and applicable provisions of ERISA and
the
-17-
Code and Treasury Regulations promulgated thereunder; and (18) there has been no
"Reportable Event" as defined in Section 4043 of ERISA with respect to any
employee benefit plan subject to Subtitle B of Title IV of ERISA that has not
been waived by the PBGC.
(d) Compliance With Employment Laws. Lexus has complied in all
material respects with all applicable federal, state and local laws, rules and
regulations relating to employees' employment and/or employment relationships,
including, without limitation, wage related laws, anti-discrimination laws and
employee safety laws.
(e) Continued Employment. Lexus is not a party to any contract or
agreement which would require Merger Sub to hire any person, or subject Merger
Sub to liability if it terminated any employee of Lexus, after the Closing Date
or which would require Merger Sub to pay or provide, or subject Merger Sub to
liability if it did not pay or provide, any employee benefits to any employee of
Lexus for periods prior to or after the Closing Date (including any and all
employee benefits and any compensatory, over-time, vacation, sick or holiday
pay), except as otherwise disclosed herein or in the Schedules, except as set
forth on Schedule 5.17.
5.18 Environmental Matters. Except as set forth on Schedule 5.18, to the
knowledge to the Individual Shareholders:
(a) Permits. All material federal, state and local permits, licenses
and authorizations required for the use and operation of the real property
leased or used by Lexus have been obtained and are presently in effect.
(b) No Hazardous Waste. None of such real property has been used by
Lexus to handle, treat, store or dispose of any hazardous or toxic waste or
substance, nor is any of the real property, including all soils, ground waters
and service waters located on, in or under such real property, contaminated with
pollutants or other substances, which contamination may give rise to a clean-up
obligation under any federal, state or local law, rule, regulation or ordinance.
-18-
(c) No Violations. There are no outstanding violations or any
consent decrees entered against Lexus regarding environmental and land use
matters, including, but not limited to, matters affecting the emission of air
pollutants, the discharge of water pollutants, the management of hazardous or
toxic substances or wastes or noise. There are no claimed, threatened or alleged
violations with respect to any federal, state or local environmental law, rule,
regulation, ordinance, permit, license, or authorization and there are no
present discussions with any federal, state or local governmental agency
concerning any alleged violation of environmental laws, rules, regulations,
ordinances, permits, licenses or authorizations.
(d) Operations. All operations conducted by Lexus on such real
property have been and are, in all material respects, in compliance with all
federal, state and local statutes, rules, regulations, ordinances, permits,
licenses and authorizations relating to environmental compliance and control.
(e) No Proceedings. There are no threatened or pending lawsuits or
administrative proceedings against Lexus that may affect Lexus regarding
environmental compliance, control or liability.
5.19 Contracts and Commitments. Except as set forth in Schedule 5.19:
(a) Contracts. Lexus does not have any contracts, commitments,
arrangements or understandings which may involve the expenditure by Lexus after
December 31, 1999, of more than $25,000 for any individual contract, commitment,
arrangement or understanding or which was not entered into in the ordinary
course of business. The legal enforceability after the Closing of the rights of
Lexus under any of its contracts will not be affected in any manner by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
-19-
(b) No Sales or Purchase Commitments. Lexus has no sales or purchase
commitments which are in excess of the normal, ordinary and usual capacity or
requirements of its business or which are not terminable on 60 days' notice.
(c) Agreements with Employees, Etc. Except as described in Schedule
5.19, Lexus is not a party to or bound by (1) any outstanding contracts with
officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by Lexus on
notice of not longer than 30 days and without liability, penalty or premium, (2)
any agreement or arrangement providing for the payment of any bonus or
commission based on sales or earnings, or (3) any agreements that contain any
severance or termination pay, liabilities or obligations.
(d) No License Agreements. Lexus is not a party to any licensing
agreement, either as licensor or licensee.
(e) No Restrictive Agreements. Lexus is not restricted or purported
to be restricted by agreement from carrying on its business anywhere in the
world.
5.20 Accounts Receivable. All accounts and notes receivable of Lexus,
whether reflected in the Financial Statements or otherwise, represent
transactions actually made in the ordinary course of business; none of such
receivables is subject to any counterclaim or set-off other than normal
adjustments or allowances consistent with past practice; and all such
receivables are collectible in accordance with their respective terms, net of
any reserve reflected in the 1999 Financial Statements, as set forth on Schedule
5.20.
5.21 Labor Matters. There are none, and there have never been, any
collective bargaining agreements in effect between Lexus and labor unions or
organizations representing any of Lexus's employees, to the knowledge of the
Individual Shareholders. During the past three years there has been no request
for collective bargaining or for an employee election from any employee, union
or
-20-
the National Labor Relations Board. Except as and to the extent set forth in
Schedule 5.21, (a) Lexus is in material compliance with all federal, state and
local laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, and is not engaged in any unfair labor
practice; (b) there is no unfair labor practice complaint against Lexus pending
or, to the knowledge of the Individual Shareholders threatened before the
National Labor Relations Board or the United States Department of Labor; (c)
there is no labor strike, dispute, slowdown or stoppage in progress or, to the
knowledge of the Individual Shareholders threatened against or involving Lexus;
(d) no question concerning representation has been raised or, to the knowledge
of the Individual Shareholders, is threatened respecting the employees of Lexus;
(e) no grievance or arbitration proceeding is pending and, to the knowledge of
the Individual Shareholders, no claim therefor exists; (f) no private agreement
restricts Lexus from relocating, closing or terminating any of its operations or
facilities; and (g) Lexus has not in the past five years experienced any labor
strike, dispute, slowdown, stoppage or other material labor difficulty.
5.22 No Breach. Each of Lexus's and Calumet's contracts and each other
arrangement (whether evidenced by a written document or otherwise and of
whatever type) referred to in this Agreement or in any Schedule hereto under
which Lexus has any right, interest or obligation is in full force and effect;
there have been no threatened cancellations thereof nor outstanding disputes
thereunder, and Lexus has not breached any provision of, nor does there exist
any default in any material respect under, or event (including the execution and
delivery of this Agreement and the consummation of the transactions contemplates
hereby) which is, or with the giving of notice or the passage of time or both
would become, a breach or default in any material respect under the terms of any
such arrangement.
5.23 Year 2000. All devices, systems, machinery, information technology,
computer software and hardware, and other date sensitive technology
(collectively, the "Systems") necessary for Lexus and Calumet to carry on their
businesses as presently conducted and as contemplated to be conducted in the
future are Year 2000 Compliant, except as set forth on Schedule 5.23. Neither
Lexus nor Calumet has received, or reasonably expects to receive, any type of
notice from a vendor, customer or regulator relating to their failure to be Year
2000 Compliant. For purposes of this
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Section 5.23, "Year 2000 Compliant" means that Systems are designed to be used
prior to, during and after the Gregorian calendar year 2000 AD and will operate
during each such time period without material error relating to date data,
specifically including any material error relating to, or the product of, date
data which represents or references different centuries or more than one
century. Lexus and Calumet have undertaken a detailed inventory and assessment
of all areas within their business that could be adversely affected by the
failure of Lexus and Calumet to be Year 2000 Compliant on a timely basis and
have developed and implemented a detailed plan for becoming Year 2000 Compliant
on a timely basis.
5.24 Professional Fees. Neither Lexus nor any of the Shareholders has
done anything to cause or incur any liability or obligation for investment
banking, brokerage, finders, agents or other fees, commissions, expenses or
charges in connection with the negotiation, preparation, execution or
performance of this Agreement or the consummation of the transactions
contemplated hereby, and the Individual Shareholders do not know of any claim by
anyone for such a fee, commission, expense or charge, except as set forth on
Schedule 5.24.
5.25 Consents and Approvals. Except as provided in Section 8.1 and 8.2,
the Individual Shareholders and Lexus have obtained all consents, approvals,
authorizations or orders of third parties, including governmental authorities,
necessary for the authorization, execution and performance of this Agreement by
Shareholders, except as set forth on Schedule 5.25.
5.26 Corporate Records. The Individual Shareholders have delivered or
provided to Loraca for its review true, complete and correct copies of the
following items, as amended and presently in effect, for Lexus and Calumet: (a)
Articles of Incorporation, (b) Bylaws, (c) minute books, and (d) stock
registration books. To the knowledge of the Individual Shareholders, the Minute
Books contain a record of all shareholder, director and executive committee
meetings and actions taken without a meeting from the date of Lexus's
incorporation to the date hereof. To the knowledge of the Individual
Shareholders, the stock registration books are complete and accurate and contain
a
-22-
complete record of all transactions in Lexus's capital stock from the date of
its incorporation to the date hereof.
5.27 Inventories. The Inventories of Lexus and/or Calumet reflected on
the Financial Statements, whether originated, serviced, and/or acquired by
either Lexus or Calumet after the date thereof consist of items of a quality and
quantity usable or saleable in the normal course of their businesses and the
values at which such inventories are carried reflect the face value. As of
December 31, 1999, the aggregate principal amount of closed mortgage loans in
process expressed as par is $1,286,800.75. The approximate market value
expressed as a percent of par of these mortgage loans is 1.0325% of par.
5.28 Servicing Agreements. No event has occurred and to the knowledge of
the Individual Shareholders not been cured which would constitute an event of
default under any of the Servicing Agreements or result in the cancellation of
private mortgage insurance with respect to any Loan. Calumet is the lawful
holder of agreements for the respective Servicing Rights, is fiduciary of the
related escrow accounts and has the sole right and authority to the Servicing
Rights and the related escrow accounts as contemplated under the Servicing
Agreements.
5.29 Mortgage Loans. Except as set forth on Schedule 5.29:
(a) The Loan Documents are genuine, legally valid and binding
obligations of the parties thereto (except as enforcement thereof may be limited
by applicable bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally, Soldiers and Sailors Relief Act,
laws relating to administering decedent's estates, and general principles of
equity) and have been duly executed by parties of legal capacity, and all
insertions in any Loan Document were correct when made. The Loan Documents were
in compliance with applicable law and Investor requirements upon origination and
are complete in all material respects with regard to origination and servicing
activity. All monies received with respect to each Loan have been properly
accounted for and applied. The Loan Documents for each Loan contain all items
required for applicable
-23-
Investor requirements for the certification or recertification of Pools by
Merger Sub and/or Loraca and such Pools will be in compliance with all
applicable Investor requirements. All Pools relating to the Loans which are
eligible have been certified, finally certified and recertified (if required) or
are pending final certification, all in accordance with applicable rules and
guidelines, and the securities backed by such Pools have been issued on uniform
documents, promulgated in the applicable Investor guide without any material
deviations therefrom. The Principal of the Loans in each Pool equals or exceeds
the amount owing to the corresponding security holder of such Pool except for
payments received by Calumet under the terms of the Loan Documents and not yet
remitted to the corresponding security holder. Neither Lexus nor Calumet or any
other prior servicer or originator has violated any applicable law, regulation,
ordinance, order, injunction or decree, or any other requirement of any
governmental body, court or Investor or issuer in connection with the
origination or servicing of the Loans (including, without limitation, those
relating to the way in which adjustable rate loans are to be adjusted over
time). All Loans were fully disbursed and made or consummated in accordance with
applicable laws and regulations. The amount of the unpaid balance for each Loan
is correct as set forth on Exhibit H (as of the date of such Exhibit) and there
are no defenses, setoffs or counterclaims against payment under any such Loans.
(b) The security interest granted in the collateral securing each
Loan is valid, binding, duly perfected and enforceable (except as enforcement
thereof may be limited by applicable bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally, Soldiers and
Sailors Relief Act, laws relating to administering decedent's estates, and
general principles of equity) first priority lien on the collateral. Neither the
collateral nor any party to any related security interest has been released,
with the exception of partial releases, releases required by divorce decrees,
releases required by assumptions, and other releases effective in accordance
with Investor requirements. A title policy currently in effect to the benefit of
the owner of each Loan has been issued for each Loan insuring that the security
interest relating thereto is a valid first lien on the property therein
described, which has not been modified.
(c) Calumet and all prior servicers and originators have complied
with all of their contractual obligations which relate to any of the Servicing
Rights including, without limitation,
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those relating to the way in which adjustable rate loans are to be adjusted over
time. Calumet has filed or will have filed by the Closing Date all reports
required by any Investor, Insurer and/or any federal, state or municipal law,
regulation or ordinance. Calumet is a lawful fiduciary of all escrow accounts
relating to the Servicing Rights, and such accounts have been and are being
maintained in accordance with applicable law. Lexus shall deliver to Loraca at
the Closing written confirmation of the amounts and types of deposits from each
financial institution with which Lexus or Calumet maintains a fiduciary account.
Such written report shall confirm in all respects the amounts and types of
fiduciary balances Lexus or Calumet has previously reported to Loraca as being
on hand at such financial institutions. There are no accrued liabilities of the
Company with respect to the Loans or the Servicing Rights that could result in
any material loss to Calumet and/or Lexus. All payoff and assumption statements
with respect to each Loan provided by Calumet to borrowers or their agents were,
at the time they were provided, complete and correct.
5.30 Definitions. As used in Section 5 of this Agreement, the following
terms shall have the following meanings:
"FHA" means the Federal Housing Administration of the Department of Housing
and Urban Development of the United States of America or any successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation or any successor
thereto.
"FNMA" means the Federal National Mortgage Association or any successor
thereto.
"GNMA" means the Government National Mortgage Association of any successor
thereto.
"Inventories" shall mean closed mortgage loans in process, whether
committed or uncommitted, against which either Lexus or Calumet has incurred a
funding liability.
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"Investor" means the FHLMC, FNMA, GNMA, a state, county or municipal
housing authority or agency or any private investor, as the case may be, which
either owns any of the Loans or any portion of a Pool of Loans, holds beneficial
title to the Loans or any portion of a Pool of Loans, or guarantees securities
based on or backed by such Loans.
"Loan Documents" means all files, records and documents necessary to
service the Loans in accordance with Investor requirements.
"Loan" and "Loans" means each loan/mortgage and the aggregate of the
loans/mortgages set forth on Exhibit H attached hereto, including but not
limited to mortgages in process and those loans/mortgages set forth on Report
CM181.
"Pool" means the aggregation of Loans that have been pledged to
collateralize securities.
"Principal" means the outstanding principal balance of a Loan after the
application, in accordance, with the Loan Documents of all payments received.
"Servicing Agreement" means the contract or agreement pursuant to which
Lexus and/or Calumet performs mortgage servicing with respect to any of the
Loans.
"Servicing Rights" means the right to receive the servicing fee income and
any Ancillary Income arising from or connected to the Loans and the related
obligations (i) to administer and collect the payments for the reduction of
principal and application of interest; (ii) to pay taxes and insurance; (iii) to
remit all amounts in accordance with the Servicing Agreement; (iv) to provide
foreclosure services and full escrow administration; and (v) to perform such
other obligations as may, from time to time, be imposed by any Investor.
5.31 Full Disclosure. Neither this Agreement, nor any Schedule, Exhibit,
certificate or other instrument and document furnished or to be furnished by
Shareholders to Loraca pursuant to
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this Agreement, contains any untrue statement of a material fact or omits to
state any material fact required to be stated herein or therein or necessary to
make the statements and information contained herein or therein not misleading.
To the knowledge of the Individual Shareholders, no Individual Shareholder has
withheld from Loraca disclosure of any event, condition or fact which such
Individual Shareholder knows may materially adversely affect Lexus or Calumet,
except as set forth in Schedule 5.31.
6. Representations and Warranties by Loraca and Merger Sub. Loraca and Merger
Sub hereby represent and warrant to Shareholders as follows:
6.1 Organization and Good Standing. Loraca is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby. Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington and has full corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby.
6.2 Capitalization. The Loraca Common Stock consists solely of 50,000,000
shares of common stock, $0.001 par value per share, of which approximately
7,003,000 shares were issued and outstanding on December 9, 1999. All of Loraca
Shares are duly authorized, validly issued and outstanding and fully paid.
6.3 Loraca Information. Prior to the date hereof, Loraca has furnished to
the "Shareholders' Agent" (as defined in Section 11) copies of (a) the Form 10,
as amended, as filed by Loraca with the Securities and Exchange Commission on
October 7, 1999 and December 9, 1999 attached hereto as Exhibit I, (b) the
Business Plan attached hereto as Exhibit J, and (c) the Proforma Financials of
Loraca attached hereto as Exhibit K ("Loraca Information"). The parties hereto
acknowledge that no information contained in the Business Plan is, or shall be
relied upon as, a
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representation, whether as to the past or future, and no representation is made
as to the attainability of the estimates or projections contained in such
Business Plan.
6.4 Loraca Financials. The unaudited consolidated and consolidating
balance sheet and statement of operations of Loraca for the calendar year 1999
("1999 Financials") attached hereto on Exhibit L and the financial statements
contained in the Form 10 ("Loraca Financials") present fairly, in all material
respects, the financial position of Loraca and its subsidiaries ("Subsidiaries")
as at the respective dates thereof, and the results of their operations for the
periods therein referred to, all in accordance with generally accepted United
States accounting principles, subject, in the case of the 1999 Financials, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, have a material adverse effect on the
financial condition, results of operations, cash flows or prospects of Loraca or
the Subsidiaries), a cash flow statement and lack of footnotes.
6.5 Condition of Loraca. To the knowledge of Loraca there is not in
existence any material agreement or commitment that is materially adverse to the
business, properties or financial condition of Loraca or any of its Subsidiaries
taken as a whole. Except to the extent of the amounts reflected or reserved
against in the 1999 Financials or otherwise, Loraca does not have any
liabilities or obligations of any nature, whether absolute, accrued, contingent
or otherwise and whether due or to become due (including, without limitation,
liabilities for taxes and interest, penalties and other charges payable with
respect thereto).
6.6 Compliance with Applicable Law. Each of Loraca and the Subsidiaries
have in the past duly complied and is presently duly complying, in all material
respects, in the conduct of their business and the ownership of their assets
with all applicable Laws. Neither Loraca nor any of the Subsidiaries has
received any notice of, or notice of any investigation of, a possible violation
of any applicable Laws, or any other Law or requirement relating to or affecting
the operations or properties of Loraca or the Subsidiaries.
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6.7 Assets. All of the major equipment of Loraca and the Subsidiaries is
in good working condition and repair, normal wear and tear excepted, and is
adequate for the uses for which it is intended. All of such major equipment is,
to the knowledge of Loraca, in material conformity with applicable health,
sanitation, fire, environmental (including air and water pollution laws and
regulations), safety, labor, zoning and building laws and ordinances; and
neither Loraca nor any of the Subsidiaries has received any notification within
the last five years of any material violation of any applicable ordinance or
regulation of building, zoning or other law, in respect of its plants,
structures, properties or operations. To the extent that any Subsidiary or any
other person or entity has any interest in any of the "collateral" under the
Security Agreement (Exhibit D) on the date hereof, Loraca shall cause such
interest to be conveyed to it on or before the Closing Date.
6.8 Authorization. The Board of Directors of Loraca has taken all action
required by law, its Articles of Incorporation, its Bylaws and otherwise to
authorize the execution and delivery by Loraca of this Agreement and the
consummation by Loraca of the transactions contemplated hereby. The Board of
Directors of Merger Sub has taken all action required by law, its Articles of
Incorporation, its Bylaws and otherwise to authorize the execution and delivery
by Loraca of this Agreement and the consummation by Loraca of the transactions
contemplated hereby.
6.9 Valid and Binding Agreement. This Agreement constitutes a valid and
binding agreement of Loraca, enforceable against Loraca in accordance with its
terms. This Agreement constitutes a valid and binding agreement of Merger Sub,
enforceable against Merger Sub in accordance with its terms.
6.10 No Violation. The execution and delivery of this Agreement by Loraca
and Merger Sub does not, and the consummation of the transactions contemplated
hereby will not, (a) violate any provision, or result in the creation of any
lien or security interest under, any agreement, indenture, instrument, lease,
security agreement, mortgage or lien to which Loraca the Subsidiaries is a party
or by which it is bound; (b) violate any provision of Loraca's or the
Subsidiaries' Articles of Incorporation or Bylaws; (c) violate any order,
arbitration award, judgment, writ, injunction,
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decree, statute, rule or regulation applicable to Loraca or the Subsidiaries; or
(d) violate any other contractual or legal obligation or restriction to which
Loraca or the Subsidiaries is subject.
6.11 Professional Fees. Neither Loraca nor the Subsidiaries has done
anything to cause or incur any liability for investment banking, brokerage,
finders, agents or other fees, commissions, expenses or charges in connection
with the negotiation, preparation, execution and performance this Agreement or
the consummation of the transactions contemplated hereby, and Loraca does not
know of any claim by anyone for such a commission or fee.
6.12 Consents and Approvals. Each of Loraca and Merger Sub has obtained
all consents, approvals, authorizations or orders of third parties, including
governmental authorities, necessary for the authorization, execution and
performance of this Agreement by Loraca and Merger Sub.
6.13 Full Disclosure. Neither this Agreement, nor any certificate or
other instrument or document furnished or to be furnished by Loraca to
Shareholders pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state a material fact required to be stated herein or
therein or necessary to make the statements and information contained herein or
therein not misleading. To the knowledge of Loraca, it has not withheld from
the Shareholders disclosure of any event, condition or fact which Loraca knows
may materially adversely affect Loraca.
7. Covenants and Agreements of the Parties. The Individual Shareholders
agree that from the date hereof until the Closing, and thereafter if so
specified, they will, and will cause Lexus to, fulfill the following covenants
and agreements unless otherwise consented to by Loraca in writing:
7.1 Operation of Business. From the date of this Agreement through the
Closing Date, neither Lexus nor Calumet will engage, and the Individual
Shareholders will not cause or allow Lexus or Calumet to engage, in any
practice, take any action, or enter into any transaction outside the ordinary
course of business. The Individual Shareholders agree that from the date hereof
until
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the Closing, and thereafter if so specified, they will, and will cause Lexus and
Calumet to, fulfill the following covenants and agreements unless otherwise
consented to by Loraca in writing:
(a) Shareholders and Lexus will take such action as may be necessary to
maintain, preserve, renew and keep in full force and effect the existence,
rights and franchises of Lexus and Calumet, to preserve the business
organizations of Lexus and Calumet intact, to keep available to Loraca Lexus'
officers and employees, and to preserve for Loraca the present business
relationships of Lexus and Calumet.
(b) Shareholders and Lexus will not do or omit to do any act, or permit
any act or omission to act, which may cause a breach of any contract, commitment
or obligation of Lexus, or any breach of any representation, warranty, covenant
or agreement made by the Shareholders.
(c) Each of Lexus and Calumet will duly comply with all laws applicable
to it and its respective business and operations and all laws, compliance with
which is required for the valid consummation of the transactions contemplated by
this Agreement.
(d) With respect to Lexus, the Shareholders and Lexus will not (i) grant
any increase in the wages or salary of any officer, employee or agent of Lexus,
except normal wage or salary increases for employees (other than Shareholders or
Paul K. Tufano) in the ordinary course of business and consistent with past
practice; (ii) by means of any bonus or pursuant to any plan or arrangement or
otherwise, increase by any amount or to any extent the benefits or compensation
of any such officer, employee or agent; (iii) enter into any employment
agreement, sales agency or other contract or arrangement with respect to the
performance of personal services which is not terminable by it without liability
on not more than 30 days notice; (iv) enter into or extend any labor contract
with any hourly-paid employees or any union; or (v) agree to take any such
action.
(e) Lexus will not terminate or modify any lease, license, permit,
contract or other agreement to which it is a party.
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(f) Lexus will not mortgage, pledge or subject to lien or any other
encumbrance, any of Lexus' assets.
(g) Lexus will not enter into any transaction involving more than
$5,000 or a commitment extending more than six months.
(h) Lexus will not declare, pay or make or set aside for payment or
making, any dividend or other distribution in respect of its capital stock or
other securities, or directly or indirectly redeem, purchase or otherwise
acquire any of its capital stock or other securities.
7.2 Notice of Developments. Lexus and the Individual Shareholders, as
applicable, will give prompt notice to Loraca of any material adverse
development causing a breach or threatened breach of any of the representations
and warranties in Sections 4 or 5 above. Each Shareholder will give prompt
written notice to the others of any material adverse development causing a
breach or threatened breach of any of such Shareholder's own representations and
warranties in Section 4 above. Loraca will give prompt notice to Lexus of any
material adverse development causing a breach or threatened breach of any of the
representations and warranties in Section 6. No disclosure by any Shareholder
pursuant to this Section 7.2, however, shall be deemed to amend or supplement
the disclosure Schedules to Section 5, or to prevent or cure any
misrepresentation, breach or threatened breach of warranty, or breach or
threatened breach of covenant.
7.3 Exclusivity. Neither Lexus nor the Individual Shareholders will (a)
solicit, initiate, or encourage the submission of any proposal or offer from any
person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of, Lexus (including any
acquisition structured as a merger, consolidation, or share exchange) or (b)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person (other than Loraca) to do or
seek any of the foregoing. None of the Shareholders will vote their shares of
Lexus Common Stock
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or Lexus Preferred Stock in favor of any such acquisition structured as a
merger, consolidation, or share exchange. Lexus and the Shareholders will notify
Loraca immediately if any person makes any proposal, offer, inquiry, or contact
with respect to any of the foregoing.
7.4 Reorganization. The Shareholders and Loraca will take all such action
as may be reasonably requested by the other in order to facilitate the
transaction contemplated herein to be treated for tax purposes as a
reorganization under Section 368(a)(2)(D) of the Code.
7.5 Election of Shareholder to Loraca Board of Directors. Loraca shall
cause the designee of the Shareholders' Agent to be elected to its Board of
Directors during the period that any interest or principal is unpaid on the
Convertible Notes.
7.6 Preservation of Existing Business. During the period that there is
any principal or interest outstanding on any of the Convertible Notes, Loraca
shall cause all business operations and activities which now reside in Loraca or
one or more of its Subsidiaries to remain in Loraca or one or more of its
subsidiaries.
7.7 Stock Pledge. Loraca and Merger Sub will use their reasonable
commercial efforts to obtain the consent of Bank One, Lexington, N.A. ("Bank
One"), and shall execute such documents as are appropriate, to grant to the
Shareholders' Agent a secondary lien on all of the outstanding capital stock of
Calumet, which capital stock will be held by Bank One until all of the debts and
obligations of Loraca and Merger Sub to Bank One are satisfied, and after that
occurs, if any amounts are outstanding on the Convertible Notes, the
Shareholders' Agent shall hold such capital stock as security for payment of the
Convertible Notes.
7.8 Registration Rights of Shareholders. The Shareholders who receive
Loraca Common Stock in the Merger and who convert the Convertible Notes to
Loraca Common Stock shall have the right to "piggy-back" the registration of
such shares in any registration statement filed with the Securities and Exchange
Commission by Loraca, subject to the usual terms and conditions.
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8. Conditions To Closing.
8.1 Conditions to Obligations of Loraca. The obligation of Loraca and
Merger Sub to consummate the Merger and to take the other actions required to be
taken by Loraca and Merger Sub at the Closing is subject to the satisfaction at
or prior to the Closing of each of the following conditions, any one or more of
which Loraca and Merger Sub may waive in whole or in part at or prior to the
Closing:
(a) Representations True. The representations and warranties of the
Shareholders contained in this Agreement must have been true and correct in all
material respects as of the date hereof, and must be true and correct in all
material respects on and as of the Closing Date (including those representations
and warranties which specifically speak as of the date hereof) with the same
effect as though such representations and warranties had been made and this
Agreement had been delivered on and as of the Closing Date, without giving
effect to any supplement to the Schedules.
(b) Covenants Performed. All of the covenants, agreements and
conditions of the Shareholders to be performed or complied with at or prior to
the Closing pursuant to the terms of this Agreement, must have been duly
performed and complied with in all material respects.
(c) Bank One, Lexington, N.A. Loraca and/or Merger Sub shall have
obtained the consent of Bank One, Lexington, N.A. to the Merger or entered into
a new senior credit facility with Bank One, Lexington, N.A. (replacing the
existing Lexus/Calumet Loan Agreement with Bank One, Lexington, N.A.), either on
terms and conditions satisfactory to Loraca in its sole discretion.
(d) No Litigation. No proceeding shall have been instituted or, to
the knowledge of the Individual Shareholders, threatened, before any
Governmental Body by any person, (1) making any challenge to, or seeking damages
or other relief in connection with, the contemplated transactions
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or (2) that may have the effect of restraining, enjoining or prohibiting, making
illegal or otherwise interfering with the contemplated transactions.
(e) Consents. Loraca shall have received from the Shareholders
executed counterparts of the consents referred to in Section 5.25 hereof and all
other consents required (including the consent of the Indiana Housing Authority
and any other regulatory approvals from investors required), for the
consummation of the transactions contemplated hereby, all of which consents
shall be in form and substance satisfactory to Loraca.
(f) Employment Agreements. Paul K. Tufano and Oberle shall have
entered into Employment Agreements with Loraca or Merger Sub or Calumet in form
and substance satisfactory to Loraca.
8.2 Conditions to Obligations of the Shareholders. The obligation of the
Shareholders to consummate the merger and to take the other actions required to
be taken by them at the Closing is subject to the satisfaction at or prior to
the Closing of each of the following conditions, any one or more of which the
Shareholders may waive in whole or in part at or prior to the Closing:
(a) Representations True. The representations and warranties of
Loraca and Merger Sub contained in this Agreement must have been true and
correct in all respects as of the date hereof, and must be true and correct in
all respects on and as of the Closing Date (including those representations and
warranties which speak specifically as of the date hereof) with the same effect
as though such representations and warranties had been made and this Agreement
had been delivered on and as of the Closing Date.
(b) Covenants Performed. All of the covenants, agreements and
conditions of Loraca and Merger Sub to be performed or complied with at or prior
to the Closing pursuant to the terms of this Agreement must have been duly
performed and complied with in all material respects.
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(c) No Litigation. No Proceeding shall have been instituted or, to
the knowledge of Loraca, threatened, before any governmental body by any person,
(1) making any challenge to, or seeking damages or other relief in connection
with, the contemplated transactions or (2) that may have the effect of
restraining, enjoining or prohibiting, making illegal or otherwise interfering
with the contemplated transactions.
(d) Release of Personal Guaranties. The Shareholders shall have
received a release from Bank One of the lien on the Shares owned by Stilz and
Alford.
(e) Consents. The Shareholders shall have received executed
counterparts of the consents referred to in Section 5.25 and all other consents
required (including the consent of Loraca's senior lenders), for the
consummation of the transactions contemplated hereby.
9. Termination.
9.1 Termination of Agreement. This Agreement may, by notice given at or
prior to the Closing, be terminated as follows:
(a) Mutual Consent. Loraca and the Shareholders may terminate this
Agreement by mutual consent.
(b) Conditions Not Satisfied.
(1) Loraca may terminate this Agreement if any of the conditions
in Section 8.1 have not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Loraca to comply with its obligations under this Agreement) and
Loraca has not waived such condition at or prior to the Closing.
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(2) Shareholders may terminate this Agreement if any of the
conditions in Section 8.2 have not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of the Shareholders to comply with their obligations under this
Agreement) and Shareholders have not waived such condition at or prior to the
Closing.
(c) Breach by a Party. Either Loraca or the Shareholders may
terminate this Agreement if a material breach of any provisions of this
Agreement has been committed by the other party and such breach has not been
cured or waived at or prior to the Closing.
(d) Closing Did Not Timely Occur. Either Loraca or Shareholders may
terminate this Agreement if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully with
his or its obligations under this Agreement) on or before March 15, 2000, or
such later date as the parties may agree upon.
9.2 Effect of Termination. Each party's right of termination under
Section 9.1 is in addition to any other rights the party may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
9.1, all further obligations of the parties under this Agreement will terminate;
provided, that if this Agreement is terminated by a party because of the breach
of the Agreement by the other party or parties or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. Indemnification.
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10.1 Indemnification by Individual Shareholders. Individual Shareholders,
jointly and severally, hereby agree to defend, indemnify and hold harmless
Loraca, Merger Sub, and each of Loraca's shareholders, affiliates, officers,
directors, employees, agents, successors and assigns ("Loraca's Indemnified
Persons") and shall reimburse Loraca's Indemnified Persons for, from and against
each claim, loss, liability, cost and expense (including, without limitation,
interest, penalties, costs of preparation and investigation, and the reasonable
fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, "Losses"), directly or indirectly relating
to, resulting from or arising out of: (a) any untrue representation,
misrepresentation, breach of warranty or nonfulfillment of any covenant,
agreement or other obligation by or of any Shareholder contained herein, any
Schedule hereto or in any certificate, delivered to Loraca pursuant hereto; and
(b) any tax liability of Lexus or Calumet not previously paid, or for which
adequate reserves have not been established in the balance sheet of Lexus as of
December 31, 1998 or December 31, 1999 or disclosed in Schedule 5.5, which may
at any time be asserted or assessed against it for any event or period prior to
the Closing Date (regardless of whether the possibility of the assertion or
assessment of any such tax liability shall have been disclosed to Loraca at or
prior to the Closing); and (c) any other Loss incidental to any of the
foregoing.
10.2 Indemnification by Loraca. Loraca hereby agrees to defend, indemnify
and hold harmless the Shareholders, and each of them and their affiliates,
agents, successors and assigns ("Shareholders' Indemnified Persons") and shall
reimburse Shareholders' Indemnified Persons for, from and against all Losses,
directly or indirectly relating to, resulting from or arising out of any untrue
representation, misrepresentation, breach of warranty or nonfulfillment of any
covenant, agreement or other obligation by or of Loraca contained herein, any
Schedule hereto or in any certificate, delivered to Shareholders pursuant
hereto.
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10.3 Limitation on Individual Shareholder Indemnification.
(a) "Baskets" and "Lid." Except as provided in Section 10.3(a)(3),
the Loraca Indemnified Persons shall be entitled to recover Losses pursuant to
Section 10.1 as follows:
(1) To the extent that Losses, in the aggregate, exceed $* * *
but are less than $* * *, the Loraca Indemnified Persons shall be entitled
to recover all of such Losses.
(2) To the extent that Losses, in the aggregate, are greater
than $* * *, but less than the Merger Consideration, the Loraca Indemnified
Persons shall be entitled to recover * * *% of such Losses.
(3) To the extent of a breach by a Shareholder of the
representations made in the first sentence of Section 4, the Loraca
Indemnified Persons shall be entitled to recover such Loss from the Individual
Shareholder designated on Exhibit M as being responsible for the Shareholder's
breach, * * *.
(4) * * *.
(b) Limitation on Amount of Indemnification. No Individual
Shareholder shall be obligated to indemnify the Loraca Indemnified Persons for
an amount in excess of the Individual Shareholder's "Indemnification Amount" of
the Merger Consideration as set forth on Exhibit M, except as set forth in
Section 10.3(a)(3).
(c) Source of Indemnification. Any Losses to which the Loraca
Indemnified Persons are entitled shall be satisfied only after the alternative
dispute resolution provisions of Section 12
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* Confidential Treatment Requested
have been exhausted and then shall be satisfied with one or more of the
following elected by the Individual Shareholders:
(1) Transferring to Loraca shares of Loraca Common Stock at a
price per share of $5.10.
(2) A prorata offset against the Convertible Notes held by the
Individual Shareholders.
(3) A cash payment.
10.4 Limitation on Loraca Indemnification. The Shareholders'
Indemnified Persons shall be entitled to recover Losses pursuant to Section 10.2
as follows:
(a) To the extent that Losses, in the aggregate, exceed $* * * but
are less than $* * *, the Shareholders' Indemnified Persons shall be entitled
to recover all of such Losses.
(b) To the extent that Losses, in the aggregate, are greater than
$* * *, but less than the Merger Consideration, the Shareholders' Indemnified
Persons shall be entitled to recover * * *% of such Losses.
(c) The Shareholders' Indemnified Persons shall not be entitled to
recover any Losses in excess of the amount set forth in this Section 10.4.
10.5 * * *. The representation and warranty concerting taxes contained in
Section 5.11 shall not be deemed to have been breached to the extent that * * *
of the consolidated group containing Lexus and Calumet which existed on the
Closing Date * * * which might be asserted by applicable taxing authority.
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* Confidential Treatment Requested
10.6 Time Limitations. If the Closing occurs, the Individual Shareholders
will have no liability (for indemnification or otherwise) hereunder with respect
to any representation or warranty (except for the representation and warranty
contained in Section 5.11), or covenant or obligation to be performed and
complied with prior to the Closing unless on or before * * * after the Closing
Date Loraca notifies Shareholders' Agent of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Loraca. Notice
must be given prior to expiration of the applicable statute of limitations for
claims arising under Section 5.11. If the Closing occurs, Loraca will have no
liability (for indemnification or otherwise) hereunder with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing unless on or before * * * after the Closing
Date Shareholders' Agent notifies Loraca of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Shareholders'
Agent.
10.7 Indemnity Claims.
(a) Notification of Claims. In the event that any claim ("Claim") is
hereafter asserted by a party hereto as to which such party may be entitled to
indemnification hereunder, such party ("Indemnitee") shall notify the party
required by the terms of this Agreement to indemnify the Indemnitee
("Indemnifying Party") thereof ("Claims Notice") within 30 days after (1)
receipt of "Notice" (as defined in Section 13.6) of commencement of any third-
party litigation against such Indemnitee, (2) receipt by such Indemnitee of
written notice of any third-party claim pursuant to an invoice, notice of claim
or assessment, against such Indemnitee, or (3) such Indemnitee becomes aware of
the existence of any other event in respect of which indemnification may be
sought from the Indemnifying Party. The Claims Notice shall describe the Claim
and the specific facts and circumstances in reasonable detail, shall include a
copy of the Notice referred to in (1) and (2), above, shall indicate the amount,
if known, or an estimate, if possible, of Damages that have been or may be
incurred or suffered, and shall state the name of the executive who shall
represent the Indemnitee in the mediation provided for in Section 12.
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* Confidential Treatment Requested
(b) Defense of Third Party Claim by Indemnifying Party. The
Indemnifying Party may elect to defend or compromise any Claim by a third party
("Third Party Claim"), at the Indemnifying Party's own expense and by its or his
own counsel, who shall be reasonably acceptable to the Indemnitee. The election
by the Indemnifying Party to defend or compromise a claim shall constitute an
avowal by the Indemnifying Party that the Indemnifying Party is obligated to
indemnify the Indemnitee with respect to such claim. The Indemnitee may
participate, at the Indemnifying Party's own expense, in the defense of any
Claim assumed by the Indemnifying Party. Without the approval of the
Indemnitee, which approval shall not be unreasonably withheld or delayed, the
Indemnifying Party shall not agree to any compromise of a Claim defended by the
Indemnifying Party which would require the Indemnitee to perform or take any
action or to refrain from performing or taking any action.
(c) Assumption of Defense by Indemnitee. Notwithstanding the
foregoing, if an Indemnitee determines in good faith that there is a reasonable
probability that a proceeding may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnitee may, by notice to the
Indemnifying Party, assume the exclusive right to defend, compromise, or settle
such proceeding, but the Indemnifying Party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld or
delayed).
(d) Defense of Claim by Indemnitee. If, within 30 days of the
Indemnifying Party's receipt of a Claim Notice involving a Third Party Claim,
the Indemnifying Party shall not have notified the Indemnitee of the
Indemnifying Party's election to assume the defense, the Indemnitee shall have
the right to assume control of the defense or compromise of such Claim, and the
costs and expenses of such defense, including costs of investigation and
reasonable attorneys' fees, shall be added to the Claim. The Indemnitee shall
have the right to compromise such Claim without the consent of the Indemnifying
Party.
(e) Cooperation of Parties. The party assuming the defense of any Claim
shall keep the other party reasonably informed at all times of the progress and
development of the party's defense of and compromise efforts with respect to
such Claim and shall furnish the other party with copies of all relevant
pleading, correspondence and other papers. In addition, the parties to this
Agreement shall cooperate with each other, and make available to each other and
their representatives all available relevant records or other materials required
by them for their use in defending, compromising or contesting any Claim. The
failure to timely notify the Indemnifying Party of the commencement of such
actions in accordance with Section 10.6(a) shall relieve the Indemnifying Party
from the obligation to indemnify under Section 10.1 or 10.2, as the case may be.
(f) Contribution. In the event that one or more of the Individual
Shareholders is required to indemnify, and does indemnify, a Loraca Indemnified
Person, such Individual Shareholder or Shareholders shall have the right to
contribution from any other Individual Shareholder who paid less than that
Individual Shareholder's "Indemnification Percentage," as set forth on Exhibit
M, of such indemnification obligation, provided, if one or more, but less than
all, of the Individual Shareholders settle a claim by a Loraca Indemnified
Person and other Individual Shareholder(s) do not at such time settle the claim,
the Individual Shareholder(s) who did settle the claim shall not at a later date
have a right, or an obligation, to contribution from or to the other Individual
Shareholder(s) who may have settled the claim for a lesser or greater amount.
11. Shareholders' Agent'. Shareholders do hereby irrevocably constitute and
appoint Stilz as their agent and attorney-in-fact, on their behalf and on behalf
of each of them, (a) to perform all acts which, by the provisions of this
Agreement, are to be performed after the date hereof, (b) to execute and give,
and to receive, all Notices required or permitted hereunder, (c) to contest,
compromise and to otherwise deal with any and all set-offs, claims and
proceedings hereunder, (d) to participate as a Shareholders' Indemnified Party
or as an Indemnitee in the mediation and arbitration procedures provided for in
Section 12 and (e) generally, to act for and on behalf of Shareholders and each
of them in all matters connected with any claim for Losses by the Loraca
Indemnified Person with the same force and effect as though such act had been
taken by them, or
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any one of them, personally. Shareholders agree that the foregoing appointment
and power are coupled with an interest and every party acting hereunder or under
any other instrument executed or delivered in connection with the contemplated
transactions shall be entitled to rely on any action taken or omitted by
Shareholders' Agent on behalf of Shareholders. Shareholders do hereby appoint
Alford and Tufano who, along with the Shareholders's Agent, shall constitute a
committee ("Committee"). The Committee shall direct the Shareholder's Agent in
the performance of his duties hereunder by a majority vote of its members.
Notwithstanding the appointment of the Committee and its directions to the
Shareholders' Agent, the Shareholders' Agent shall be the exclusive
representative of the Shareholders with reference to the matters set forth in
this Section 11 and Section 12, and his actions shall be binding on Shareholders
and Loraca shall have no duty to ascertain if the Shareholders' Agent is
properly carrying out his obligations hereunder.
12. Mediation of Claims; Arbitration of Certain Claims.
12.1 Party Mediation of Claims. In the event that a Claim is asserted by
an Indemnitee against an Indemnifying Party, and the Indemnifying Party disputes
such Claim, the parties will attempt in good faith to resolve the dispute
promptly by mediation between the parties who are involved in the Claim. Within
10 days after receipt of the Claims Notice, the Indemnifying Party shall submit
to the Indemnitee a written response. The response shall (a) describe the
specific facts and circumstances in reasonable detail as to why the Indemnifying
Party disputes the Claim and (b) the name and title of the person who will
represent the Indemnifying Party. The executive of Loraca and Shareholders'
Agent shall each have the authority to settle the Claim. The executive of Loraca
and Shareholders' Agent shall meet at a mutually acceptable time and place
within 20 days of the date of the Indemnitee's Claims Notice and thereafter as
often as they reasonably deem necessary to exchange relevant information and to
attempt to resolve the dispute.
12.2 Structured Mediation of Claims. If the Claim has not been resolved
by mediation pursuant to Section 12.1 within 30 days after the Indemnitee's
Claims Notice, or if the Indemnifying Party will not meet within 20 days, either
party may demand mediation of the Claim in accordance
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with the Commercial Mediation Rules of the American Arbitration Association
("AAA") then in effect in accordance with the following procedures and
provisions:
(a) Qualification of Mediator. Unless the parties agree otherwise,
the mediator shall be a lawyer with excellent academic and professional
credentials who (1) is or has been a partner in or counsel to a highly respected
law firm for at least 10 years as a practicing attorney specializing in either
general commercial litigation or general corporate and commercial matters, (2)
has had both training and experience as a mediator, and (3) is impartial.
(b) Selection of Mediator. The party initiating mediation of the
Claim shall give the other party a written notice setting forth the list of the
names and resumes of three persons who that party ("Initiating Party") believes
would be qualified as a mediator. Within 15 days after delivery of this notice,
the other party ("Recipient Party") shall give a counter-notice to the
Initiating Party in which the Recipient Party may designate a person to serve as
the mediator from among the three persons listed by the Initiating Party, or if
no such selection is made, the Recipient Party may set forth a list of names and
resumes of three persons who the Recipient Party believes to be qualified as a
mediator. Within 10 days after delivery of the counter-notice the Initiating
Party may designate a person to serve as mediator from among the three persons
listed by the Recipient Party. If the parties cannot agree on a mediator from
the three nominees submitted by each party, the mediator shall be selected by
the Regional Vice President of the AAA.
(c) Mediation Session. Within 30 days after the mediator has been
selected, both parties and their respective attorneys shall meet with the
mediator for one mediation session of at least four hours. The executive of
Loraca and Shareholders' Agent shall each have authority to settle the Claim.
Efforts to reach a settlement will continue until the conclusion of the
proceeding, which is deemed to occur when: (1) a written settlement is reached,
or (2) the mediator concludes and informs the parties in writing that further
efforts would not be useful, or (3) the parties agree in writing that an impasse
has been reached. Neither party may withdraw before the conclusion of the
proceeding, provided, if a party breaches this duty, such party shall pay all of
the costs and expenses of the
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mediator. Except as provided in the immediately preceding sentence, each party
shall pay its or his costs and expenses of the mediation, including attorneys'
fees, and the costs and expenses of the mediator shall be shared equally by the
parties.
(d) Failure to Settle in Mediation. If the Claim cannot be settled
as a result of the mediation sessions, the mediation process shall end and the
Claim shall be resolved by arbitration as provided in Section 12.3, or be
subject to judicial process as provided in Section 12.3.
(e) Confidentiality of Mediation. All conferences and discussions
which occur in connection with the mediation conducted pursuant to this
Agreement shall be deemed settlement discussions and nothing said or disclosed
nor any document produced which is not otherwise independently discoverable
shall be offered or received as evidence or used for impeachment or for any
other purpose in any current or future arbitration or litigation.
(f) Obligation to Mediate. The parties regard the obligation to
mediate an essential provision of this Agreement and one that is legally binding
on them. In case of a violation of such obligation by either party, the other
may bring an action to seek enforcement of such obligation in any court of law
having jurisdiction thereof.
12.3 Arbitration of Certain Claims. If the Claim has not been resolved
pursuant to the mediation procedures outlined in Sections 12.1 and 12.2 within
70 days of the initiation of such procedure, or if either party will not
participate in the mediation, the Claim shall be determined by means of
arbitration before the AAA. The AAA Commercial Arbitration Rules, as the same
may be amended from time to time in the future, shall be applicable in the
arbitration, provided, that the arbitration shall be conducted by three
arbitrators, all of whom shall be appointed from a panel of at least 10
qualified arbitrators. Each party shall have the right to strike three names
from the panel proposed by the AAA. The arbitrators are not empowered to award
any damages, including punitive damages, in excess of compensatory damages and
each party hereby irrevocably waives the right to receive any damages in excess
of economic damages. The parties shall furnish each other with the
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originals or true copies of all books, records and other documents in their
possession which the may be requested by the other party. Any decision or award
of the arbitrator shall be final and binding upon the parties. Judgment upon the
award rendered may be entered in any court having jurisdiction, or application
may be made to such court for a judicial acceptance of the award or any order of
enforcement, as the case may be. No Claim between the parties hereto which
arises by reason of any non-fulfillment or alleged non-fulfillment of any
covenant, agreement or obligation, whether contained in this Agreement or
otherwise, shall be so arbitrable. The arbitrators are empowered to apportion
the costs and expenses of arbitration, including costs of investigation and
reasonable attorneys' fees, among the parties in such manner as they deem
reasonable. In the conduct of the arbitration:
(a) Summaries of any expert testimony, along with copies of all
documents to be submitted as exhibits, shall be exchanged at least 10 days
before the arbitration under procedures set up by the arbitrator.
(b) Each party's presentation at the arbitration hearing shall be
limited to a maximum of five hours, and the hearing shall be completed within a
maximum of three days.
(c) The arbitration decision shall be rendered no later than 30 days
after the final day of the hearing. The arbitration award shall be rendered no
later than 30 days after the final day of the hearing. The arbitration award
shall specify the factual and legal basis for the award.
The arbitration shall be held in Chicago, Illinois and governed by the laws of
the State of Washington and the United States Arbitration Act, 9 U.S.C. (S)1-16.
12.4 Exclusive Procedures. The procedures specified in this Section 12
shall be the sole and exclusive procedures for the resolution of Claims between
the parties arising out of or relating to the matters subject to mediation and
arbitration as provided herein.
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12.5 Tolling of Statutes of Limitation. All applicable statutes of
limitation shall be tolled while the procedures specified in this Section 12 are
pending. The parties will take such action, if any, required to effectuate such
tolling.
13. Miscellaneous.
13.1 Assignability; Parties in Interest.
(a) No party hereto may assign, transfer or otherwise dispose of
any of the party's rights hereunder without the prior written consent of the
other parties.
(b) All the terms and provisions of this Agreement shall be binding
upon, shall inure to the benefit of and shall be enforceable by the respective
heirs, successors, assigns and legal or personal representatives of the parties
hereto.
13.2 Entire Agreement; Amendments. This Agreement, including the
Exhibits, Schedules, lists and other documents and writings referred to herein
or delivered pursuant hereto, which form a part hereof, contains the entire
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes all
prior agreements and undertakings between the parties with respect to its
subject matter. This Agreement may be amended only by a written instrument duly
executed by all parties or their respective heirs, successors, assigns or legal
personal representatives. Any condition to a party's obligations hereunder may
be waived, but only by a written instrument signed by the party entitled to the
benefits thereof. The failure or delay of any party at any time or times to
require performance of any provision or to exercise its rights with respect to
any provision hereof, shall in no manner operate as a waiver of or affect such
party's right at a later time to enforce the same.
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13.3 Headings. The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
13.4 Severability. The invalidity of any term or terms of this Agreement
shall not affect any other term of this Agreement, which shall remain in full
force and effect.
13.5 Non-Competition; Non-Solicitation-.
(a) No Interference With Employees, Etc. Each Individual
Shareholder agrees that after the Closing he or she shall not engage or
participate in any effort or act to induce any of the suppliers, associates,
employees, independent contractors, customers, or vendors to cease doing
business, or terminate their association or employment with Calumet.
(b) Non-Competition. For a period of * * * after the Closing
Date, neither Stilz, Alford nor Kirsch ("Non-Competing Shareholders") shall,
directly or indirectly, for or on behalf of itself or any other person, firm,
entity or other enterprises, have a proprietary interest in, be employed by, be
a director or manager of, act as a consultant for, be a partner in, give advice
to, loan money to or otherwise associate with, any person, enterprise,
partnership, association, corporation, joint venture or other entity which
directly or indirectly engages in the business of owning, operating or managing
any mortgage origination or servicing business anywhere in any of the states
listed in Schedule 5.1, provided a Non-Competing Shareholder may own no more
than 10% of the securities of such corporation or other entity provided that the
Non-Competing Shareholder has no other connection or relationship, direct or
indirect, with the issuer of such securities.
(c) Equity Remedies. The Individual Shareholders acknowledge that
the restrictions contained in this Section 13.5 are reasonable and necessary to
protect the legitimate business interests of Loraca and Calumet and that any
violation thereof would result in irreparable harm to Loraca and Calumet for
which the remedy at law would be inadequate. Accordingly, the Individual
Shareholders agree that upon the violation by them of any of the restrictions
contained in this Section
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* Confidential Treatment Requested
13.5, Loraca and/or Calumet shall be entitled to obtain from any court of
competent jurisdiction a preliminary and permanent injunction, as well as any
other relief provided at law or equity, under this Agreement or otherwise. In
the event any of the foregoing restrictions are adjudged unreasonable in any
proceeding, then the parties agree that the period of time or the scope of such
restrictions (or both) shall be adjusted in such a manner or for such a time (or
both) as is adjudged to be reasonable.
13.6 Notices. All notices, request, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (a) mailed (registered or certified mail, postage prepaid, return
receipt requested) or (b) personally delivered against a written receipt or (c)
delivered to a reputable express messenger (such as Federal Express, United
Parcel Service or DHL Courier) as follows:
If to Shareholders' Agent: Robert C. Stilz, Jr.
c/o Kinkead & Stilz
3120 Wall Street, Suite 350
Lexington, Kentucky 40513
With a copy (which shall not
constitute notice) to: Edwin H. Perry
Greenebaum, Doll & McDonald PLLC
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202-3197
If to Loraca or Merger Sub: Loraca International, Inc.
6 CenterPointe Drive, Suite 360
Lake Oswego, Oregon 9735
Attn: Bernard A. Guy
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With a copy (which shall not
constitute notice) to: Mark T. Lee
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, CA 92121
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
13.7 Release by Shareholders. As an inducement for Loraca to enter into
this Agreement and as consideration therefor, and for other good and valuable
consideration, and with the intention of binding the Shareholder's heirs,
executors, legal representatives, and assigns, each of the Shareholders hereby
fully, completely, and irrevocably forever, expressly releases and discharges
Lexus, Loraca, and their prior and present officers, directors, employees,
agents, legal representatives, receivers, trustees, and assigns from all claims
of whatever nature, demands, actions, judgments, damages, and executions, except
for each Shareholder's rights granted under this Agreement and the related
documents and for any accrued but unpaid salary through the Closing, that each
Shareholder hereby ever has, or now has, or may have, or that anyone claiming
through or under him or her may have, or claim to have against Lexus, Calumet,
Loraca, or their past or present officers, directors, employees, agents, legal
representatives, receivers, trustees, or assigns.
13.8 Survival of Representations. All representations, warranties,
covenants and agreements by the parties contained in this Agreement shall
survive the Closing and any investigation at any time made by or on behalf of
any party hereto. All statements contained in any certificate or Schedule
delivered by Shareholders hereto shall be deemed representations and warranties
for all purposes of this Agreement.
13.9 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Washington, without regard
to its conflict of law rules. No party hereto shall commence any litigation
against another party hereto arising out of this Agreement
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except in a court located in the State of Washington. All parties hereby consent
to jurisdiction over it by such a court.
13.10 Expenses. Except as provided below, all fees and expenses incurred
by the Shareholders, including without limitation, legal fees and expenses, in
connection with this Agreement will be borne by the Shareholders and all fees
and expenses incurred by Loraca, including, without limitation, legal fees and
expenses, in connection with this Agreement will be borne by Loraca, provided
Lexus may pay $* * * of its legal fees incurred in connection with this
Agreement.
13.11 Knowledge. In Sections 4 and 5 of this Agreement, an individual
will be deemed to have "knowledge" of a particular fact or other matter if (a)
such individual is actually aware of such fact or other matter; or (b) a prudent
individual investor could be expected to discover or otherwise become aware of
such fact or other matter in the course of conducting reasonable investigation
concerning the existence of such fact or other matter.
13.12 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, with the same effect as if the signatories executing the
several counterparts had executed one counterpart, provided, however, that the
several executed counterparts shall together have been signed by Loraca, Merger
Sub, Lexus and each of the Shareholders. All such executed counterparts shall
together constitute one and the same instrument.
In Witness Whereof, this Agreement has been duly executed and delivered by
the duly
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* Confidential Treatment Requested
authorized officers of Loraca and Merger Sub, Lexus and by each of the
Shareholders as of the date first above written.
LORACA:
Loraca International, Inc.
By: ___________________________
Title: ________________________
("Loraca")
Loraca Acquisition Corporation
By: ___________________________
Title: ________________________
("Merger Sub")
The Lexus Companies, Inc.
By: ___________________________
Title: ________________________
("Lexus")
SHAREHOLDERS:
_______________________________
Robert C. Stilz, Jr.
_______________________________
William Van Meter Alford, Jr.
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_____________________________________
Lynn S. Kirsch
_____________________________________
David M. Oberle
_____________________________________
Robert C. Stilz, Jr., As Co-Trustee
_____________________________________
William K. Stilz, As Co-Trustee
("Stilz Trustees")
Trent Capital Management Company, As
Custodian for the Robert C. Stilz, Jr.
IRA
By: _________________________________
Title: ______________________________
("TCM Custodian")
Vine Street Trust Company, as
Custodian for the William Van Meter
Alford, Jr. IRA
By: _________________________________
Title: ______________________________
("Vine Trustee")
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