FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from .........to........
Commission File No. 0-5235
HUGHES SUPPLY, INC.
Incorporated in the State I.R.S. Employer I.D.
of Florida Number 59-0559446
Post Office Box 2273
20 North Orange Avenue, Suite 200
Orlando, Florida 32802
Registrant's Telephone Number, including area code: 407/841-4755
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock Outstanding as of November 29, 1994
$1 Par Value 5,793,235
Page 1
HUGHES SUPPLY, INC.
FORM 10-Q
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
October 31, 1994 and January 28, 1994 3 - 4
Consolidated Statements of Income for
the Three Months Ended October 31, 1994
and 1993 5
Consolidated Statements of Income for the
Nine Months Ended October 31, 1994 and 1993 6
Consolidated Statements of Cash Flows for the
Nine Months Ended October 31, 1994 and 1993 7
Notes to Consolidated Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 11 - 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14 - 16
Signatures 17
Index of Exhibits 18
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HUGHES SUPPLY, INC.
Consolidated Balance Sheets
(dollars in thousands)
October 31, January 28,
1994 1994
----------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,981 $ 1,078
Accounts receivable, less allowance for
losses of $7,089 and $3,914 111,079 97,765
Inventories 103,048 94,223
Deferred income taxes 6,488 4,972
Other current assets 1,516 5,532
---------- ----------
Total current assets 224,112 203,570
---------- ----------
Property, Plant and Equipment, at cost:
Land 12,333 12,353
Buildings and improvements 41,887 37,097
Transportation equipment 19,979 19,674
Furniture, fixtures and equipment 18,234 14,843
Leased property under capital leases 10,794 10,794
---------- ----------
Total 103,227 94,761
Less accumulated depreciation and
amortization (50,327) (45,439)
---------- ----------
Net property, plant and equipment 52,900 49,322
---------- ----------
Deferred Income Taxes 2,437 2,210
Other Assets 7,853 8,303
---------- ----------
$ 287,302 $ 263,405
========== ==========
See accompanying notes to consolidated financial statements.
Page 3
HUGHES SUPPLY, INC.
Consolidated Balance Sheets-Continued
(dollars in thousands)
October 31, January 28,
1994 1994
----------- -----------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 971 $ 898
Accounts payable 58,552 52,053
Accrued compensation and benefits 7,142 7,257
Other current liabilities 12,872 8,401
---------- ----------
Total current liabilities 79,537 68,609
---------- ----------
Long-Term Debt, less current portion:
Notes and subordinated debentures 78,837 95,367
Capital lease obligations 3,242 3,859
---------- ----------
Total long-term debt 82,079 99,226
---------- ----------
Other Noncurrent Liabilities 1,349 1,143
---------- ----------
Total liabilities 162,965 168,978
---------- ----------
Shareholders' Equity:
Preferred stock - -
Common stock-6,148,944 and
5,075,670 shares issued 6,149 5,076
Capital in excess of par value 37,290 15,410
Retained earnings 86,446 80,425
---------- ----------
129,885 100,911
Less treasury stock-358,142 and
418,566 shares, at cost (5,548) (6,484)
---------- ----------
Total shareholders' equity 124,337 94,427
---------- ----------
$ 287,302 $ 263,405
========== ==========
See accompanying notes to consolidated financial statements.
Page 4
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share amounts)
Three months ended October 31,
1994 1993
----------- -----------
Net Sales $ 210,584 $ 178,993
Cost of Sales 169,162 144,413
---------- ----------
Gross Profit 41,422 34,580
---------- ----------
Operating Expenses:
Selling, general and administrative 33,580 28,385
Depreciation and amortization 2,226 1,984
Provision for doubtful accounts 545 735
---------- ----------
Total operating expenses 36,351 31,104
---------- ----------
Operating Income 5,071 3,476
---------- ----------
Non-Operating Income and (Expenses):
Interest and other investment income 660 491
Interest expense (1,174) (1,215)
Other, net 90 253
---------- ----------
(424) (471)
---------- ----------
Income Before Income Taxes 4,647 3,005
Income Taxes 1,869 1,162
---------- ----------
Net Income $ 2,778 $ 1,843
========== ==========
Earnings Per Share:
Primary $ .47 $ .40
========== ==========
Fully Diluted $ .47 $ .36
========== ==========
Average Number of Shares Outstanding:
Primary 5,898 4,665
========== ==========
Fully Diluted 5,899 5,751
========== ==========
Dividends Per Share $ .06 $ .04
========== ==========
See accompanying notes to consolidated financial statements.
Page 5
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share amounts)
Nine months ended October 31,
1994 1993
----------- -----------
Net Sales $ 597,104 $ 491,457
Cost of Sales 478,325 395,238
---------- ----------
Gross Profit 118,779 96,219
---------- ----------
Operating Expenses:
Selling, general and administrative 96,657 80,491
Depreciation and amortization 6,368 5,342
Provision for doubtful accounts 1,957 1,968
---------- ----------
Total operating expenses 104,982 87,801
---------- ----------
Operating Income 13,797 8,418
---------- ----------
Non-Operating Income and (Expenses):
Interest and other investment income 1,768 1,380
Interest expense (3,428) (3,547)
Other, net 425 667
---------- ----------
(1,235) (1,500)
---------- ----------
Income Before Income Taxes 12,562 6,918
Income Taxes 5,106 2,658
---------- ----------
Net Income $ 7,456 $ 4,260
========== ==========
Earnings Per Share:
Primary $ 1.31 $ .92
========== ==========
Fully Diluted $ 1.28 $ .87
========== ==========
Average Number of Shares Outstanding:
Primary 5,700 4,631
========== ==========
Fully Diluted 5,944 5,744
========== ==========
Dividends Per Share $ .16 $ .11
========== ==========
See accompanying notes to consolidated financial statements.
Page 6
HUGHES SUPPLY, INC.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Nine months ended October 31,
1994 1993
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash flows from operating activities:
Cash received from customers $ 582,431 $ 473,593
Cash paid to suppliers and employees (568,802) (465,422)
Interest income received 1,768 1,380
Interest paid (2,758) (3,171)
Income taxes paid (6,281) (3,566)
---------- ----------
Net cash provided by
operating activities 6,358 2,814
---------- ----------
Cash flows from investing activities:
Capital expenditures (10,001) (6,234)
Proceeds from sale of property, plant
and equipment 553 483
Payment for business acquisitions,
net of cash acquired (1,341) (3,554)
---------- ----------
Net cash used in
investing activities (10,789) (9,305)
---------- ----------
Cash flows from financing activities:
Net borrowings under
short-term debt arrangements 6,506 8,851
Principal payments on:
Long-term notes (147) (1,974)
Capital lease obligations (544) (495)
Issuance of common shares under
stock option plans 542 12
Purchase of common shares (210) (12)
Dividends paid (813) (433)
---------- ----------
Net cash provided by
financing activities 5,334 5,949
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents 903 (542)
Cash and Cash Equivalents:
Beginning of period 1,078 2,253
---------- ----------
End of period $ 1,981 $ 1,711
========== ==========
See accompanying notes to consolidated financial statements.
Page 7
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of October 31, 1994, the results
of operations for the three months and nine months ended October
31, 1994 and 1993, and cash flows for the nine months then ended.
2. On March 8, 1994, the Company issued a call for redemption of its
outstanding 7% convertible subordinated debentures to take place on
April 7, 1994. Of the $22,960,000 debentures outstanding at
January 28, 1994, $22,889,000, or 99.7%, were converted into the
Company's common stock at $21.17 per share or 47.2 common shares
for each $1,000 face amount of debentures. This conversion
resulted in the issuance of 1,081,146 common shares. If the
conversion had occurred at the beginning of fiscal year 1995,
primary earnings per share for the nine months ended October 31,
1994 would have been $1.28. Fully diluted earnings per share for
the nine months ended October 31, 1994 of $1.28 already assumes the
conversion of the debentures.
3. On May 24, 1994, the shareholders approved an amendment to the
articles of incorporation of the Company increasing the number of
authorized shares of common stock to 20,000,000 shares, $1.00 par
value per share. The shareholders also approved an amendment to
the Directors' Stock Option Plan for non-employee directors (the
"Plan") increasing from 60,000 shares to 135,000 shares the number
of shares as to which options under the Plan may be granted and
extending the term of the Plan from May, 1998 to May, 2003.
4. On October 20, 1994, the Company entered into an Asset Purchase
Agreement (the "Agreement") with The Treaty Company ("Treaty"),
pursuant to which the Company agreed to buy from Treaty and Treaty
agreed to sell to the Company, all of those assets (the "Purchased
Assets") operated by Treaty through its operating division known as
The Treaty Distribution Group (the "Group").
The Group is engaged in the wholesale distribution of plumbing,
heating and air conditioning supplies, and water and sewer
supplies and equipment. Headquartered in Greenville, Ohio, the
Group sells primarily to contractors, industrial users and
municipalities from 16 branch locations in Ohio and Indiana. The
Group had net sales of $63 million in 1993.
Under the terms of the Agreement, the Company will pay Treaty for
the Purchased Assets a base price of $15,250,000 and will assume
certain liabilities. The acquisition, which will be accounted for
as a purchase, is subject to certain contingencies including, but
not limited to, the approval of the transaction by certain
regulatory authorities. It is anticipated that the transaction
will be consummated on January 3, 1995, or as soon thereafter as
Page 8
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
the conditions precedent to the closing have been fulfilled.
5. The Company's revolving credit and line of credit agreement with a
group of banks has been amended. The agreement, as amended, now
permits the Company to borrow up to $130,000,000 (subject to
borrowing limitations under the agreement) - $95,000,000 long-term,
expiring June 30, 1997, and $35,000,000 line of credit convertible
to term note due two years from conversion date. The $35,000,000
line of credit backs the Company's commercial program which has
been increased to $35,000,000.
Additionally, the Company's bank lines of credit have been
increased to $6,000,000 from $2,000,000.
6. The following is a reconciliation of net income to net cash
provided by (used in) operating activities(in thousands):
Nine months ended October 31,
1994 1993
---------- ----------
Net income $ 7,456 $ 4,260
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 5,724 4,781
Amortization 644 561
Provision for doubtful accounts 1,957 1,968
(Gain) on sale of property,
plant and equipment (220) (203)
Undistributed (earnings) of
affiliate (111) (177)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (14,767) (18,153)
Inventories (8,370) 1,273
Other current assets 4,016 3,724
Other assets (86) (32)
Increase (decrease) in:
Accounts payable and accrued
expenses 10,414 5,207
Accrued interest and income
taxes 1,490 79
Other noncurrent liabilities 206 137
Decrease (increase) in deferred
income taxes (1,995) (611)
---------- ----------
Net cash provided by
operating activities $ 6,358 $ 2,814
========== ==========
Page 9
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Noncash Activities:
As discussed in Note 2, the Company issued approximately 1,081,146
shares of common stock for the conversion of $22,889,000 debentures
during the nine months ended October 31, 1994.
During the nine months ended October 31, 1994, the Company
contributed 16,597 treasury shares in the amount of $500,000 to an
employee benefit plan.
Page 10
PART I. FINANCIAL INFORMATION - continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
HUGHES SUPPLY, INC.
On March 8, 1994, the Company called for redemption of its 7%
convertible subordinated debentures as of April 7, 1994. Substantially
all of the outstanding debentures were converted into common stock by
April 7, 1994, which resulted in an increase of approximately $23
million in shareholders' equity and a corresponding decrease of long-
term debt of $23 million. As a result of the conversion, 1,081,146 new
shares of common stock were issued.
On October 20, 1994, the Company signed an Asset Purchase Agreement to
acquire all of the assets of The Treaty Distribution Group, a wholesale
distributor of plumbing, heating and air conditioning supplies, and
water and sewer supplies and equipment with 16 branch locations in Ohio
and Indiana. The Group had net sales of $63 million in 1993.
The Company's bank financing has been amended to increase the Company's
borrowing capacity. It now consists of $130 million unsecured credit
facility, which includes $95 million long-term revolving credit facility
and $35 million line of credit convertible to a term note, as well as
short-term lines of credit totaling $6 million.
Material Changes in Results of Operations
Net Sales:
Net sales increased 18% to $210.6 million for the three months ended
October 31, 1994 from $179.0 million in the prior year. Net sales for
the nine months ended October 31, 1994 were $597.1 million, a 21%
increase over last year's sales of $491.5 million. The three and nine
month sales increases reflect the continued recovery of the building
industry throughout the Southeast. In addition, newly-opened and
acquired wholesale outlets accounted for approximately 30% of the
increase for both periods.
Management expects construction activity to remain strong for the
remainder of fiscal year 1995 and is confident that the Company's growth
plans can be sustained, despite rising interest rates, through
aggressive marketing in existing markets and selective acquisitions of
complementary businesses.
Gross Profit:
Gross profit for the three months ended October 31, 1994 increased 20%
to $41.4 million from $34.6 million for the three months ended October
31, 1993. The gross margin (gross profit expressed as a percentage of
sales) for the three months ended October 31, 1994 was 19.7%, compared
to 19.3% last year.
Page 11
Gross profit increased 23% to $118.8 million for the nine months ended
October 31, 1994, compared to $96.2 million last year. The gross margin
was 19.9% and 19.6% for the nine months ended October 31, 1994 and 1993,
respectively.
The increase in gross profit dollars and the improvement in gross
margins for both periods were due to more efficient purchasing which is
attributable to increased volume and a greater concentration of supply
sources resulting from the Company's preferred vendor program.
Operating Expenses:
Operating expenses as a percentage of net sales were 17.3% and 17.4% for
the three months ended October 31, 1994 and 1993, respectively.
Operating expenses increased to $36.4 million for the three months ended
October 31, 1994 from $31.1 million last year.
Operating expenses as a percentage of net sales were 17.6% and 17.9% for
the nine months ended October 31, 1994 and 1993, respectively, and
increased to $105.0 million from $87.8 million.
The percentages to net sales has declined for both periods compared to
the comparable prior year due to higher volume of sales and the
Company's continuing efforts to control operating costs. Newly-opened
wholesale outlets and recent acquisitions accounted for approximately
45% of the increase in operating expense dollars for both periods. Most
of the remainder of the increases for both periods is due to personnel
and other costs, such as transportation, associated with the growth in
sales.
Non-Operating Income and Expenses:
Interest expense was virtually unchanged at $1.2 million for the three
months ended October 31, 1994 and 1993. Lower average borrowings for
the current quarter (due primarily to the conversion of the debentures
in the first quarter) compared to the prior year were partially offset
by a slightly higher effective interest rate during the current year.
Interest expense decreased slightly to $3.4 million for the nine months
ended October 31, 1994 compared to $3.5 million for the prior year as a
result of lower borrowing levels during the current period.
Income Taxes:
The effective tax rates were as follows:
1994 1993
Three months ended October 31, 40.2% 38.7%
Nine months ended October 31, 40.6% 38.4%
The change in rates is due to fluctuations of nondeductible expenses and
a 1% increase in the federal tax rate.
Page 12
Net Income:
As a result of the factors discussed above, net income increased 51% for
the quarter and 75% for the nine month period, compared to the prior
year. Fully diluted earnings per share for the three months ended
October 31, 1994 and 1993 were $.47 and $.36, respectively, a 31%
increase. Fully diluted earnings per share for the nine months ended
October 31, 1994 and 1993 were $1.28 and $.87, respectively, an increase
of 47%.
Liquidity and Capital Resources
Working capital at October 31, 1994 amounted to $144.6 million, an
increase of $9.6 million compared to $135.0 million at January 28, 1994.
As discussed above, the Company is in a period of sales expansion.
Consequently, it is necessary to carry higher levels of inventories and
receivables. Inventories and accounts receivable at October 31, 1994
were $8.8 million and $13.3 million higher, respectively, than at
January 28, 1994. Despite these increases, turnover for these assets
improved. Annualized inventory turnover was 6.5 and 6.2 times for the
nine months ended October 31, 1994 and 1993, respectively. Annualized
accounts receivable turnover for these periods was 7.2 and 7.1 times,
respectively.
Cash provided by operations was $6.4 million and $2.8 million for the
nine months ended October 31, 1994 and 1993, respectively. The increase
can be attributed primarily to an increase in net income.
Capital expenditures for the nine months ended October 31, 1994 and 1993
were $10.0 million and $6.2 million, respectively. The increase in
capital expenditures is related to the Company's sales growth as new
facilities and transportation equipment have been added to adequately
service the growth. In addition, payments for business acquisitions
were $1.3 million and $3.6 million for the nine months ended October 31,
1994 and 1993, respectively. Management has revised its estimate for
1995 of capital expenditures, which are now expected to total
approximately $13 million.
The Company's financial condition remains strong and the Company has the
resources necessary, with approximately $57 million in unused debt
capacity (subject to borrowing limitations under long-term debt
covenants), to meet future working capital requirements. Future
expansion will be financed on a project-by-project basis through
additional borrowings or, if circumstances are more favorable, through
the issuance of common stock.
Page 13
PART II. OTHER INFORMATION
HUGHES SUPPLY, INC.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Filed.
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession - not applicable.
2.1 Asset Purchase Agreement between Hughes Supply,
Inc. and The Treaty Company dated October 20, 1994.
(4) Instruments defining the rights of security holders,
including indentures.
4.1 Specimen Stock Certificate representing shares of
the Company's common stock, $1.00 par value, filed
as Exhibit 4.2 to form 10-Q for the quarter ended
October 31, 1984.
4.2 Specimen Copy of Certificate representing 7%
Convertible Debentures, filed as Exhibit 4(c) to
Registration No. 33-4714.
4.3 Resolution Approving and Implementing Shareholder
Rights Plan filed as Exhibit 4.4 to Form 8-K dated
May 17, 1988.
(10) Material contracts.
10.1 Lease Agreements with Hughes, Inc.
(a) Orlando Trucking, Garage and Maintenance
Operations dated December 1, 1971, filed as
Exhibit 13(n) to Registration No. 2-43900.
Letter dated April 15, 1992 extending lease
from month to month, filed as exhibit 10.1(a)
to Form 10-K for the fiscal year ended January
31, 1992.
(b) Leases effective March 31, 1988, filed as
exhibit 10.1(c) to Form 10-K for the fiscal
year ended January 27, 1989.
Sub-item Property
(1) Clearwater
(2) Daytona Beach
(3) Fort Pierce
(4) Lakeland
(5) Lakeland - Lightstyle
(6) Leesburg
Page 14
(7) Orlando Electrical Operation
(8) Orlando Plumbing Operation
(9) Orlando Utility Warehouse
(10) St. Petersburg
(11) Sarasota
(12) Venice
(13) Winter Haven
(c) Lease amendment letter between Hughes,
Inc. and the Registrant, dated December
1, 1986, amending Orlando Truck
Operations Center and Maintenance Garage
lease, filed as Exhibit 10.1(i) to Form
10-K for the fiscal year ended January
30, 1987.
(d) Lease agreement dated June 1, 1987,
between Hughes, Inc. and the Registrant,
for additional Sarasota property, filed
as Exhibit 10.1(j) to Form 10-K for the
fiscal year ended January 29, 1988.
(e) Leases dated March 11, 1992, filed as
Exhibit 10.1(e) to Form 10-K for the
fiscal year ended January 31, 1992.
Sub-item Property
(1) Tallahassee Electrical Operation
(2) Gainesville Electrical Operation
(3) Valdosta Electrical Operation
10.2 Hughes Supply, Inc. 1988 Stock Option Plan,
filed as Exhibit A to Prospectus included in
Registration No. 33-26468.
10.3 Form of Supplemental Executive Retirement Plan
Agreement entered into between the Registrant
and eight of its executive officers, filed as
Exhibit 10.6 to Form 10-K for fiscal year
ended January 30, 1987.
10.4 Directors' Stock Option Plan consisting of
Amendment No. 1 to Hughes Supply, Inc.
Directors' Stock Option Plan dated May 24,
1994 and Hughes Supply, Inc. Directors' Stock
Option Plan as adopted January 24, 1989, filed
as Exhibit 10.4 to Form 10-Q for the quarter
ended July 31, 1994.
10.5 Asset Purchase Agreement with Accord
Industries Company, dated October 9, 1990, for
sale of Registrant's manufacturing operations,
filed as Exhibit 10.7 to Form 10-K for fiscal
year ended January 25, 1991.
Page 15
10.6 Lease Agreement dated June 30, 1993 between
Donald C. Martin and Electrical Distributors,
Inc., filed as Exhibit 10.6 to Form 10-K for
fiscal year ended January 28, 1994.
10.7 Consulting Agreement dated June 30, 1993
between Hughes Supply, Inc. and Donald C.
Martin, filed as Exhibit 10.7 to Form 10-K for
fiscal year ended January 28, 1994.
10.8 Written description of senior executives'
long-term incentive bonus plan for fiscal year
1996 incorporated by reference to the
description of the bonus plan set forth under
the caption "Approval of the Stock Award
Provisions of the Senior Executives' Long-Term
Incentive Bonus Plan for Fiscal Year 1996" on
pages 26 and 27 of the Registrant's Proxy
Statement Annual Meeting of Shareholders To Be
Held May 24, 1994.
(11) Statement re computation of per share earnings.
11.1 Summary schedule of earnings per share calculation.
(15) Letter re unaudited interim financial information - not
applicable.
(18) Letter re change in accounting principles - not
applicable.
(19) Report furnished to security holders - not applicable.
(22) Published report regarding matters submitted to vote of
security holders - not applicable.
(23) Consents of experts and counsel - not applicable.
(24) Power of attorney - not applicable.
(27) Financial Data Schedule.
27.1 Financial Data Schedule.
(99) Additional exhibits - not applicable.
(b) Reports on Form 8-K.
During the quarter ended October 31, 1994, the Registrant
filed a Current Report on Form 8-K dated October 20, 1994,
which reported under Item 5 (Other Events) that the Registrant
entered into an Asset Purchase Agreement with The Treaty
Company (see Note 4 of Notes to Consolidated Financial
Statements).
Page 16
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 thereunto duly authorized.
HUGHES SUPPLY, INC.
Date: December 5, 1994 By: /s/ David H. Hughes
David H. Hughes, Chairman of
the Board and Chief Executive
Officer
Date: December 5, 1994 By: /s/ J. Stephen Zepf
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Page 17
INDEX OF EXHIBITS FILED WITH THIS REPORT
2.1 Asset Purchase Agreement between Hughes Supply, Inc. and The
Treaty Company dated October 20, 1994.
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
Page 18
Exhibit 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
HUGHES SUPPLY, INC.
AND
THE TREATY COMPANY
Date: October 20, 1994
<PAGE>
TABLE OF CONTENTS
(The Table of Contents for this Agreement is for
convenience of reference only and is not intended to
define, limit or describe the scope or intent of any
provisions of this Asset Purchase Agreement.)
PAGE
RECITALS: . . . . . . . . . . . . . . . . . . . . . . . .-1-
ARTICLE I SALE AND PURCHASE OF ASSETS. . . . . . . .-1-
Section 1.01 Assets to be Acquired. . . . . . . . . . .-1-
(a) Fixed Assets. . . . . . . . . . . . .-1-
(b) Inventory.. . . . . . . . . . . . . .-2-
(c) Supplies. . . . . . . . . . . . . . .-2-
(d) Intellectual Property.. . . . . . . .-2-
(e) Other Promotional Rights. . . . . . .-2-
(f) Accounts Receivable.. . . . . . . . .-2-
(g) Real Property . . . . . . . . . . . .-3-
(h) Customer Lists and other
Intangible Assets.. . . . . . . . . .-3-
(i) Seller's Prepayments. . . . . . . . .-3-
(j) Permits.. . . . . . . . . . . . . . .-3-
(k) Telephone and Fax Numbers.. . . . . .-3-
(l) Books and Records.. . . . . . . . . .-3-
(m) Claims Relating to Purchased
Assets. . . . . . . . . . . . . . . .-3-
(n) Other Property and Rights.. . . . . .-4-
Section 1.02 Assumed Obligations. . . . . . . . . . . .-4-
(a) Trade, Other Payables, and
Accrued Expenses. . . . . . . . . . .-4-
(b) Leases. . . . . . . . . . . . . . . .-4-
(c) Other Contracts.. . . . . . . . . . .-4-
(d) Open Customer Purchase Orders.. . . .-4-
(e) Customer Deposits and Prepayments.. .-5-
(f) Purchase Obligations. . . . . . . . .-5-
Section 1.03 Excluded Assets. . . . . . . . . . . . . .-5-
(a) Books and Records.. . . . . . . . . .-5-
(b) Cash, etc.. . . . . . . . . . . . . .-5-
(c) Claims Against Third Parties. . . . .-6-
(d) Prepaid Insurance Premiums. . . . . .-6-
(e) Rights Hereunder. . . . . . . . . . .-6-
(f) Prepaid Expenses. . . . . . . . . . .-6-
(g) Contracts not Assigned. . . . . . . .-6-
ARTICLE II PURCHASE PRICE: POST-CLOSING
ADJUSTMENT; ALLOCATIONS. . . . . . . . . .-6-
Section 2.01 Purchase Price and Payment.. . . . . . . .-6-
Section 2.02 Allocation of Purchase Price.. . . . . . -11-
ARTICLE III CLOSING; DOCUMENTS OF CONVEYANCE . . . . -11-
Section 3.01 Closing. . . . . . . . . . . . . . . . . -11-
Section 3.02 Assignment and Assumption Agreements.. . -12-
Section 3.03 Other Instruments of Conveyance. . . . . -12-
Section 3.04 Other Deliveries at Closing. . . . . . . -13-
Section 3.05 Allocation of Closing Costs. . . . . . . -13-
Section 3.06 Prorations at Closing. . . . . . . . . . -14-
Section 3.07 Transfer of Possession.. . . . . . . . . -14-
Section 3.08 Termination and Related Employee
Matters. . . . . . . . . . . . . . . . . -14-
Section 3.09 Utility Services.. . . . . . . . . . . . -14-
Section 3.10 Procedure Relating to Motor Vehicles.. . -14-
Section 3.11 Other Actions and Instruments. . . . . . -15-
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
BUYER. . . . . . . . . . . . . . . . . . -15-
Section 4.01 Organization, Good Standing and
Qualification. . . . . . . . . . . . . . -15-
Section 4.02 Corporate Power and Authority. . . . . . -15-
Section 4.03 Validity of Contemplated Transactions. . -15-
Section 4.04 Capitalization.. . . . . . . . . . . . . -16-
Section 4.05 Regulatory Approvals.. . . . . . . . . . -16-
Section 4.06 Copies of Articles and Bylaws. . . . . . -16-
Section 4.07 Inventory Held for Resale. . . . . . . . -16-
Section 4.08 Litigation: Compliance with Laws.. . . . -16-
Section 4.09 Brokers' or Finders' Fees. . . . . . . . -17-
Section 4.10 Completeness of Disclosure . . . . . . . -17-
Section 4.11 Buyer's Filings with SEC . . . . . . . . -17-
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
SELLER . . . . . . . . . . . . . . . . . -18-
Section 5.01 Organization, Good Standing and
Qualification. . . . . . . . . . . . . . -18-
Section 5.02 Corporate Power and Authority. . . . . . -18-
Section 5.03 Validity of Contemplated Transactions. . -18-
Section 5.04 Regulatory Approvals.. . . . . . . . . . -19-
Section 5.05 Copies of Articles and Code of
Regulations. . . . . . . . . . . . . . . -19-
Section 5.06 Liabilities and Obligations of Seller. . -19-
Section 5.07 Condition of and Title to Purchased
Assets.. . . . . . . . . . . . . . . . . -19-
Section 5.08 Material Contracts.. . . . . . . . . . . -19-
Section 5.09 Assumed Leases and Contracts.. . . . . . -20-
Section 5.10 Concerning the Leased Real Estate
and the Real Property. . . . . . . . . . -21-
Section 5.11 Buildings, Structures and Other
Improvements.. . . . . . . . . . . . . . -23-
Section 5.12 Financial Statements.. . . . . . . . . . -23-
Section 5.13 Certain Tax Matters. . . . . . . . . . . -24-
Section 5.14 Ad Valorem, Real Property Tax Matters. . -24-
Section 5.15 Litigation: Compliance with Laws.. . . . -24-
Section 5.16 Permits and Licenses.. . . . . . . . . . -25-
Section 5.17 Intellectual Properties. . . . . . . . . -25-
Section 5.18 All Necessary Assets.. . . . . . . . . . -25-
Section 5.19 Labor or Employee Disputes; Employment
Matters. . . . . . . . . . . . . . . . . -25-
Section 5.20 Inventory. . . . . . . . . . . . . . . . -26-
Section 5.21 Employee Compensation. . . . . . . . . . -26-
Section 5.22 No Changes.. . . . . . . . . . . . . . . -26-
Section 5.23 No Affiliates' Assets, Leases or
Contracts. . . . . . . . . . . . . . . . -28-
Section 5.24 Insurance Coverages. . . . . . . . . . . -29-
Section 5.25 Environmental Matters. . . . . . . . . . -29-
Section 5.26 Customers and Sales. . . . . . . . . . . -30-
Section 5.27 Benefit Plans. . . . . . . . . . . . . . -30-
Section 5.28 Brokers' or Finders' Fees. . . . . . . . -32-
Section 5.29 Investment Information . . . . . . . . . -32-
Section 5.30 Seller Not a Foreign Person. . . . . . . -33-
Section 5.31 Completeness of Disclosure . . . . . . . -33-
ARTICLE VI ACTIVITIES PRIOR TO THE CLOSING. . . . . -33-
Section 6.01 Activities Prior to Closing. . . . . . . -33-
Section 6.02 Reports; Taxes.. . . . . . . . . . . . . -35-
Section 6.03 Access; Confidentiality. . . . . . . . . -35-
Section 6.04 Seller's Employees.. . . . . . . . . . . -37-
Section 6.05 Consents.. . . . . . . . . . . . . . . . -37-
Section 6.06 Public Announcements.. . . . . . . . . . -37-
Section 6.07 Hart-Scott-Rodino. . . . . . . . . . . . -38-
Section 6.08 Filings with SEC . . . . . . . . . . . . -38-
Section 6.09 Condition of Title; Title Insurance. . . -38-
Section 6.10 Surveys. . . . . . . . . . . . . . . . . -39-
Section 6.11 Exclusivity. . . . . . . . . . . . . . . -39-
ARTICLE VII CASUALTY AND CONDEMNATION. . . . . . . . -40-
Section 7.01 Casualty.. . . . . . . . . . . . . . . . -40-
Section 7.02 Condemnation.. . . . . . . . . . . . . . -40-
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF BUYER . . . -41-
Section 8.01 Representations and Warranties.. . . . . -41-
Section 8.02 Performance of Covenants, Agreements
and Obligations. . . . . . . . . . . . . -41-
Section 8.03 Prohibitions.. . . . . . . . . . . . . . -41-
Section 8.04 Certificate. . . . . . . . . . . . . . . -42-
Section 8.05 Opinion of Seller's Counsel. . . . . . . -42-
Section 8.06 Authority. . . . . . . . . . . . . . . . -43-
Section 8.07 No Material Change.. . . . . . . . . . . -43-
Section 8.08 Required Consents. . . . . . . . . . . . -44-
Section 8.09 UCC Search Report. . . . . . . . . . . . -44-
Section 8.10 Noncompetition Agreements. . . . . . . . -44-
Section 8.11 Employment Agreements. . . . . . . . . . -44-
Section 8.12 Other Documents. . . . . . . . . . . . . -44-
Section 8.13 Escrow Agreement.. . . . . . . . . . . . -44-
Section 8.14 Other Opinions of Counsel. . . . . . . . -45-
Section 8.15 Approval of Counsel. . . . . . . . . . . -45-
ARTICLE IX CONDITIONS TO OBLIGATIONS OF
SELLER . . . . . . . . . . . . . . . . . -45-
Section 9.01 Representations and Warranties.. . . . . -45-
Section 9.02 Performance of Covenants, Agreements
and Obligations. . . . . . . . . . . . . -46-
Section 9.03 Certificate. . . . . . . . . . . . . . . -46-
Section 9.04 Prohibitions.. . . . . . . . . . . . . . -46-
Section 9.05 Opinion of Buyer's Counsel.. . . . . . . -46-
Section 9.06 Authority. . . . . . . . . . . . . . . . -47-
Section 9.07 Other Documents. . . . . . . . . . . . . -47-
Section 9.08 Registration Statement.. . . . . . . . . -47-
Section 9.09 No Material Change.. . . . . . . . . . . -47-
Section 9.10 Employment Agreements. . . . . . . . . . -48-
Section 9.11 Escrow Agreement.. . . . . . . . . . . . -48-
Section 9.12 Promissory Note. . . . . . . . . . . . . -48-
Section 9.13 Approval of Counsel to the Seller. . . . -48-
ARTICLE X REGISTRATION STATEMENT . . . . . . . . . -48-
ARTICLE XI INDEMNIFICATION. . . . . . . . . . . . . -53-
Section 11.01 Indemnification by the Seller. . . . . . -53-
Section 11.02 Indemnification by the Buyer.. . . . . . -53-
Section 11.03 Survival of Obligation to Indemnify. . . -54-
Section 11.04 Notice and Procedure.. . . . . . . . . . -54-
Section 11.05 Limitation on Indemnification
Obligations. . . . . . . . . . . . . . . -56-
Section 11.06 Indemnification Exclusive Remedy.. . . . -56-
Section 11.07 Waiver of Bulk Sales and Indemnity.. . . -56-
ARTICLE XII CONDUCT OF THE PARTIES AFTER
CLOSING. . . . . . . . . . . . . . . . . -57-
Section 12.01 Cooperation. . . . . . . . . . . . . . . -57-
Section 12.02 Access to Books and Records. . . . . . . -57-
Section 12.03 Manufacturers' Warranties. . . . . . . . -57-
Section 12.04 Use of License Tags. . . . . . . . . . . -57-
Section 12.05 Use of Name. . . . . . . . . . . . . . . -58-
Section 12.06 Collection and Disposition of
Accounts and Notes Receivable. . . . . . -58-
Section 12.07 Covenant not to Compete and
Confidentiality. . . . . . . . . . . . . -58-
Section 12.08 Arrangements with Suppliers. . . . . . . -58-
Section 12.09 Filings with SEC . . . . . . . . . . . . -58-
ARTICLE XIII BROKERAGE; EXPENSES. . . . . . . . . . . -59-
Section 13.01 Brokerage. . . . . . . . . . . . . . . . -59-
Section 13.02 Transactional Expenses.. . . . . . . . . -59-
ARTICLE XIV TERMINATION. . . . . . . . . . . . . . . -59-
Section 14.01 Termination by Mutual Consent. . . . . . -59-
Section 14.02 Termination Due to Casualty or
Condemnation.. . . . . . . . . . . . . . -59-
Section 14.03 Termination Attributable to Default. . . -60-
Section 14.04 Termination Due to Failure to
Satisfy Conditions.. . . . . . . . . . . -60-
ARTICLE XV MISCELLANEOUS. . . . . . . . . . . . . . -60-
Section 15.01 Notices. . . . . . . . . . . . . . . . . -60-
Section 15.02 Assignability and Parties in Interest. . -61-
Section 15.03 Governing Law. . . . . . . . . . . . . . -61-
Section 15.04 Exclusive Jurisdiction.. . . . . . . . . -61-
Section 15.05 Counterparts.. . . . . . . . . . . . . . -61-
Section 15.06 Waiver.. . . . . . . . . . . . . . . . . -61-
Section 15.07 Publicity. . . . . . . . . . . . . . . . -62-
Section 15.08 Complete Agreement.. . . . . . . . . . . -62-
Section 15.09 Modifications, Amendments and Waivers. . -62-
Section 15.10 Interpretation.. . . . . . . . . . . . . -62-
Section 15.11 Severability.. . . . . . . . . . . . . . -62-
Section 15.12 Time of Essence. . . . . . . . . . . . . -62-
Section 15.13 Gender, Number.. . . . . . . . . . . . . -62-
Section 15.14 Exhibits and Schedules.. . . . . . . . . -63-
Section 15.16 Definition of Seller's Knowledge.. . . . -63-
Section 15.17 Facts Concerning the Group.. . . . . . . -63-
Section 15.18 Definition of Buyer's Knowledge. . . . . -63-
Section 15.19 No Benefit to Others.. . . . . . . . . . -63-
Section 15.20 Attorneys' Fees. . . . . . . . . . . . . -63-
Section 15.21 Certain Defined Terms. . . . . . . . . . -64-
Section 15.22 Survival of Agreement. . . . . . . . . . -65-
Section 15.23 Recitals.. . . . . . . . . . . . . . . . -65-
<PAGE>
SCHEDULES AND EXHIBITS
Schedules Description
Schedule 1.01(a) . . . . . . . . . Fixed Assets
Schedule 1.01(d) . . . . . . . . . Intellectual Property
Schedule 1.01(g) . . . . . . . . . Real Property
Schedule 1.02(a) . . . . . . . . . Accrued Expenses
Schedule 1.02(b) . . . . . . . . . Assumed Leases
Schedule 1.02(c) . . . . . . . . . Assumed Contracts
Schedule 2.01(ii). . . . . . . . . 3/25/94 Group Balance Sheet
Schedule 5.03. . . . . . . . . . . Validity of Transactions
Schedule 5.07. . . . . . . . . . . Condition of Assets
Schedule 5.08. . . . . . . . . . . Material Contracts
Schedule 5.09. . . . . . . . . . . Assumed Leases and Contracts
Schedule 5.10. . . . . . . . . . . Concerning the Real Property
Schedule 5.11. . . . . . . . . . . Fixed Assets and Structures
Schedule 5.12. . . . . . . . . . . Financial Statements
Schedule 5.13. . . . . . . . . . . Certain Tax Matters
Schedule 5.15. . . . . . . . . . . Litigation
Schedule 5.16. . . . . . . . . . . Permits
Schedule 5.19. . . . . . . . . . . Labor Matters
Schedule 5.21. . . . . . . . . . . Employee Compensation
Schedule 5.23. . . . . . . . . . . Affiliates' Leases, etc.
Schedule 5.24. . . . . . . . . . . Insurance
Schedule 5.25. . . . . . . . . . . Environmental Matters
Schedule 5.26. . . . . . . . . . . Customers and Sales
<PAGE>
Schedule 5.27. . . . . . . . . . . Benefit Plans
Schedule 15.16 . . . . . . . . . . Seller's Knowledge
Exhibits Description
Exhibit 2.01(i)(b) . . . . . . . Promissory Note
Exhibit 3.02 . . . . . . . . . . Assumption Agreements
Exhibit 3.03(a). . . . . . . . . Bill of Sale
Exhibit 3.04(a). . . . . . . . . Noncompetition Agreements
Exhibit 3.04(b). . . . . . . . . Employment Agreement
Exhibit 8.04 . . . . . . . . . . Certificate of Seller
Exhibit 8.13 . . . . . . . . . . Escrow Agreement
Exhibit 9.03 . . . . . . . . . . Certificate of Buyer
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), is made this
20th day of October, 1994, by and between HUGHES SUPPLY, INC., a
Florida corporation (hereinafter referred to as the "Buyer"), and
THE TREATY COMPANY, an Ohio corporation (hereinafter referred to as
the "Seller"). The Buyer and the Seller are sometimes referred to
collectively herein as the "parties" or individually as a "party."
W I T N E S S E T H:
WHEREAS, Seller desires to sell or cause to be sold to Buyer,
and Buyer wishes to purchase from Seller, the business and assets
of Seller's plumbing, HVAC and municipal water and waste water
materials business, which business is operated by the Seller
through its division known as The Treaty Distribution Group (the
"Group").
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises, covenants, representations, warranties, and
agreements contained herein, and intending to be legally bound, the
Buyer and the Seller agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
Section 1.01 Assets to be Acquired. Subject to the terms
and conditions set forth herein, on the Closing Date (as set forth
in Section 3.01), the Seller shall sell, assign, transfer, convey
and deliver to the Buyer, free and clear of all mortgages, deeds of
trust, pledges, liens, conditional sales agreements, leases, lease-
purchase agreements, security interests, restrictions,
encumbrances, and options (hereafter collectively referred to as
"Encumbrances"), except as approved by Buyer pursuant to Section
6.09 and as set forth on Schedule 5.07 attached hereto, and the
Buyer shall purchase, acquire and accept from the Seller, all of
the Seller's right, title and interest in and to the following
assets of the Seller which are utilized in the business operations
of the Group, whether real, personal or mixed, and whether tangible
or intangible (hereafter collectively referred to as the "Purchased
Assets"):
(a) Fixed Assets. All machinery, equipment, Rolling
Stock, fixtures and leasehold improvements (but only to the extent
owned by Seller), tools, furniture, furnishings, signs, displays
and other fixed assets, in each case owned by the Seller as of the
Effective Time and utilized by or for the benefit of the Group,
including without limitation computer hardware and software, and
those assets more particularly described in Schedule 1.01(a) which
shall be attached to this Agreement as of the Closing Date (the
fixed assets to be purchased by the Buyer are hereafter
collectively referred to as the "Fixed Assets");
(b) Inventory. All merchandise, supplies, and all
inventory, fixtures and equipment and other products, in each case
owned by the Seller for the benefit of the Group and held for sale
to customers as of the Effective Time (the foregoing items to be
purchased by the Buyer are hereafter collectively referred to as
the "Inventory");
(c) Supplies. All usable supplies, in each case owned
by the Seller for the benefit of the Group as of the Effective
Time, including without limitation all fuel, petroleum products,
tires, parts, product labels, packaging materials, sacks, bags,
containers, shop supplies, office supplies and cleaning supplies
owned by the Seller for the benefit of the Group as of the
Effective Time (the supplies to be purchased by the Buyer are
hereafter collectively referred to as the "Supplies");
(d) Intellectual Property. All trademarks, patents,
service marks, copyrights and trade names (including the name "The
Treaty Company", or any variation thereof) set forth in Schedule
1.01(d), all goodwill associated therewith, and any applications
therefor or registrations thereof (hereafter referred to as the
"Intellectual Property");
(e) Other Promotional Rights. All trademarks, patents,
service marks, copyrights and trade names, whether or not listed in
Schedule 1.01(d), all goodwill associated therewith, and all
applications for or registrations of any of the foregoing, and all
marketing or promotional designs, brochures, advertisements,
concepts, literature, books, media rights, rights against any other
Person in respect of any of the foregoing and all other promotional
properties (hereafter collectively referred to as the "Promotional
Rights"), in each case primarily used or useful or developed or
acquired by the Seller for the benefit of the Group for use in
connection with the ownership and operation of the Purchased
Assets;
(f) Accounts Receivable. All of the Seller's accounts
receivable and the proceeds thereof after the Effective Time
resulting from the operations of the Group as of the Effective Time
(which shall mean accounts receivable created when products are
shipped or delivered by the Seller), including all promissory
notes, guarantees and collateral relating thereto (hereinafter
referred to as the "Accounts Receivable");
(g) Real Property. All of Seller's interest in the real
property operated or utilized in the conduct of the Group's
operations reflected as owned (the "Real Property") in the most
recent audited or unaudited Financial Statements (as defined in
Section 5.12), the legal descriptions of which are attached as
Schedule 1.01(g) hereto, together with all buildings, structures,
improvements, equipment, furniture and fixtures owned by Seller and
utilized in connection with the Real Property;
(h) Customer Lists and other Intangible Assets. All
other intangible assets and petty cash (except cash or cash
equivalents) and deposits with others such as utility deposits
owned by the Seller for the benefit of the Group as of the
Effective Time, including without limitation, all customer lists
(the "Customer Lists"), goodwill, "know-how," proprietary
information and trade secrets, in each case relating to the Group's
business operations; and all supplier and manufacturers' warranties
(including pending warranty claims) and manuals in Seller's
possession relating to the Fixed Assets and the Inventory;
(i) Seller's Prepayments. All of the Seller's
prepayments connected in any fashion to the operation of the Group
and existing as of the Effective Time (including without limitation
prepaid ad valorem taxes and heavy vehicle highway use taxes but
excluding prepaid and rebatable insurance premiums) (hereafter
referred to as the "Seller's Prepayments");
(j) Permits. All Permits (as defined in Section 5.16)
relating to the operation of the Group's business, to the extent
such Permits are transferable and whether or not all action
necessary to effect such transfer has been taken prior to the
Closing (as defined in Section 3.01);
(k) Telephone and Fax Numbers. The right to use the
telephone and fax machine numbers (including any mobile telephone
numbers) assigned to the Group and/or its employees, and to each of
the Group's places of business in the States of Ohio and Indiana;
(l) Books and Records. Except as expressly set forth in
Section 1.03(a), true and correct copies of all papers, documents,
computerized databases and records of Seller relating to the
Purchased Assets and the business operations of the Group,
including without limitation all personnel, labor relations and
workers' compensation records relating to employees hired by the
Buyer, environmental control records, sales records, marketing
records, accounting and financial records, and maintenance records;
(m) Claims Relating to Purchased Assets. All claims,
causes of action, rights of recovery and rights of set-off of every
type and kind relating to supplier and manufacturers warranties
issued with respect to the Purchased Assets and all claims, causes
of action, rights of recovery and rights of set-off of every type
and kind relating to the Assumed Obligations (as defined in Section
1.02); in each case whether accruing before or after the Closing;
(n) Other Property and Rights. Unless otherwise
expressly excluded above or in Section 1.03, all other property and
rights, tangible and intangible, real, personal or mixed, which the
Seller owns and utilizes in connection with the business operations
of the Group and which exist as of the Effective Time;
provided, however, that the definition of Purchased Assets shall
not include any items defined as Excluded Assets in Section 1.03.
Section 1.02 Assumed Obligations. Subject to the terms and
conditions set forth herein, on the Closing Date, the Seller shall
assign to the Buyer and the Buyer shall assume, pay and discharge
in full when due all of the liabilities and obligations of the
Seller in respect of the Group's operations, arising on or prior to
the Effective Time, which are accrued on the Financial Statements,
and shall assume, pay and discharge in full when due all of the
liabilities and obligations under the following leases, contracts,
purchase orders and liabilities of the Seller (hereafter
collectively referred to as the "Assumed Obligations"):
(a) Trade, Other Payables, and Accrued Expenses. All
(i) trade and other accounts payable, and (ii) all accrued but
unpaid compensation, payroll and withholding taxes relating to the
Group's employees and other accrued expenses, as described in
Schedule 1.02(a);
(b) Leases. The leases relating to the Seller's
facilities which are utilized or held for the benefit of the Group
(the "Leased Real Estate"), as well as all operating leases and
capital leases for machinery and equipment utilized or held for the
benefit of the Group, all as described in Schedule 1.02(b)
(hereafter collectively referred to as the "Assumed Leases");
(c) Other Contracts. The contracts described in
Schedule 1.02(c) (hereafter referred to as the "Assumed
Contracts");
(d) Open Customer Purchase Orders. The Seller's
obligations to deliver products to customers who have placed orders
with the Group for products which have not been delivered as of the
Effective Time, including all customer purchase orders and
contracts relating thereto, provided such obligations are incurred
in the ordinary course of the Group's business operations and will
not result in a material loss of gross profit to the Buyer
following Closing (hereafter referred to as the "Assumed Purchase
Orders");
(e) Customer Deposits and Prepayments. All deposits and
prepayments received from customers relating to Inventory to be
delivered after the Effective Time (referred to herein as the
"Customer Deposits"); and
(f) Purchase Obligations. Any obligation of the Seller
to purchase materials, supplies or inventory used in the Group's
business operations which were ordered by the Seller prior to the
Effective Time and not delivered to the Seller prior to the
Effective Time provided that: (i) such orders were placed by the
Seller in the ordinary course of the Group's business operations
and are consistent with Seller's historical purchases of such
materials, supplies, and inventory, (ii) such materials, supplies
and inventory are actually delivered to the Buyer, and (iii) such
orders result in no material loss of gross profit to Buyer
(hereafter referred to as the "Materials Purchase Obligations").
Except as expressly set forth in this Section 1.02, the Buyer
shall have no responsibility for any of the Seller's obligations
(including contracts, leases, product warranties, purchase orders
and liabilities of any type, kind or nature, and specifically
including, but not limited to, any obligations incurred in any
other division of Seller other than the Group), whether fixed,
accrued, contingent or otherwise, and whether arising in contract,
in tort, by operation or violation of law, or otherwise, and all
such obligations shall remain with the Seller and are herein
referred to as the "Excluded Obligations."
Section 1.03 Excluded Assets. The "Purchased Assets" shall
not include any of the Seller's rights, privileges, title or
interest in any other operating division of the Seller other than
the Group, or in any of the following assets (hereafter referred to
as the "Excluded Assets"):
(a) Books and Records. All of the original copies of
the Seller's books and records referred to in Section 1.01(l)
hereof and all of the Seller's minute books, stock books, tax
returns and books and records directly relating to the Excluded
Assets and the Excluded Obligations, all personnel, labor relations
and workers' compensation records relating to the Seller's
employees who are not hired by the Buyer;
(b) Cash, etc. Any currency, coins (other than petty
cash as described in Section 1.01(h)), or balances in checking or
other demand deposits, securities or money market accounts or other
cash equivalents, other than cash or cash equivalents representing
Customer Deposits;
<PAGE>
(c) Claims Against Third Parties. Any claim of the
Seller against any Person unless such claim is a Purchased Asset
under Section 1.01 hereof;
(d) Prepaid Insurance Premiums. Any claim for refund of
prepaid insurance premiums, it being understood and agreed that the
Seller may cancel all policies insuring the Purchased Assets as of
the Effective Time upon the first to occur of (i) three (3)
business days after the Closing or (ii) notification that Buyer's
insurance has become effective;
(e) Rights Hereunder. All rights and claims of the
Seller under this Agreement;
(f) Prepaid Expenses. Prepaid expenses not assignable
to the Buyer, including, without limitation, prepaid insurance
premiums; and
(g) Contracts not Assigned. All rights of the Seller
in, to and under those leases, purchase orders, contracts and other
agreements not being assigned to the Buyer pursuant to Section
1.02.
ARTICLE II
PURCHASE PRICE: POST-CLOSING ADJUSTMENT; ALLOCATIONS
Section 2.01 Purchase Price and Payment. In consideration
of the sale and purchase contemplated herein, the Buyer shall
assume or pay the Assumed Obligations as herein provided and the
Seller shall receive the Adjusted Purchase Price (as defined in
Section 2.01(iv)) which shall be determined and paid as follows:
(i) At Closing, the Buyer shall pay Seller the aggregate
sum of Fifteen Million Two Hundred and Fifty Thousand Dollars
($15,250,000) (the "Base Price"), payable as follows: (a) the cash
sum of Nine Million Four Hundred Seventy Five Thousand Dollars
($9,475,000) shall be paid to Seller by means of a wire transfer of
such funds to a bank account to be designated in writing by the
Seller prior to Closing, less the Escrowed Proceeds (as defined in
Section 2.01(v)) which shall be delivered by the Seller to the
Escrow Agent (as defined in Section 2.01(v)), (b) the delivery of
a Promissory Note in the amount of $1,525,000 (the "Promissory
Note"), in the form attached hereto as Exhibit 2.01(i)(b), and (c)
the delivery of that number of shares registered under the
Securities Act of 1933, as amended (the "Securities Act"), of the
Common Stock (as defined in Section 15.21(c)) which is equal to
Four Million Two Hundred Fifty Thousand Dollars ($4,250,000)
divided by the average closing price of the Common Stock (the
"Average Stock Price") on the New York Stock Exchange, as announced
in the Wall Street Journal at the close of business on each of the
ten trading days preceding the third trading day prior to Closing;
provided, however, if the Average Stock Price is less than $17.25,
the price of $17.25 shall be the Average Stock Price for purposes
of determining the number of shares of Common Stock to be issued
hereunder; provided, further, if the Average Stock Price is more
than $21.25 then the price of $21.25 shall be the Average Stock
Price for purposes of determining the number of shares of Common
Stock to be issued hereunder. The Base Price shall thereafter be
increased or decreased to the extent necessary for the
determination of the Adjusted Base Price as described in Section
2.01(iii).
(ii) Seller will prepare financial statements as of
December 31, 1994 (the "Valuation Date") for its 1994 fiscal year
and have such financial statements (the "Valuation Date Financial
Statements") audited by Deloitte and Touche, LLP, its certified
public accountants (the "Seller's Accountants"). The Valuation
Date Financial Statements shall be (a) unqualified by the Seller's
Accountants with respect to the business and operations of the
Group, (b) shall be prepared in accordance with generally accepted
accounting principles, and (c) will be prepared by Seller's
accounting department using the same accounting methods which were
used in preparing the March 25, 1994 balance sheet (which methods
were in compliance with GAAP), a copy of which is attached hereto
as Schedule 2.01(ii). The Valuation Date Financial Statements
shall be used as the basis from which to determine the Adjusted
Base Price pursuant to Section 2.01(iii). The cost associated with
the preparation of such financial statements and the audit thereof
by Seller's Accountants will be borne by Seller. Buyer shall have
the right to engage Price Waterhouse, LLP, its certified public
accountants (the "Buyer's Accountants") to review the audited
Valuation Date Financial Statements and the results of the audit
and procedures of Seller's Accountants with respect to such
financial statements. Except as otherwise provided in this
subparagraph (ii), the cost associated with such review by Buyer
shall be borne by Buyer.
In the event that Buyer, within ten (10) days of its
receipt of the Valuation Date Financial Statements, shall disagree
with such financial statements, Buyer shall notify Seller in
writing of such disagreement. If Buyer and Seller are unable to
resolve their disagreement within five (5) days after notice to
Seller of such disagreement, each such party shall refer the
dispute to their respective certified public accountants to resolve
the disagreement by mutual agreement of such certified public
accountants within five (5) days, which resolution, when reached,
shall be binding upon the parties. In the event that the Valuation
Date Financial Statements are adjusted as a result of the review as
described herein, and such adjustment results in a decrease of the
Group's EBIT (as hereinafter defined) in an amount in excess of
$50,000, all costs incurred by the Buyer and the Seller with
respect to such review shall be borne entirely by Seller. However,
if Buyer has disputed the Valuation Date Financial Statements and
there is either (x) no adjustment to the Adjusted Base Price
following such review, or (y) the adjustment to the Valuation Date
Financial Statements following such review does not result in a
decrease of the Group's EBIT in an amount in excess of $50,000, all
costs incurred by the Buyer and the Seller with respect to such
review shall be borne entirely by Buyer. Every effort will be made
to complete and deliver to Buyer the Valuation Date Financial
Statements no later than March 15, 1995. Any disagreement with
respect to the Valuation Date Financial Statements which cannot be
resolved in the foregoing manner shall subject to resolution in
accordance with Sections 15.03 and 15.04 of this Agreement.
(iii) From the information set forth on the audited
Valuation Date Financial Statements, initially the Buyer shall
determine and the Buyer and the Seller shall mutually agree on the
earnings before interest and income taxes ("EBIT") of the Group, on
a first-in, first-out ("FIFO") basis for the year ended December
31, 1994. The parties shall determine the "Adjusted Base Price" as
follows:
(a) The product of the following formula shall be
added to, or subtracted from, the Base Price, as appropriate:
2.5 x (EBIT - $3,300,000) = Adjustment to Base Price
(b) Subject to the limitations set forth in
subparagraph (c) below, the Adjusted Base Price is equal to the
following:
Base Price +/- Adjustment to Base Price = Adjusted Base
Price
(c) Notwithstanding anything to the contrary
contained herein, the Adjusted Base Price may not be greater than
Sixteen Million Dollars ($16,000,000) nor less than Fourteen
Million Five Hundred Thousand Dollars ($14,500,000).
In the event that Seller shall disagree with the determination by
Buyer of the Adjusted Base Price (as hereinafter defined), such
dispute will be resolved in the same manner that disputes
concerning the audited Valuation Date Financial Statements were
resolved in Section 2.01(ii).
(iv) The "Adjusted Purchase Price" shall be determined by
making the following adjustments to the Adjusted Base Price:
(a) The amount of the Net Assets (as hereinafter
defined) as of the Valuation Date shall be determined on a FIFO
basis (the "12/31/94 Net Assets Amount"). If the 12/31/94 Net
Assets Amount is less than $11,316,617, there shall be a
corresponding decrease in the Adjusted Base Price by such
difference. However, if the 12/31/94 Net Assets Amount is greater
than $11,316,617, there shall be a corresponding increase in the
Adjusted Base Price by such difference.
(b) The Adjusted Base Price, as increased or
decreased in accordance with Section 2.01(iv)(a), shall be:
(1) reduced by the amount, if any, by which
the reserve for Non-Qualifying Inventory (See Section
2.01(iv)(d)(1)) as of the Valuation Date exceeds the Inventory
reserve for obsolescence on the Valuation Date Financial
Statements;
(2) reduced by the amount, if any, by which
Non-Qualifying Accounts Receivable (See Section 2.01(iv)(d)(2)) as
of the Non-Qualifying Receivables Determination Date exceeds the
Accounts Receivable reserve for bad debts as of the Valuation Date;
and
(3) increased by the amount, if any, by which
the Accounts Receivable reserve for bad debts on the Valuation Date
Financial Statements exceeds the amount of Non-Qualifying Accounts
Receivable as of the Non-Qualifying Receivables Determination Date.
This result will then be the "Adjusted Purchase Price."
(c) For purposes of this Section 2.01(iv) the term
"Net Assets" shall be the difference between Purchased Assets and
Assumed Obligations, determined on a FIFO basis, as computed from
the Valuation Date Financial Statements approved by the Seller and
the Buyer as provided in Section 2.01(ii). The Net Assets of the
Group on March 25, 1994 is agreed by the parties hereto to be
$11,316,617, which amount was determined based on the information
set forth on the March 25, 1994 Group balance sheet, a copy of
which is attached hereto as Schedule 2.01(ii). The Net Assets as
of the Valuation Date will be determined by the mutual agreement of
the Buyer and the Seller based on the Valuation Date Financial
Statements. In the event that Buyer or Seller contests the
accuracy of the Determination of Net Assets, such dispute will be
resolved in the same manner that disputes concerning the Valuation
Date Financial Statements were resolved in Section 2.01(ii).
(d) Non-Qualifying Inventory and Non-Qualifying
Accounts and Notes Receivable shall be determined and valued as
follows:
(1) "Non-Qualifying Inventory" shall be those
items of Inventory, as of the Valuation Date, which have not sold
for the twelve (12) month period preceding the Valuation Date. In
addition, if the Seller shall, as of the Valuation Date, have any
item of Inventory which is in excess of two (2) times the number of
items of such Inventory as were sold by the Group in the twelve
(12) month period immediately preceding the Valuation Date, then
all of such items, and not merely those items in excess of two (2)
times twelve (12) months' sales of such items, shall also be
considered "Non-Qualifying Inventory." The reserve for Non-
Qualifying Inventory shall be valued at sixty-five percent (65%) of
the weighted average cost of the "Non-Qualifying Inventory.
(2) "Non-Qualifying Accounts and Notes
Receivable" shall be determined as (A) any accounts and/or notes
which are one hundred twenty (120) days or more past due on the
date which is one hundred twenty (120) days after the Closing Date
(the "Non-Qualifying Receivables Determination Date") which the
Buyer elects to return and does return to the Seller , and (B) any
service charges or unissued credits for items included as Accounts
Receivable on the Valuation Date but which remain uncollected on
the Non-Qualifying Receivables Determination Date, which the Buyer
elects to return to the Seller.
Within ten (10) days after the later of (i) the delivery to
Buyer of the audited Valuation Date Financial Statements, (ii) the
Non-Qualifying Receivables Determination Date, or (iii) the final
resolution of any dispute concerning the calculation of the
Adjusted Purchase Price (the "Adjusted Purchase Price Determination
Date"), the Buyer shall determine, and give written notice to the
Escrow Agent and Seller of, the Adjusted Purchase Price based upon
such audited Valuation Date Financial Statements, or at Buyer's
option upon the review of Buyer's Accountants engaged to review the
results of the audit and procedures of Seller's Accountants. In
the event that Seller shall disagree with the determination by
Buyer of the Adjusted Purchase Price, such dispute will be resolved
in the same manner that disputes concerning the Valuation Date
Financial Statements were resolved in Section 2.01(ii).
(v) The Escrowed Proceeds shall be delivered to Maguire,
Voorhis & Wells, P.A., the attorneys for Buyer, as Escrow Agent
(the "Escrow Agent"), to be deposited in an escrow account to be
established by the Escrow Agent as a money market demand deposit
account with Sun Bank, National Association, Orlando, Florida,
under the escrow agreement referred to in Section 8.13. The
Escrowed Proceeds shall be in an amount mutually agreed upon by the
Seller and Buyer at Closing to be an estimate of the excess of Non-
Qualifying Accounts and Notes Receivable over the amount of
Seller's reserve for bad debts as of the Valuation Date (the
"Escrowed Proceeds"). The balance in the escrow account, including
the Escrowed Proceeds and any interest thereon, shall be paid to
the appropriate party as hereinafter provided. Any interest earned
on the Escrowed Proceeds in the escrow account will follow the
settlement of the Escrowed Proceeds proportionately.
(vi) After determination of the Adjusted Purchase Price
as aforesaid, the parties shall be required to make the following
payments:
(a) To the extent that the Adjusted Purchase Price
exceeds the Base Price, the Buyer shall pay immediately to the
Seller the excess of the Adjusted Purchase Price over the Base
Price immediately following the Adjusted Purchase Price
Determination Date;
(b) To the extent that the Base Price exceeds the
Adjusted Purchase Price, such excess shall immediately be paid to
Buyer by the Seller, and to the extent such sums are being held by
the Escrow Agent pursuant to Section 2.01(v), the Escrow Agent
shall remit to Buyer the amount required hereunder from such
Escrowed Proceeds;
(c) All sums required to be remitted by the Seller
to the Buyer hereunder shall not be subject to the indemnity
obligations set forth in Section 11.05 of this Agreement and
represent an additional obligation of the Seller under this
Agreement. The Buyer may withhold payments under the Promissory
Note until such time as the Seller shall have paid all sums due the
Buyer hereunder, to the extent such payments exceed the amount of
the Escrowed Proceeds; and
(d) After the payments of the amounts under this
Section 2.01(vi), the Escrow Agent shall remit to Seller all
remaining sums held by it pursuant to Section 2.01(v).
Section 2.02 Allocation of Purchase Price. Each party
agrees to report the purchase and sale contemplated herein on
Internal Revenue Service Form 8594 and to mutually agree on the
allocation of the consideration being paid by the Buyer for the
Purchased Assets and for all other federal and state tax purposes
in accordance with such allocation and within the applicable time
periods required for such reporting. The written instrument of
this allocation will be attached at Closing. In the event that
Seller and the Buyer shall be unable to agree on the allocation of
such consideration, then such dispute will be resolved in the same
manner that disputes concerning the Valuation Date Financial
Statements were resolved in Section 2.01(ii).
ARTICLE III
CLOSING; DOCUMENTS OF CONVEYANCE
Section 3.01 Closing. Subject to the satisfaction of the
conditions set forth in Articles VIII and IX, the purchase and sale
contemplated hereby shall be consummated at a closing (referred to
herein as the "Closing") to be held at the offices of D'Ancona &
Pflaum, Suite 2900, 30 N. Lasalle, Chicago, Illinois, starting at
10:00 a.m. local time on January 3, 1995 or at such other location,
or such earlier or later date or time as the parties may mutually
agree. The date the Closing occurs is referred to herein as the
"Closing Date". The purchase and sale shall be deemed effective
for all purposes as of the opening of business on the Closing Date
(the "Effective Time"). The Buyer and the Seller may mutually agree
to extend the Closing Date to a date not later than January 31,
1995.
Section 3.02 Assignment and Assumption Agreements. At the
Closing, the Buyer and the Seller shall execute and deliver to each
other instruments of assignment and assumption, in form and content
reasonably acceptable to counsel for the Buyer and the Seller,
pursuant to which the Seller shall assign the Assumed Obligations
(to the extent legally transferable to Buyer) to the Buyer and the
Buyer shall assume all such obligations. The instruments of
assignment and assumption are hereafter collectively referred to as
the "Assignment and Assumption Agreements," and shall be in the
form of Exhibit 3.02 attached hereto. With respect to the Leased
Real Estate, the Seller shall also deliver to the Buyer copies of
the landlord consents to the assignment of such leases to the Buyer
and such landlord estoppel certificates, non-disturbance
agreements, and waivers as the Buyer or the Buyer's lenders may
reasonably request. With respect to the Assumed Contracts, the
Seller shall also deliver to the Buyer copies of the consents to
the other parties thereto to the assignment of the Assumed
Contracts and such estoppel certificates as the Buyer may
reasonably request. The Buyer shall reasonably cooperate with
Seller in obtaining all such consents.
Section 3.03 Other Instruments of Conveyance. At the
Closing, the Seller shall execute and/or deliver to the Buyer the
following instruments of conveyance (hereafter referred to as the
"Other Instruments of Conveyance"):
(a) A bill of sale conveying the Fixed Assets (including
all manufacturers' and other warranties relating thereto) (the
"Bill of Sale") and Inventory described in Section 1.01(a) and (b)
to the Buyer, in the form attached hereto as Exhibit 3.03(a).
(b) Certificates of title relating to the titled Rolling
Stock, duly endorsed for transfer to the Buyer;
(c) General Warranty Deeds conveying good and marketable
record title to the Real Property and improvements thereon at each
of the Locations, together with Title Insurance thereon;
(d) An assignment of all other Purchased Assets
(including without limitation the Seller's Prepayments); and
(e) Such other instruments as may be reasonably
requested by the Buyer to convey the Purchased Assets or any part
thereto to the Buyer or to transfer any Permits to the Buyer.
All Other Instruments of Conveyance shall be free of all
Encumbrances and shall be in form and content reasonably acceptable
to counsel for the Buyer and the Seller.
Section 3.04 Other Deliveries at Closing. At the Closing,
in addition to the instruments described in Sections 3.02 and 3.03,
the following deliveries shall be made:
(a) The Seller shall deliver to Buyer (i) a sales tax
status certificate issued by the appropriate regulatory authorities
dated not less than five (5) days prior to the Closing Date
indicating that all sales taxes required to be paid by the Seller
as of such date have been paid (provided, however, that if the
Seller cannot deliver said certificate, the Seller shall indemnify
the Buyer for any sales tax matters pursuant to a separate
indemnification agreement), (ii) the Noncompetition Agreements in
the form attached hereto as Exhibit 3.04(a), and (iii) all
certificates and opinions required by Article VIII, except such as
may be expressly waived in writing by the Buyer;
(b) The Buyer shall deliver to the Seller (i) the cash
portion of the Base Price as set forth in Section 2.01(i), (ii) the
Promissory Note, (iii) the shares of Common Stock as set forth in
Section 2.01(i), (iv) an Employment Agreement with Ray Lear in the
form attached hereto as Exhibit 3.04(b); (v) a copy of the Buyer's
blanket certificate of resale; and (vi) all certificates and
opinions required by Article IX, except such as may be expressly
waived in writing by Seller.
(c) The Escrowed Proceeds shall be delivered to the
Escrow Agent pursuant to Section 2.01(i)(a), together with such
other deliveries as may be required by the provisions of Section
3.11.
Section 3.05 Allocation of Closing Costs. At or promptly
after the Closing, (a) the Buyer shall pay in a timely manner all
documentary stamp taxes, if any, on the shares of Common Stock, and
(b) the Buyer shall pay all sales taxes and transfer fees relating
to the Purchased Assets (other than the transfer fees and recording
costs related to the Real Property which shall be the
responsibility of the Seller), the transfer of the certificates of
title described in Section 3.03(b) and, as applicable, the issuance
of new license tags for the Rolling Stock. Except as otherwise
provided in this Agreement, each party shall be responsible for and
bear all of its own transactional costs and charges relating to the
purchase and sale contemplated herein.
Section 3.06 Prorations at Closing. All ad valorem taxes,
general and special real property taxes, and special district
levies and assessments, if any relating to the Purchased Assets for
the 1994 calendar year shall be allocated as of the Closing Date
based on the Seller's 1993 tax bills (with any subsequent
adjustment to be paid by the appropriate party once the 1994 tax
bills are delivered). All other operating expenses and liabilities
relating to the ownership and operation of the Purchased Assets
attributable to the period ending at the Effective Time (other than
expenses included in the Assumed Obligations) shall be paid by the
Seller as they fall due. All operating and other expenses relating
to the ownership and operation of the Purchased Assets attributable
to periods commencing on and after the Effective Time and all of
the Assumed Obligations shall be the sole responsibility of the
Buyer.
Section 3.07 Transfer of Possession. Simultaneously with
the Effective Time, the Seller shall give the Buyer full possession
and enjoyment of the Purchased Assets.
Section 3.08 Termination and Related Employee Matters.
Simultaneously with the Effective Time, the Seller shall terminate
all of its employees engaged in the business operations of the
Group and that it no longer intends to employ as of the Effective
Time and the Buyer shall employ such of the terminated employees as
it determines in its sole discretion; provided, however, the Buyer
shall give each employee of Seller that it hires credit for past
years of service with the Seller for purposes of calculating such
employee's ability to participate in, and benefits under, the
Buyer's pension and welfare plans.
Section 3.09 Utility Services. On the Closing Date or as
soon thereafter as practicable, the Seller and the Buyer will
cooperate with each other to arrange to obtain final readings with
respect to all electricity, water, telephone, and other utilities
serving the Real Property being purchased hereunder and the Leased
Real Estate that is the subject of the Assumed Leases, and to have
such services transferred to the Buyer's name immediately
thereafter. All unpaid utility charges accrued through the
Effective Time shall be paid by the Seller or accrued for on the
Valuation Date Financial Statements.
Section 3.10 Procedure Relating to Motor Vehicles. At the
Closing, the Buyer and the Seller shall execute an affidavit
prepared by the Seller, together with all other documentation
required in transferring the certificates of title to the titled
motor vehicles (and trailers) included in the Purchased Assets.
The affidavit shall identify each such motor vehicle by year, make,
model and vehicle identification number and shall set forth the
current odometer readings and the purchase price that the parties
have mutually agreed to allocate to each such motor vehicle.
Section 3.11 Other Actions and Instruments. The Buyer and
the Seller shall take such other actions and shall execute and
deliver such other instruments, documents and certificates at the
Closing as are required by the terms of this Agreement or as may be
reasonably requested by the Buyer or the Seller in connection with
the Closing of the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller hereunder, Buyer represents
and warrants to Seller that:
Section 4.01 Organization, Good Standing and Qualification.
The Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida. The Buyer is
duly qualified to do business and is in good standing in each and
every jurisdiction where the failure to qualify or to be in good
standing would have a material adverse effect upon its financial
condition, the conduct of its business or the ownership of the
Purchased Assets.
Section 4.02 Corporate Power and Authority. The Buyer has
the requisite corporate power and authority to execute, deliver and
perform its obligations under and pursuant to this Agreement, and
all documents executed and delivered by Buyer in connection
herewith, including without limitation, the requisite corporate
power and authority to acquire the Purchased Assets and assume the
Assumed Obligations upon the terms and conditions set forth herein.
The execution and delivery of this Agreement and all documents
executed and delivered by Buyer in connection herewith and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of
the Buyer. This Agreement and all documents executed and delivered
by Buyer in connection herewith will be duly executed and upon the
execution and delivery thereof will be the legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
Section 4.03 Validity of Contemplated Transactions. The
execution, delivery and performance of this Agreement and all
documents executed and delivered in connection herewith, and the
consummation of the transactions contemplated hereby do not and
will not (a) contravene any provision of the Articles of
Incorporation or the Bylaws of the Buyer, (b) violate, be in
conflict with, constitute a default under, result in the
termination of, cause the acceleration of any payments pursuant to,
or otherwise impair the good standing, validity, and effectiveness
of any agreement, contract, commitment, indenture, lease or
mortgage applicable to the Buyer, (c) violate any provision of law,
rule, regulation, order, license, permit, authorization, or
approval to which the Buyer is subject, or (d) violate any
judgment, order, writ, prohibition, injunction or decree of any
court, governmental body or arbitrator by which the Buyer is bound,
except where such breach or conflict would not, individually or in
the aggregate, have a material adverse effect on the Buyer.
Section 4.04 Capitalization. The authorized capital stock
of the Buyer consists of 20,000,000 shares of Common Stock, of
which 6,148,944 shares of Common Stock were issued and outstanding
as of October 20, 1994 and 10,000,000 shares of Preferred Stock, no
par value, none of which were outstanding on October 20, 1994. All
of such shares of outstanding Common Stock are duly authorized and
validly issued, fully paid and nonassessable. The Common Stock
shall have been duly authorized and issued and when issued shall be
outstanding, fully paid and nonassessable. Subject to the
provisions of Article X, as of the Closing Date, the Common Stock
will be properly registered under the Securities Act of 1933, as
amended, and all applicable state securities laws and Seller shall
be entitled to freely transfer such Common Stock in compliance with
such laws.
Section 4.05 Regulatory Approvals. All consents, waivers,
approvals, authorization or exemptions from governmental entities
and other third parties and other requirements prescribed by any
law, rule or regulation which must be obtained or satisfied by the
Buyer in order to permit the consummation of the transactions
contemplated by this Agreement have been obtained and satisfied or
will be obtained and satisfied prior to the Closing.
Section 4.06 Copies of Articles and Bylaws. The copy of the
Buyer's Articles of Incorporation and Bylaws (the completeness and
accuracy of which will be certified by an authorized officer of the
Buyer at Closing) which have been delivered to the Seller are true,
complete and correct in full force and effect as of the date hereof
and will be in effect on the Closing Date.
Section 4.07 Inventory Held for Resale. The Buyer intends
to hold the Inventory for resale to customers and for no other
purpose.
Section 4.08 Litigation: Compliance with Laws. (a) To the
best of Buyer's knowledge, there is no suit, action, claim,
investigation, arbitration, administrative or legal or other
proceeding or governmental investigation pending or threatened
against the Buyer, which may adversely affect the Buyer in an
amount in excess of Five Hundred Thousand Dollars ($500,000), nor
(b) to the best of Buyer's knowledge, has the Buyer failed to
comply with any law, including without limitation all ordinances,
requirements, regulations, or orders applicable to the Buyer, nor
(c) to the best of Buyer's knowledge, has the Buyer violated any
order, writ, injunction, judgment, or decree of any court or
federal, state or local department, official, commission,
authority, board, bureau, agency, or other instrumentality which
was issued against or is pending against the Buyer, which violation
might have a material adverse effect on the financial condition,
business or results of operations of the Buyer.
Section 4.09 Brokers' or Finders' Fees. No broker, Person
or firm acting on behalf of the Buyer or under its authority is or
will be entitled to any commission, broker's or finder's fee or
financial advisory fee from the Buyer in connection with any of the
transactions contemplated herein.
Section 4.10 Completeness of Disclosure. No representation
or warranty by the Buyer in this Agreement contains or at the
Effective Time will contain any false or misleading statement of
material fact or omits a fact necessary to make the statements
made, in light of the circumstances under which they were made, not
misleading.
Section 4.11 Buyer's Filings with SEC.
(a) The Buyer is current with all its filings with the
Securities and Exchange Commission (the "SEC") and any other
securities regulatory agency or governmental body required by the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), and the regulations promulgated thereunder or any other
applicable securities laws.
(b) Buyer has heretofore delivered to the Seller: (i)
the annual reports on Form 10-K for its fiscal years ended January
28, 1994 and January 29, 1993; (ii) its quarterly reports on Form
10-Q for its fiscal quarters ending April 30, 1994 and July 31,
1994; (iii) its proxy or information statements relating to
meetings of the stockholders of Buyer since January 28, 1994; and
(iv) all of its other reports, statements, schedules, and
registration statements (including exhibits and schedules thereto)
filed with the SEC since January 28, 1994 and through the date of
this Agreement (the "SEC Filings").
(c) As of their respective filing dates, each such
report or statement filed pursuant to the Exchange Act did not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer hereunder, Seller represents
and warrants to Buyer that, except as the contrary expressly may be
indicated in this Agreement or in the Schedules and Exhibits
attached hereto:
Section 5.01 Organization, Good Standing and Qualification.
The Seller is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Ohio. The Seller
is duly qualified to do business and is in good standing in each
and every jurisdiction where the failure to qualify or to be in
good standing would have a material adverse effect upon its
financial condition, the conduct of its business or the ownership
of the Purchased Assets.
Section 5.02 Corporate Power and Authority. The Seller has
the requisite corporate power and authority to execute and deliver
the Agreement and subject to obtaining third party consents from
Triumph and Star Bank, National Association, at Closing, to perform
its obligations under and pursuant to this Agreement and all
documents executed and delivered by Seller in connection herewith,
including without limitation, the requisite corporate power and
authority to sell the Purchased Assets and transfer the Assumed
Obligations upon the terms and conditions set forth herein. The
execution and delivery of this Agreement and all documents executed
and delivered by Seller in connection herewith and subject to
obtaining third party consents from Triumph and Star Bank, National
Association, at Closing, the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Seller. This
Agreement and all documents executed and delivered by Seller in
connection herewith will be duly executed and upon the execution
and delivery thereof will be legal, valid and binding obligations
of the Seller enforceable against the Seller in accordance with
their respective terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium,
or other laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
Section 5.03 Validity of Contemplated Transactions. Except
as set forth on Schedule 5.03 attached hereto, the execution,
delivery and performance of this Agreement and all documents
executed and delivered in connection herewith, and the consummation
of the transactions contemplated hereby do not and will not (a)
contravene any provision of the Articles of Incorporation or Code
of Regulations of the Seller, (b) violate, be in conflict with, or
constitute a default under, any agreement, contract, commitment,
indenture, lease or mortgage, to which the Seller is a party or by
which the Seller or the Purchased Assets are bound, (c) to the best
of Seller's knowledge, violate any material provision of any law,
rule or regulation of any governmental authority, administrative
body or agency applicable to Seller, or (d) violate any judgment,
order, writ, prohibition, injunction or decree specifically
applicable to the Seller or the Purchased Assets of which Seller
has knowledge.
Section 5.04 Regulatory Approvals. All consents, waivers,
approvals, authorizations or exemptions from governmental entities
and other material requirements prescribed by any law, rule or
regulation which must be obtained or satisfied by the Seller in
order to permit the consummation of the transactions contemplated
by this Agreement have been obtained or satisfied or will be
obtained or satisfied prior to the Closing.
Section 5.05 Copies of Articles and Code of Regulations.
The copy of the Seller's Articles of Incorporation and Code of
Regulations (the completeness and accuracy of which will be
certified by an authorized officer of the Seller at Closing) which
have been delivered to the Buyer are true, complete and correct in
full force and effect as of the date hereof and will be in effect
on the Closing Date.
Section 5.06 Liabilities and Obligations of Seller. The
Seller understands and acknowledges that the Buyer is not assuming
any liabilities or obligations of the Seller other than the Assumed
Obligations. All such liabilities or obligations other than the
Assumed Obligations shall continue to be the obligation of Seller.
Section 5.07 Condition of and Title to Purchased Assets.
Except as set forth on Schedule 5.07 attached hereto or Section
6.09, (a) all of the Purchased Assets (other than the Real
Property) are in good condition and repair, ordinary wear and tear
excepted, and (b) the Seller at Closing will have, good title to
all of the Purchased Assets, free and clear of any and all
Encumbrances and restrictions of any nature whatsoever, other than
the restrictions affecting the Real Property approved in writing by
the Buyer pursuant to Section 6.09. In the case of leased assets
which are included in the Purchased Assets, to Seller's knowledge
all such assets have been maintained in a condition required by
their respective leases in all material respects, none of which
will result in material charges to Buyer for excess wear and tear
on or to such items.
Section 5.08 Material Contracts. Schedule 5.08 attached
hereto contains a true and complete listing of the following oral
and written material contracts (and all amendments, supplements,
and modifications thereto) to which the Seller, for the benefit of
the Group, is a party: (a) any contract or agreement relating to
capital expenditures in excess of $50,000; (b) all current or
pending contracts or agreements between the Seller and any other
party which involve, in the aggregate, the payment or receipt by
the Seller of more than $50,000, which cannot be cancelled by the
Seller without penalty upon thirty (30) days notice; (c) any loan
or advance to, or investment in, any Person or any contract or
agreement relating to the making of any such loan, advance, or
investment in excess of $50,000; (d) any guarantee or other
contingent liability in respect of any indebtedness or obligation
of any Person; (e) any management, consulting, employment,
severance, union, termination or other agreement or similar
contract or agreement; (f) any contract or agreement limiting the
freedom of Seller or its successors from engaging in any line of
business, soliciting employees or customers, competing with any
person and any contract or agreement where any Person has agreed
not to compete with Seller or its Affiliates; (g) any contract,
agreement or obligation to complete an existing customer's job or
purchase order which, to the best knowledge, information, and
belief of the Seller may reasonably be expected to have a potential
material adverse impact on the business or operations of Group; (h)
any contract, commitment, or agreement between (1) Seller and (2)
any shareholder, officer, employee or Director (or any of their
Affiliates) of Seller that are relevant to the Group; and (i) all
concession agreements.
Such listing identifies the parties to the contract and the
nature of the Agreement. True and complete copies of all such
contracts and agreements have been made available for review by
Buyer or its representatives.
Section 5.09 Assumed Leases and Contracts. Subject to
receipt of all necessary third party and lessor consents, at the
Closing, the Buyer will receive the Seller's entire right, title
and interest in the Assumed Leases and the Assumed Contracts, free
and clear of all Encumbrances and restrictions. To the best of
Seller's knowledge, each of the Assumed Leases and Assumed
Contracts is valid, binding, in full force and effect, and
enforceable by or against Seller in accordance with their
respective terms and conditions, and to the best of Seller's
knowledge, upon assignment and assumption by Buyer, will be
enforceable by Buyer in accordance with their respective terms,
subject to bankruptcy, insolvency and laws affecting the rights of
creditors generally. To the best of Seller's knowledge there is no
existing material default thereunder or material breach thereof or
condition which, with the passage of time or notice or both, might
constitute a default thereunder. There has been no termination or,
to Seller's knowledge, threatened termination or notice of default
(not heretofore cured) relating to any such lease or contract.
Prior to the Closing, the Seller will obtain all necessary consents
to the assignment of the Assumed Leases and Assumed Contracts to
the Buyer at the Closing. Except as set forth on Schedule 5.09
attached hereto and except for the Assumed Leases, there are no
leases, agreements or commitments, written or oral, pursuant to
which the Group uses or occupies or has the right to occupy, any
real property (except for the Real Property or the Leased Real
Estate that is the subject of the Assumed Leases) now or in the
future in connection with the business of the Group.
Section 5.10 Concerning the Leased Real Estate and the Real
Property. With respect to the Group, the Seller does not own,
lease or use any real estate other than the Leased Real Estate and
the Real Property in connection with the present business
operations of the Group. Further representations and warranties as
to the Leased Real Estate and the Real Property are as follows, and
are subject to the disclosures set forth on Schedule 5.10 attached
hereto:
(a) The only person in occupancy of the Leased Real
Estate and the Real Property is the Group. The Leased Real Estate
and the Real Property is not homestead property, and no person
resides at the Leased Real Estate or the Real Property.
(b) To the knowledge of the Seller, the Real Property
and the Leased Real Estate that is the subject of the Assumed
Leases is zoned to permit the operations of the Group being
conducted on the Leased Real Estate and the Real Property as of the
date of this Agreement. To the best of Seller's knowledge, there
are no planned or threatened changes to the current zoning or land
use designations of the Leased Real Estate or the Real Property.
(c) The Seller has not received any notice or
communication from any governmental entity indicating that any
condition exists with respect to the Leased Real Estate or the Real
Property or with respect to the improvements thereon that violates
any city, county, state or federal law, ordinance, regulation,
ruling or code, including, without limitation, the Environmental
Laws (as defined in Section 5.25). The Seller has not received
from any insurance carrier insuring or proposing to insure the
Leased Real Estate or the Real Property or any other person any
notice or other communication noting any dangerous or illegal
condition at the Leased Real Estate or the Real Property or any
other condition at the Leased Real Estate or the Real Property
otherwise requiring material corrective action;
(d) The Real Property is not subject to any outstanding
lease, agreement of sale (except for this Agreement), option or
other right of a third party to acquire any interest therein.
(e) To the best of Seller's knowledge, the Leased Real
Estate is not subject to any outstanding lease (other than the
Assumed Leases), agreement of sale (except for this Agreement),
option or other right of a third party to acquire any interest
therein.
(f) To the best of Seller's knowledge there is ingress
and egress to and from the Leased Real Estate or the Real Property
of record adequate for the use of the Leased Real Estate or the
Real Property as currently operated by the Seller. To the best of
Seller's knowledge, and except as set forth on either Schedule 5.08
or Schedule 5.09, the Seller has made no material off-record agree-
ments affecting the ownership, use or operation of the Leased Real
Estate or the Real Property.
(g) To the knowledge of the Seller, all public utili-
ties, including, without limitation, sewers, water, electric, gas,
and telephone, required for the operation of the Leased Real Estate
and the Real Property as presently operated are installed and
operating, and all installation and connection charges therefor
have been paid in full. The Seller has not received any notice
stating that the Group will not be able to obtain adequate supplies
of water to operate the business of the Group on the Leased Real
Estate and the Real Property as presently conducted, or that the
provision of utilities violates any public or private easement.
(h) The Seller has received no notice that any part of
any improvements on the Leased Real Estate and Real Property en-
croaches upon any property adjacent thereto or upon any easement,
nor is there, to Seller's knowledge, any encroachment or overlap
upon the Leased Real Estate and Real Property.
(i) To the knowledge of the Seller, there is no
underground or buried storage tank or drum located on the Leased
Real Estate and Real Property, except for the underground storage
tanks described in Schedule 5.10. Each of the underground storage
tanks on the Leased Real Estate and the Real Property described in
Schedule 5.10 is in material compliance with all applicable
requirements of law in all material respects, has been duly per-
mitted and inspected in accordance with all applicable requirements
of law, and no deficiencies have been noted in any inspections
thereof. No law (i) that is presently in effect, (ii) that has
been passed prior to the date hereof but with a delayed effective
date, or (iii) that, to the Seller's knowledge, has been proposed,
would require any of such underground storage tanks to be relocated
above ground within five (5) years from the date of this Agreement.
(j) To the knowledge of the Seller, except as set forth
on Schedule 5.10 attached hereto, the Group has no Hazardous
Materials Liabilities, and neither the Purchased Assets, the
operations of the Group nor the operations of its predecessors in
interest on the Leased Real Estate or the Real Property will carry
with them any Hazardous Materials Liabilities (x) for which the
Buyer could be responsible, or (y) that would materially and
adversely affect the ability of the Buyer to use the Leased Real
Estate and the Real Property in the manner heretofore used by the
Group.
Section 5.11 Buildings, Structures and Other Improvements.
Except as set forth on Schedule 5.11 attached hereto, (a) on the
Closing Date the buildings, structures and other improvements
constituting part of the real property subject to the Assumed
Leases and included on the Real Property being purchased hereunder
(collectively the "Structures") will be in a good state of repair
and operating condition, reasonable wear and tear and normal usage
excepted; (b) to the best of Seller's knowledge, the Structures do
not contain any latent defects; (c) all of the Structures comply in
all material respects with all applicable building, fire, and other
applicable laws, codes and regulations; and (d) the Fixed Assets
will include all fixed assets of any material value used in the
business operations of the Group. The Seller is not leasing or
holding for consignment any of its Fixed Assets or Inventory except
as set forth on Schedule 5.11. Seller has no notice that there are
any outstanding special tax assessments against any of the Seller's
Fixed Assets or Inventory.
Section 5.12 Financial Statements. The Seller's Financial
Statements consisting of: (a) audited balance sheets, statements of
income and retained earnings, and statements of cash flows, and the
footnotes thereto, for the years ended December 31, 1993 and 1992
for the Group, accompanied by the opinion of the Seller's
Accountants, and (b) the interim financial statements for the
period ended September 25, 1994 for the Group, are attached hereto
as Schedule 5.12 and incorporated by reference herein (such balance
sheets and statements being referred to herein collectively as the
"Financial Statements"). September 25, 1994 is hereafter referred
to as the "Financial Statement Date." To the best of Seller's
knowledge, the Seller's Financial Statements were prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods noted, except for the
absence of footnotes for the interim periods, and present fairly in
all material respects the financial condition of the Seller on the
last day of and the results of operations for the respective
periods ended on such dates. To the best knowledge of Seller,
there are no liabilities or obligations, absolute, fixed or
contingent, known or unknown, of the Group or of the Seller that
are relevant to the Group that are required to be disclosed on
financial statements prepared in accordance with GAAP, except (x)
those reflected in or otherwise provided for in the Financial
Statements, and (y) those arising in the ordinary course of
business since the Financial Statement Date, except as set forth on
Schedule 5.12 attached hereto. Since the Financial Statement Date,
there has been no material adverse change in the financial
condition of the Seller or the Group. The income statements
included in the Financial Statements do not materially overstate
net income before income taxes for the periods included therein.
Section 5.13 Certain Tax Matters. The Seller has duly filed
all federal, state, and local tax returns and reports required to
be filed by it and all taxes for which Seller is or could be liable
have either been paid, withheld or reserved. The Seller's income
tax returns have not been audited except as noted on Schedule 5.13
attached hereto, and all such returns have been properly completed
and filed on a timely basis and such returns are true and correct
in all material respects. As of the time of filing, all such
returns correctly reflected in all material respects the facts
regarding the income, business, assets, operations, activities,
status or other matters of the Seller or any information required
to be shown thereon. Except as set forth on Schedule 5.13 attached
hereto, the Seller has not (i) entered into any agreements for the
extension of time or for the assessment of any tax or tax
delinquency which would adversely affect the Buyer or the Purchased
Assets or (ii) received any outstanding or unresolved notices from
the Internal Revenue Service or any taxing body of any proposed
deficiency or assessment. To the best of the Seller's knowledge,
the Seller has properly paid all sales and use taxes due with
respect to its business operations and withheld all amounts, if
any, required by law to be withheld for income taxes and
unemployment taxes, including without limitation, social security
and unemployment compensation, relating to its employees, and
remitted such withheld amounts to the appropriate taxing authority.
Section 5.14 Ad Valorem, Real Property Tax Matters. There
are no taxes, fees, or assessments of any kind or nature whatsoever
which are presently due or, to the best of Seller's knowledge,
which will or may become due with respect to the Purchased Assets,
except for ad valorem personal property taxes, general and special
real property taxes and special district levies and assessments, if
any, for the current calendar year, which have been prorated and
accrued for in accordance with Section 3.06. Any taxes, fees or
assessments of any kind or nature arising out of the Group's
business activities prior to Closing shall be the responsibility of
the Seller, except to the extent assumed by Buyer in the Assumed
Obligations.
Section 5.15 Litigation: Compliance with Laws. (a) The
Seller has not been served with any notice of any legal proceeding,
and to the best of Seller's knowledge, there is no material suit,
action, claim, investigation, arbitration, administrative or legal
or other proceeding or governmental investigation pending or
threatened against the Seller or the Purchased Assets except as
disclosed on Schedule 5.15 nor (b) to the best of Seller's
knowledge, has the Seller failed to comply with any law, including
without limitation all ordinances, requirements, regulations, or
orders applicable to the Seller, nor (c) to the best of Seller's
knowledge, has the Seller violated any order, writ, injunction,
judgment, or decree of any court or federal, state or local
department, official, commission, authority, board, bureau, agency,
or other instrumentality which was issued against or is pending
against the Seller, which violation might have a material adverse
effect on the financial condition, business or results of
operations of the Seller, or, the Purchased Assets.
Section 5.16 Permits and Licenses. To the best of Seller's
knowledge, the only permits, licenses, approvals or other
authorizations (hereafter referred to as the "Permits") necessary
for the complete operation of the Group's business as it is
presently operated, have been obtained, are in full force and
effect, and are listed on Schedule 5.16 hereto. To the best of
Seller's knowledge, all such Permits are currently valid and no
revocation, cancellation or withdrawal thereof has been effected
or, to the best of Seller's knowledge, threatened.
Section 5.17 Intellectual Properties. To the best of
Seller's knowledge, except as set forth on Schedule 1.01(d)
attached hereto, the Seller owns no trademarks, service marks,
trade names, copyrights, patents or applications for any of the
foregoing and none are used in connection with the Group's
business. The Seller will transfer, without warranty, all
intellectual property rights it may own in respect of the business
operations of the Group to the Buyer. The Seller has no knowledge
of any claim or reason to believe that the Seller is or may be
infringing on or otherwise acting adversely to the rights of any
person under or in respect of any proprietary rights. The Seller
is not obligated to make any payments by way of royalties, fees, or
otherwise to any owner or franchisor, licensor, permitter, or
easement grantor of, or other claimant to, any trademark, service
mark, trade name, trade secret, copyright, or patent with respect
to the use thereof, in connection with the conduct of its business
operations, except to sanctioning bodies whose name it uses on its
products.
Section 5.18 All Necessary Assets. The Purchased Assets,
the Assumed Purchase Orders, the Assumed Contracts, the Assumed
Leases, the Customer Deposits and the Materials Purchase
Obligations constitute all of the assets, contracts and leases used
in the operation of the Group's business other than the Excluded
Assets.
Section 5.19 Labor or Employee Disputes; Employment Matters.
Except as set forth on Schedule 5.19 attached hereto, with respect
to the Group the Seller is not a party to any contract or other
agreement with any labor union and is not experiencing or the
subject of, or to the best of Seller's knowledge, threatened by,
any union organization campaign or any strike, slowdown, picketing,
work stoppage, or other labor disturbance by any labor union or
group of employees and there have not been any, strikes, walkouts,
work stoppages, slow downs, or other material labor difficulties
affecting the Group's operations since May 1, 1987. To the best of
Seller's knowledge, no Person (including, but not limited to, any
federal, state, county or local government or other governmental,
regulatory or administrative agency or authority) has any claim or
basis for any suit, action, claim, proceeding or investigation
against the Seller regarding the operations of the Group arising
out of any statute, law, ordinance, code, rule or regulation
relating to discrimination in employment or employment practices or
occupational safety and health standards (including, without
limitation, The Fair Labor Standards Act, as amended, Title VII of
the Civil Rights Act of 1964, as amended, 42 U.S.C. Sec. 1981, the
Rehabilitation Act of 1973, as amended, the Age Discrimination in
Employment Act of 1967, as amended, or the Americans with
Disabilities Act of 1990) which, if upheld, would have a material
adverse effect on the business, assets, properties, operations,
results of operations, condition (financial or otherwise) or
prospects of the Group or the Seller. To the best knowledge of the
Seller, the employment or termination of any of the Group's
employees within the past five (5) years, has been in material
compliance with all applicable laws, rules and regulations.
Section 5.20 Inventory. To the best of Seller's knowledge,
the Inventory is and at the Effective Time will be merchantable and
in salable condition in all material respects and no portion of the
Inventory is or at the Effective Time will be obsolete or unusable
except as set forth in the Financial Statements.
Section 5.21 Employee Compensation. Schedule 5.21 hereto is
a list of all employees of the Seller relating to the Group or to
the Group's operations, their dates of hire, positions, base
salaries and commissions or bonus schedules, and a list of all
employment contracts with the Seller's employees related to the
Group or to the Group's operations, and all employee manuals which
have been distributed to or otherwise apply to the Seller's
employees.
Section 5.22 No Changes. Between the date of the most
recent unaudited financial statements that heretofore have been
delivered to Buyer by the Seller and the date of this Agreement (i)
there has not been any material change in the business or
condition, financial or otherwise, or in the results of operations
or prospects of the Group, or in the Purchased Assets or Assumed
Obligations, and to the best knowledge, information, and belief of
Seller, no fact or condition exists or is contemplated or
threatened that might cause such a change in the future, and (ii)
with respect to the Group there has not been:
(a) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
Purchased Assets, financial condition, operating results, prospects
or business of the Group;
(b) any waiver by the Seller of a valuable right or of
a material debt owed to it relating to the Group;
(c) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Seller, except in
the ordinary course of business consistent with past practices and
that is not material to the Purchased Assets, financial condition,
operating results or business of the Seller or the Group;
(d) any default (including without limitation, any event
that with the giving of notice or passage of time would cause a
default), termination or threatened termination under or amendment
to any material agreement, arrangement, contract, lease or license
that constitutes a portion of the Purchased Assets or any other
material contract or agreement relating to the Group or the
Purchased Assets;
(e) any material change in any compensation arrangement
or agreement with any employee (including, without limitation, any
increase in the rate of wages, salaries, bonuses or other
remuneration of any employee of the Group) except in the ordinary
course of business and consistent with the ordinary cycles of
employee review and past practices;
(f) any sale, assignment or transfer of any assets of
the Group, except in the ordinary course of business consistent
with past practices;
(g) any resignation or termination of employment of any
officer or key employee of the Group, other than the resignation of
the director of operations of The Treaty Supply division; and the
Seller, to the best of its knowledge, information, and belief, does
not know of the impending resignation or termination of employment
of any such officer or key employee;
(h) to the best of Seller's knowledge, information, and
belief, any material change in its relations with the Group's
employees or independent contractors;
(i) receipt or notice that there has been a loss of, or
material order cancellation by, any major customer or supplier of
the Group;
(j) the mortgage, pledge, encumbrance, restriction,
security interest, transfer of a security interest in, or lien,
created by the Seller, with respect to any of the Purchased Assets,
except liens for taxes not yet due or payable;
(k) any bonuses or profit sharing distribution of any
kind or any loans or guarantees made by the Seller relating to the
Group or its operations, to or for the benefit of any of its
employees, officers or directors, or any members of their immediate
families, other than travel advances and other business-related
advances made in the ordinary course of business consistent with
past practices;
(l) any declaration, setting aside, or payment of any
dividend or other distribution in respect of any of Seller's
capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of such stock or any option, warrant, or
other right to purchase or acquire any such stock by Seller;
(m) any capital expenditure or commitment therefor,
except in the ordinary course of business consistent with past
practices;
(n) any incurrence of indebtedness or guaranty of
indebtedness, liability or obligation by Seller, except for the
obligations incurred in the ordinary course of business consistent
with past practices;
(o) any change in the method of accounting or auditing
practice;
(p) any write-off as uncollectible of any notes or
accounts receivable, except write-offs in the ordinary course of
business charged to applicable reserves consistent with past
practices, none of which individually or in the aggregate is
material to the Seller;
(q) to the best of Seller's knowledge, any other event
or condition of any character that is likely to materially affect
the Purchased Assets, prospects, financial condition, operating
results or business of the Group (as such business is presently
conducted and as it is proposed to be conducted);
(r) any business conducted by Seller with respect to the
Group or the Group's operations, or any transaction entered into by
Seller with respect to the Group or the Group's operations, except
in the ordinary course of business consistent with past practices;
or
(s) any agreement or commitment by the Seller to do any
of the things described in this Section.
Section 5.23 No Affiliates' Assets, Leases or Contracts.
(a) None of the Purchased Assets are owned by any person other than
the Seller, and (b) all of the Assumed Contracts and Assumed Leases
are with Persons who are not Affiliates of the Seller and were
negotiated at arms' length, except as listed in Schedule 5.23
attached hereto.
Section 5.24 Insurance Coverages. Schedule 5.24 attached
hereto contains a true, complete and correct listing of all
policies of fire, liability, and other forms of insurance,
including the amounts and types of coverages pursuant to which the
Seller and the Purchased Assets are insured. All of such insurance
policies shall be kept in full force and effect until the first to
occur of (a) three (3) business days after the Closing or (b)
notification that the Buyer's insurance has become effective. All
of such insurance policies provide that a third party, such as the
Buyer, may be subrogated to the rights of Seller, with respect to
all claims concerning the Purchased Assets which might be asserted
against the Buyer for occurrences occurring prior to Closing.
Section 5.25 Environmental Matters. To the best of Seller's
knowledge, and except as set forth on Schedule 5.25 attached
hereto, with respect to the Group, Seller has not, during its
ownership of the Purchased Assets, generated, processed,
distributed, transported, used, treated, stored, handled, emitted,
discharged, released or disposed of (or caused any person or entity
to do any of the foregoing or assisted any person or entity in
doing any of the foregoing) any oil, gasoline, petroleum-related
products, hazardous substances, hazardous waste, or pollutants or
contaminants (as defined by CERCLA), including, without limitation,
asbestos or asbestos containing materials, PCB's or urea
formaldehyde, except in accordance with applicable laws or any
product which may give rise to Hazardous Materials Liabilities.
For purposes of this Section 5.25, the following terms shall have
the following meanings:
(i) The term "Hazardous Materials" shall mean (a)
hazardous materials, contaminants, constituents, medical wastes,
hazardous or infectious wastes and hazardous substances as those
terms are defined in any Environmental Laws, including without
limitation the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C.
Sec. 1801 et seq. (the "HMTA"), the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. Sec. 9601
et seq. (as so amended, "CERCLA"), the Clean Water Act, 33 U.S.C.
Sec. 1251 et seq. (the "CWA"), and the Clean Air Act, 42 U.S.C.
Sec. 7401 et seq. (the "CAA"); (b) petroleum, including crude oil
and any fractions thereof; (c) natural gas, synthetic gas and any
mixtures thereof; (d) asbestos and/or asbestos-containing
materials; and (e) polychlorinated biphenyl ("PCBs") or materials
or fluids containing PCBs in excess of 50 parts per million (ppm);
(ii) The term "Hazardous Materials Liabilities" shall
mean any and all damages, losses, liabilities, disabilities, fines,
penalties, costs or expenses (including reasonable attorneys' fees)
incurred or to be incurred, whether absolute, fixed or contingent,
civil or criminal, and whether arising under federal law or state
law, incurred or to be incurred in connection with the handling,
storage, transportation, or disposal of any Hazardous Materials;
and
(iii) The Term "Environmental Laws" shall mean any
statute, law, ordinance, code, rule, regulation, policy, guideline,
permit, consent, approval, license, judgment, order, writ, decree
or authorization, including the requirement to register storage
tanks, established or enacted for, or relating to, the protection
of the environment or the health and safety of any Person
(including, without limitation, those relating to (a) the HMTA,
CERCLA, the CWA, the CAA or the Resource Conservation and Recovery
Act, 42 U.S.C. Sec.6903 et seq.; (b) emissions, discharges,
releases or threatened releases of Hazardous Materials into the
environment, including, without limitation, into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities,
surface water, groundwater, publicly-owned treatment works, septic
systems or land; or (c) the generation, treatment, storage,
disposal, use, handling, manufacturing, transportation or shipment
of Hazardous Materials.
Section 5.26 Customers and Sales. Schedule 5.26 attached
hereto and incorporated herein by reference, is a true and accurate
list of the top twenty (20) customers of, and suppliers to, the
Group for the fiscal years ended December 31, 1992 and 1993, and
the eight months ended August 25, 1994. Except as set forth on
Schedule 5.26 attached hereto, the officers and Directors of Seller
do not possess, directly or indirectly, any financial interest in,
or as a director, officer or employee of, any Person that is a
supplier, customer, lessor, lessee, or competitor of the Group. No
customer or supplier of the Seller has advised the Seller that it
intends to cease doing business with the Seller (or the Buyer after
the Closing).
Section 5.27 Benefit Plans. To the best knowledge of the
Seller:
(a) The Seller neither sponsors nor otherwise
participates in, nor has Seller previously sponsored or otherwise
participated in any Employee Pension Benefit Plan (as defined in
Section 3(2) of ERISA) that is subject to the minimum funding
standards of Section 412 of the Internal Revenue Code of 1986, as
amended (the "Code") or Section 301, et seq. of ERISA.
(b) No Non-Exempted Prohibited Transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code) has occurred
with respect to any Employee Benefit Plan (as defined in Section
3(3) of ERISA) sponsored by the Seller and covered by Part 4 of
Subtitle B of Title I of ERISA.
(c) With respect to any self-funded Employee Welfare
Benefit Plan (as defined in Section 3(1) of ERISA), such plan is
fully funded on a present value actuarial basis, except as set
forth on Schedule 5.27 attached hereto.
(d) Except as otherwise set forth in Schedule 5.27
hereto, the Group is not now, nor has it been during the preceding
five years, a contributing employer to a Multiemployer Plan (as
defined in Section 4001(a)(3) of ERISA).
(e) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of the
Seller, threatened, that could reasonably be expected to be
asserted against any Employee Pension Benefit Plan or Employee
Welfare Benefit Plan, or the assets of any such plans. To the best
of Seller's knowledge, no civil or criminal action brought pursuant
to the provisions of Title I, Subtitle B, Part 5 of ERISA or any
other federal or state law is pending or threatened against any
fiduciary of any such plans. To the best of Seller's knowledge, no
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or
any fiduciary thereof, has been, or is currently, the direct or
indirect subject of an audit, investigation or examination by any
governmental or quasi-governmental agency.
(f) To the best of Seller's knowledge, all of the
Employee Pension Benefit Plans and Employee Welfare Benefit Plans
maintained by the Seller comply currently, and have complied in the
past, both as to form and operation, with their terms and with the
provisions of ERISA and the Code, and all other applicable laws,
rules and regulations. All necessary governmental approvals and
determinations for the Employee Pension Benefit Plans have been
obtained, including where applicable, a favorable determination
(covering all changes or amendments required by TEFRA, DEFRA and
REA) as to the qualification of such plans under Sections 401(a)
and 501(a) of the Code. Each of the Employee Pension Benefit Plans
maintained by the Seller has either obtained a favorable
determination (covering all changes or amendments required by TRA
'86 and subsequent pension legislation, regulations or rulings)
from the Internal Revenue Service as to its qualification under
Sections 401(a) and 501(a) of the Code or is within the remedial
amendment period (as provided in Section 401(b) of the Code) for
making any required changes or amendments, and nothing has occurred
since the date of each such determination or recognition letter
that would adversely affect such qualification.
(g) Except as otherwise set forth in Schedule 5.27
hereto, the Seller is not a party to, or has no liability under,
any nonqualified plan of deferred compensation (whether funded or
unfunded).
(h) Except as otherwise set forth in Schedule 5.27
hereto, all discretionary, employer contributions that have been
declared by the Seller have been contributed to the Treaty Company
Employees' (401(k)) Profit Sharing Plan (the "Plan"), and all
employer matching contributions for employee 401(k) contributions
made to the Plan prior to Closing, have been made and contributed
to the Plan.
(i) For purposes of all Sections of this Agreement
dealing with ERISA, the term "Seller" shall mean the Seller and
each trade or business (whether or not incorporated) that together
with the Seller would be treated as a single employer under the
provisions of Titles I or IV of ERISA.
(j) To the best of Seller's knowledge, the Seller has
complied with all provisions of the health care continuation
coverage requirements of Code Section 4980B, the Family and Medical
Leave Act of 1993, and the regulations thereunder.
(k) Except as set forth on Schedule 5.27 hereto, the
Seller does not have in effect any Employee Benefit Plans or
employee health insurance plans. Seller intends to maintain such
plans following the Closing. The Plan permits, or prior to Closing
shall be amended to permit, employees of Seller hired by the Buyer
to roll or directly transfer their vested account balances to a
qualified Employee Pension Plan at no cost to Buyer.
(l) The Seller agrees that the termination of employees
in connection with this Agreement shall constitute a partial
termination of the Plan, and accordingly all such terminated
employees shall be one hundred percent (100%) vested in all their
accounts in the Plan.
Section 5.28 Brokers' or Finders' Fees. The Seller has
employed the services of Banc One Capital Corporation which will be
entitled to a commission, payable by Seller, upon the Closing of
the transactions contemplated by this Agreement. No other broker,
Person or firm acting on behalf of the Seller or under the
authority of either the Seller is or will be entitled to any
commission, broker's or finder's fee or financial advisory fee from
the Seller in connection with any of the transactions contemplated
herein.
Section 5.29 Investment Information. Seller represents that
it has been furnished with or has had access to the information
such parties have requested from the Buyer and has had an
opportunity to ask questions and receive answers from management of
Buyer. The Seller acknowledges that it has received and reviewed
copies of the SEC Filings. Seller further represents that it is
either (i) an "accredited investor" (as that term is defined in
Rule 501(a) promulgated pursuant to the Securities Act), or (ii)
alone, or together with a "purchaser representative" (as that term
is defined in Rule 501(h) promulgated pursuant to the Securities
Act), has such knowledge, experience and skill in business and
financial matters and with respect to investments in securities so
as to enable it to understand and evaluate the merits and risks of
the acquisition of the shares of Common Stock and to form an
investment decision with respect to such investment.
Section 5.30 Seller Not a Foreign Person. The Seller is not
a "foreign person" within the meaning of Section 1445, et seq., of
the Code.
Section 5.31 Completeness of Disclosure. No representation
or warranty by the Seller in this Agreement contains or at the
Effective Time will contain any false or misleading statement of
material fact or omits a material fact necessary to make the
statements made, in light of the circumstances under which they
were made, not misleading.
ARTICLE VI
ACTIVITIES PRIOR TO THE CLOSING
Section 6.01 Activities Prior to Closing. The Seller hereby
covenants and agrees that from and after the date hereof to the
Closing Date, the Seller will, in all material respects, conduct
the business of the Group solely in the ordinary course and in a
reasonably prudent manner consistent with past practices and the
Seller will in connection with the operation of the business of the
Group:
(a) Engage in no material transaction out of the
ordinary course of business except as contemplated herein and will
operate the business of the Group in the ordinary course of
business except as contemplated herein;
(b) Not merge or consolidate the Seller with any other
corporation or allow it to acquire or agree to acquire or be
acquired by any corporation, association, partnership, joint
venture, or other entity;
(c) Not sell, assign, lease, transfer, or otherwise
dispose of any of the Purchased Assets without the prior written
consent of the Buyer (which consent shall not be unreasonably
withheld), except in the ordinary course of business;
(d) Not create or suffer to exist any Encumbrance on any
of the Purchased Assets, and maintain and keep the Purchased Assets
in good repair and condition, ordinary wear and tear excepted;
(e) Not commit to make, any capital expenditure or major
repair in excess of Ten Thousand Dollars ($10,000) in the aggregate
without the prior written consent of the Buyer, which consent shall
not be unreasonably withheld;
(f) Not waive any material rights or material claims of
the Seller related to the Purchased Assets without first having
notified the Buyer and received the Buyer's written consent
thereto, which consent will not be unreasonably withheld;
(g) Preserve, and take no action, or omit to take any
action, in accordance with past practices, which may adversely
affect, the goodwill and the existing business organization of
Group and relations of Group with its employees that Buyer expects
to hire and with Group's customers, suppliers, and others with whom
it has a business relationship;
(h) Maintain in full force and effect, subject to the
terms and conditions thereof, all agreements, contracts, leases,
Permits, authorizations, and approvals necessary for or related to
the business operations of the Group as such operations are now
conducted, except for changes made in the ordinary course of
business, and comply in all material respects with all laws, rules
and regulations applicable to the business operations of Group; and
(i) Promptly advise Buyer in writing of any change or
inaccuracy in any document, Schedule, Exhibit or other information
given to the Buyer pursuant to this Agreement.
(j) Cause a physical inventory to be conducted as close
to the Valuation Date as practical employing the following
procedures and methods:
(i) The inventory date will be the Valuation Date;
(ii) The inventory will be conducted by authorized
personnel or representatives of Seller and observed by authorized
personnel and representatives of the Buyer;
(iii) The inventory taking, cutoff, and costing shall
be completed in accordance with generally accepted accounting
principles and existing policies of Seller, valuing the Inventory
at the lower of cost or market using the FIFO method for
determining cost, provided, however, that for purposes of
determining the Adjusted Purchase Price, the reserve for Non-
Qualifying Inventory shall be costed in accordance with the
provisions of Section 2.01(iv) of this Agreement;
(iv) Authorized personnel and representatives of
Buyer will be allowed to review the results of the inventory and of
the costing thereof;
(k) Grant Buyer the right to review the credit history
of customers of the Group.
(l) Use its best efforts to render true and correct in
all material respects at all times until the Closing Date its
representations and warranties set forth in this Agreement and use
its best efforts to perform or fulfill all of its covenants and
conditions to be performed or fulfilled by it under the terms of
this Agreement.
Seller shall notify Buyer of any material change in the normal
course of the Group's business or in the operation of the Group's
properties and of any governmental complaints, investigations, or
hearings (or communications indicating that the same may be
contemplated) adjudicatory proceedings, budget meetings, or
submissions involving the Purchased Assets, and to keep Buyer fully
informed of such events and permit Buyer's representatives prompt
access to all material prepared in connection therewith.
Section 6.02 Reports; Taxes. Between the date hereof and
the Closing Date, the Seller will duly and timely file all reports
or returns required to be filed with federal, state, local and
foreign authorities, will promptly pay when due all federal, state,
local and foreign taxes, assessments and governmental charges
levied or assessed upon it or any of its properties (unless
contesting such in good faith and adequate provision has been made
therefor), and will duly observe and conform in all material
respects to any lawful requirements of any governmental authority
relating to any of the Purchased Assets or to the operation and
conduct of its business operation and all covenants, terms and
conditions upon or under which any of its Purchased Assets are
held.
Section 6.03 Access; Confidentiality. Between the date
hereof and Closing, the Seller will give to authorized
representatives of the Buyer (including, without limitation,
attorneys, accountants, appraisers, environmental experts, and
equipment experts) (collectively, the "Representatives"), the right
to make complete and thorough inspections of and have access to,
during normal business hours, in such manner as not to unduly
disrupt normal business activities:
(a) the Group and all of its assets, including, but not
limited to, physical inspections of the Purchased Assets; and
(b) the businesses of the Group, including, but not
limited to (i) all premises and properties associated with the
Group, including any real property connected with the Assumed
Leases, or any Real Property being purchased hereunder, (ii) the
jobs in progress and all related work in progress data, including
information as to the amount billed and unbilled, and revenues to
be recognized, on each such job as compared with the percentage of
completion of each such job, (iii) the bid and contract documents
relating to other jobs included in backlog or pending bid prior to
Closing, (iv) employee records, including compensation and fringe
benefits, (v) agreements for the procurement of inventory, (vi) all
leases and options (vii) copies of any existing environmental
studies or any files (including alleged violations, if any)
relating thereto, (viii) environmental permits and records, (ix)
copies of the operating permits and similar permits, (x) any
matters of pending or overtly threatened litigation, and (xi) all
other books, records and files of the Group relating to the
Purchased Assets or business of the Group. In addition, the Seller
will cause its officers and employees to furnish any and all
financial, technical and operating data and other information
pertaining to the business of the Group as the Buyer will from time
to time reasonably request.
The Buyer shall promptly select an environmental consultant to
perform an environmental assessment of the Purchased Assets;
provided, however, that the Buyer's environmental consultants shall
not conduct any soil or ground water assessments without the
consent of Seller, which consent shall not be unreasonably
withheld. Buyer shall bear all costs associated with the
environmental assessment of the Purchased Assets. Seller shall
cooperate and provide access to any party who performs an
independent environmental assessment of the Purchased Assets.
The Buyer and the Representatives shall have the right to make
extracts from all documents so reviewed. Without limiting the
generality of the foregoing, the Buyer shall have the right, in
connection with such due diligence review, to discuss the business
of the Group with the respective employees, vendors, customers,
accountants and consultants of the Group. If for any reason Buyer
is not satisfied in all respects with the results of such due
diligence review, including, without limitation, the results of any
environmental assessment, it shall, on or prior to Closing, have
the right, in its discretion, to give notice to the Seller of its
desire to cancel this Agreement, and upon such written notice the
parties hereto shall be discharged of all further obligations under
this Agreement except as provided in Sections 6.03(d) of this
Agreement.
The due diligence review conducted by Buyer and/or its
Representatives shall not relieve the Seller of any duty concerning
its representations, warranties, covenants or agreements contained
in this Agreement.
(c) Between the date hereof and the Closing Date, the
Seller shall make arrangements reasonably satisfactory to the Buyer
for representatives of the Buyer to meet the Seller's vendors and
customers relating to the business conducted by the Group. Seller
will be permitted to have a representative at each such meeting.
(d) The Buyer and its representatives will hold in
confidence all information so obtained and will use such
information only for the purpose of considering the transactions
contemplated hereby. The Buyer further agrees that it will not
otherwise disclose any such information to any third party (other
than its attorneys, financial advisors and financing sources)
except upon the written consent of the Seller or except as required
by law. If the transactions contemplated hereby are not
consummated as contemplated herein, the Buyer will promptly return
all confidential data furnished to it to the Seller and copies and
summaries thereof. Such obligation of confidentiality will not
extend to any information which is shown to be or to have been
generally known to others engaged in the same trade or business as
the furnishing party, or that is or will be public knowledge
through no act or omission by the Buyer or any of its directors,
officers, employees, professional advisors or other
representatives.
Section 6.04 Seller's Employees. The Seller acknowledges
and agrees that the Buyer, at a reasonable time prior to the
Closing, will have the right to interview individuals who at the
time of such interview are employed by Seller relating to the
business of the Group.
Section 6.05 Consents. The Seller will in good faith
request and use all reasonable efforts to obtain all necessary
consents, waivers, approvals, or authorization from third parties
(collectively the "Consents") which are necessary in connection
with the assignment of the Assumed Leases, the Assumed Contracts
and the Assumed Purchase Orders as contemplated herein (including
pursuant to Section 3.02 hereof) and the Buyer will in good faith
request and use all reasonable efforts to obtain all Consents which
are necessary in connection with the assignment of the Permits that
are transferable as contemplated herein. Each party will cooperate
with the other party in such efforts. However, it is understood
and agreed that although obtaining such Consents shall be a
condition to the Buyer's obligation to close the transactions
contemplated herein, the failure to obtain the Consents shall not
give rise to any action by any party for breach of this Agreement
or any provision hereof, notwithstanding any language contained in
this Agreement to the contrary.
Section 6.06 Public Announcements. Except as set forth in
Section 15.07 or as otherwise required by law, neither party shall
make any public announcements regarding the transactions
contemplated herein without the prior written consent of the other
party, including its approval of the content thereof.
Section 6.07 Hart-Scott-Rodino. Between the date hereof
and Closing, the Seller and Buyer shall cooperate fully to timely
file all documents required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("H-S-R"), as amended. Each party shall
bear its own costs in complying with this provision.
Section 6.08 Filings with SEC. Between the date hereof and
Closing, the Buyer may have to make certain filings with the
Securities and Exchange Commission. To the extent that information
concerning the Seller and the Group is required to be included in
such filings, the Seller and the Group will supply such
information, in the manner and form requested by Buyer, and the
Seller shall bear the cost of complying with such request.
Section 6.09 Condition of Title; Title Insurance.
(a) As soon as practicable after execution of this
Agreement, Buyer shall obtain, at Seller's expense, commitments of
title insurance (the "Commitments") issued by a title insurance
company reasonably acceptable to Buyer (the "Title Company"), in
which the Title Company agrees, following the recording of a deed
in the name of the Buyer, to issue a Standard Owner's Policy of
Title Insurance (ALTA Form B) (the "Title Insurance") in the amount
of the purchase price for that Location (as hereinafter defined)
showing record title to be in Buyer, and covering the Real Property
and improvements at each of the locations owned by the Seller where
the Group conducts business (the "Locations"), and containing such
endorsements as Buyer shall reasonably request, at Seller's
expense. The Commitments shall show the state of the title of the
real property owned by Seller on which each of the Locations is
located. As soon as practicable after the execution of this
Agreement. Buyer shall also cause the Title Company to provide
Buyer with a copy of each instrument of record constituting a lien
or encumbrance on each of the Locations or an exception or
qualification to title in the Commitments.
(b) Within twenty (20) days after receipt of any
Commitment, Buyer shall deliver written notice to Seller and Escrow
Agent of any objections that Buyer has to the state of title, and
exceptions to coverage shown in the Commitment or in copies of
instruments of record. The failure of Buyer to disapprove in
writing, at or prior to that time, a particular exception or
exceptions shown in any Commitment shall be deemed to be approval
by Buyer of the exception or exceptions not disapproved or objected
to by Buyer.
(c) If Buyer disapproves of any exception from coverage
shown on any Commitment, Seller shall exercise commercially
reasonable efforts to cure the matter(s) causing Buyer's objections
by taking all reasonable action to cure the objections. If Seller
is unable to cure the matter(s) within fifteen (15) days after
receipt from Buyer of the notice of disapproval of or objection to
any Commitment, Seller shall notify Buyer of its inability to cure,
and Buyer shall have the right, for a period of five (5) days after
receipt of the notice from Seller, to terminate this Agreement, and
upon such written notice the parties hereto shall be discharged of
all further obligations under this Agreement except as provided in
Sections 6.03(d) of this Agreement.
(d) Buyer's interest in the Locations shall be insured
by a Standard Owner's Policy with fee simple title to the Real
Property vested in Buyer, together with such endorsements as Buyer
may reasonably require, subject only to:
(i) nondelinquent state, county, city and special
district taxes and assessments, if any,
(ii) standard printed exceptions and exclusions set
forth in the title policy,
(iii) the covenants, conditions, restrictions,
reservations, rights of way, easements, encumbrances, and
other matters of record approved by Buyer under this
Agreement, and
(iv) encumbrances made or created by Buyer under
this Agreement.
The Escrow Agent shall hold the title policies as a condition
precedent to Closing.
Section 6.10 Surveys. Prior to Closing, the Buyer may
obtain, at Seller's expense, a survey of the Locations being
conveyed hereunder, showing any and all improvements, easements,
rights, reservations and restrictions thereon, and all roads,
streets or highways adjacent to said Locations. If the survey
shows any material encroachments, overlaps, or boundary line
disputes, the same shall be treated as title defects hereunder.
Section 6.11 Exclusivity. From the date hereof until such
date as this Agreement is terminated, the Seller shall negotiate
with the Buyer with respect to the acquisition of the Purchased
Assets and shall not directly or indirectly: (a) solicit any other
buyers for all or any part of the capital stock of the Seller or
assets of the Group; (b) encourage any third parties to bid for any
of the Purchased Assets or to purchase shares of the capital stock
of Seller or participate in any negotiations or discussions with
any such third parties with respect thereto; (c) provide business
or financial information (not otherwise publicly available)
concerning Seller or the Group to any third parties; or (d) assist
or cooperate with any third party to make any proposal to purchase
all or any part of the capital stock or assets of Seller. Seller
will immediately notify Buyer if it becomes aware of any efforts by
any Person to, directly or indirectly, in any manner whatsoever,
acquire Seller or the Group (including the Purchased Assets) and
will cooperate with Buyer by furnishing any information that they
may reasonably request in contesting any such efforts. In
addition, Seller shall direct its financial and other advisors and
representatives to comply with each of the foregoing covenants.
ARTICLE VII
CASUALTY AND CONDEMNATION
Section 7.01 Casualty. If prior to the Effective Time, any
material portion of the Purchased Assets are damaged or destroyed
by fire or any other casualty, the Seller will promptly give notice
of the same to the Buyer. In such event, at the Buyer's option,
the Buyer will have the right to terminate this Agreement by giving
notice thereof to the Seller. If the Buyer terminates this
Agreement pursuant to this Section 7.01, this Agreement will become
null and void, and the Seller and the Buyer will thereupon have no
further liabilities or obligations under this Agreement or
otherwise hereunder. If the Buyer elects not to terminate this
Agreement pursuant to this Section 7.01, the Buyer will be entitled
to the benefits of all insurance proceeds and claims relating to
any such fire or casualty loss (except business interruption
insurance), and the Seller will at or prior to Closing assign to
the Buyer all such insurance proceeds and claims; provided that
such insurance shall be considered a Purchased Asset for purposes
of Article II of this Agreement. The Seller will inform the Buyer
of any negotiations with respect to insurance claims involving any
damaged Purchased Assets, will permit the Buyer to take part
therein, and will not settle any such claims without the Buyer's
prior written consent, which consent shall not be unreasonably
withheld.
Section 7.02 Condemnation. If any authority having the
right of eminent domain commences legal action for the damaging,
taking or acquiring of any of the Purchased Assets or the real
property subject to the Assumed Leases, either temporarily or
permanently, by condemnation or by exercise of the right of eminent
domain (a "Taking"), the Seller will promptly give notice of the
same to the Buyer. In the event of a material Taking, at the
Buyer's option, the Buyer will have the right to terminate this
Agreement by giving notice thereof to the Seller. If the Buyer
terminates this Agreement pursuant to this Section, this Agreement
will become null and void, and the Seller and the Buyer will
thereupon have no further liabilities or obligations under this
Agreement or otherwise. If the Buyer elects not to terminate this
Agreement pursuant to this Section 7.02 or if the Taking is not
material, the Buyer will be entitled to the benefits of all awards,
claims, settlement proceeds, and other proceeds payable by reason
of any such Taking, and the Seller will assign to the Buyer all
awards, claims, settlement proceeds, or other proceeds payable by
reason of any such Taking, provided that all parcels of such Taking
shall be considered a Purchased Asset for purposes of Article II of
this Agreement. In the event of any negotiations with respect to
any of the Purchased Assets with any authority regarding settlement
on account of any Taking, the Seller will inform the Buyer of all
such negotiations, will permit the Buyer to take part therein, and
will not enter into any settlements thereof without the Buyer's
prior written consent, which consent shall not be unreasonably
withheld.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of the Buyer to consummate the transactions
contemplated hereby will be subject to the satisfaction or the
waiver by the Buyer, at or prior to the Closing Date, of each of
the following conditions (Buyer hereby acknowledges that all
conditions precedent to the Closing of the transactions
contemplated by this Agreement which have not been performed by
Seller prior to Closing shall be deemed to be waived by the Buyer
as of the Closing):
Section 8.01 Representations and Warranties. The
representations and warranties of the Seller contained in this
Agreement, the Schedules hereto, or in any other document delivered
pursuant hereto, shall have been true and correct in all material
respects on the date such representations and warranties were made,
and at the Closing, as though made on and as of the Closing Date.
Section 8.02 Performance of Covenants, Agreements and
Obligations. Each covenant, agreement and obligation of the Seller
to be performed on or before the Closing Date pursuant to the terms
and specific provisions of this Agreement, will have been duly
performed and complied with on or before the Closing Date, and at
the Closing.
Section 8.03 Prohibitions. No claim, action, suit,
investigation, arbitration or legal or other proceeding or
governmental investigation will be pending or threatened before any
court of governmental agency which (i) presents a substantial risk
of the restraint or prohibition of the transactions contemplated by
this Agreement, or the obtaining of material damages or other
relief in connection therewith, or (ii) could materially affect the
right of the Buyer to acquire or utilize the Purchased Assets or
have a material adverse effect upon the business of the Group being
acquired by the Buyer.
Section 8.04 Certificate. The Buyer shall have received a
certificate in the form annexed hereto as Exhibit 8.04 dated the
Closing Date, signed by the Chairman of the Board as to the
satisfaction of the conditions contained in Sections 8.01 and 8.02,
with such additional disclosures as shall be required to make such
certificate true and accurate in all material respects.
Disclosures in such certificates shall be deemed to be disclosures
hereunder for all purposes of this Agreement, but the Buyer shall
nevertheless retain the right to refuse to close the transactions
contemplated hereby if any such additional disclosure is not
acceptable to the Buyer.
Section 8.05 Opinion of Seller's Counsel. At the Closing,
the Buyer will have been furnished with the opinion of Seller's
counsel, D'Ancona & Pflaum, dated the Closing Date, addressed to
Buyer and in form and content reasonably acceptable to the Buyer
and its counsel, substantially to the effect that:
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio;
(b) The Seller has the corporate power and authority to
execute, deliver and perform the Agreement, and has duly executed
and delivered the Agreement, and any other agreement required to be
executed by Seller in connection with the Closing of the
transactions contemplated by this Agreement. The Agreement and, to
our knowledge the Noncompetition Agreements attached as Exhibit
3.04(a), the Employment Agreement attached as Exhibit 3.04(b), the
Escrow Agreement attached as Exhibit 8.13, are legal, valid and
binding obligations of the Seller, to the extent the Seller is a
party thereto, enforceable against the Seller in accordance with
their respective terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting the enforcement of creditors'
rights generally and general equitable principles, or as such
Noncompetition Agreements may be limited by a court as to duration
or geographic scope;
(c) The Seller has the corporate power and authority to
carry on its business operations and to own and operate the
Purchased Assets as presently owned and operated;
(d) To our knowledge, after reasonable inquiry, the
consummation of the transactions contemplated by the Agreement does
not and will not:
(i) contravene any provision of the Articles of
Incorporation or Code of Regulations of the Seller; or
(ii) violate, conflict with, or constitute a default
under, result in the termination of, cause the acceleration of any
payments pursuant to, or otherwise impair the good standing,
validity, or effectiveness of any agreement, contract, indenture,
lease, or mortgage applicable to the Seller and known to us;
(e) No consent, waiver, approval, authorization or
exemption which has not been obtained by Seller from a governmental
authority or third party is required in connection with the
consummation by the Seller of the transactions contemplated by the
Agreement;
(f) Except as disclosed on the Schedules to the
Agreement, to the knowledge of such counsel after making inquiry of
the Executive Officers (as defined in Section 15.21(d)) and Board
of Directors of the Seller, (i) there is no pending or, to such
counsel's knowledge, threatened, suit, action, claim,
investigation, arbitration, administrative or legal or other
proceeding or governmental investigation of any kind against or
relating to the Seller and affecting the Group or the Purchased
Assets nor has the Seller consulted with such counsel with respect
thereto, (ii) the Seller has complied in all material respects with
all state or federal laws which might adversely affect the
Purchased Assets, including without limitation all applicable
securities laws, rules, ordinances, requirements, regulations, and
orders applicable to the Seller, except where the failure to comply
would not have a material adverse effect on the Purchased Assets or
the Seller, and (iii) there are no violations of any orders, writs,
injunctions, judgments, or decrees of any court or federal, state
or local department, official, commission, authority, board,
bureau, agency, or other instrumentality which have been issued or
are pending against the Seller, which might have a material adverse
effect on the Purchased Assets; and
(f) To the knowledge of counsel, after due inquiry, the
Bill of Sale is sufficient in form to transfer the Purchased Assets
to Buyer.
Section 8.06 Authority. All actions required to be taken
by, or on the part of, the Seller to authorize the execution,
delivery and performance of this Agreement and all agreements
executed and delivered in connection herewith, and the consummation
of the transactions contemplated hereby and thereby will have been
duly and validly taken by the Board of Directors and the
Shareholders of the Seller, if necessary, and the Buyer shall have
received copies of all such resolutions certified by the Secretary
of the Seller.
Section 8.07 No Material Change. There will not have
occurred between the date hereof and the Closing Date any material
change in the Purchased Assets or the business of the Group and the
Purchased Assets will not have been, and will not be threatened to
be, materially adversely affected in any way as a result of fire,
explosion, earthquake, disaster, accident, labor, dispute, any
action by any governmental authority, flood, drought, embargo,
riot, civil disturbance, uprising, activity of armed forces or act
of God or public enemy.
Section 8.08 Required Consents. On the Closing Date, the
parties (other than the Seller) to all of the Assumed Leases and
the Assumed Contracts, any governmental agency or body or any other
person, firm or corporation which owns or has authority to grant
any franchise, license, permit, easement, right or other
authorization necessary for the business or operations of the
Seller or the Purchased Assets which will be transferred by the
Seller to the Buyer pursuant to this Agreement, and any
governmental body or regulatory agency having jurisdiction over the
Buyer or the Seller, to the extent that their consent or approval
is required under the pertinent debt, lease, contract, commitment
or agreement or other document or instrument or under applicable
laws, rules or regulations for the consummation of the transactions
contemplated hereby (including receipt of all consents required by
H-S-R) and for the continued operation by the Buyer of Seller's
business in the same manner which the Seller operated its business
prior to the Closing, in the manner herein provided, will have
granted such consent or approval.
Section 8.09 UCC Search Report. Prior to the Closing, the
Buyer shall have received UCC search reports dated as of a date not
more than five (5) days before the Closing Date issued by the
appropriate governmental bodies indicating that there are no
filings under the Uniform Commercial Code on file with the such
governmental bodies which indicate any Encumbrances on the
Purchased Assets, other than those Encumbrances which will be
released at Closing.
Section 8.10 Noncompetition Agreements. The Seller shall
have entered into, and shall have caused each of M. Mead Montgomery
and Triumph, to enter into the Noncompetition Agreements attached
hereto as Exhibit 3.04(a).
Section 8.11 Employment Agreements. The Buyer and Ray Lear
shall have entered into an Employment Agreement in the form of
Schedule 3.04(b) hereto.
Section 8.12 Other Documents. On the Closing Date, the
Buyer will have been provided with such other documents as it may
have reasonably requested from the Seller.
Section 8.13 Escrow Agreement. At the Closing, Buyer,
Seller, and Maguire, Voorhis & Wells, P.A. (the "Escrow Agent")
shall have entered into an escrow agreement substantially in the
form annexed hereto as Exhibit 8.13, and pursuant thereto, Buyer
shall have deposited the Escrowed Proceeds (as determined in
accordance with Section 2.01(v) of this Agreement). The Escrowed
Proceeds shall be held by the Escrow Agent and shall be held for
disbursement in accordance with the terms of such Escrow Agreement.
Section 8.14 Other Opinions of Counsel. At the Closing, the
Buyer will have been furnished with an opinion of counsel to
Raymond H. Lear and an opinion of counsel to Triumph, dated the
Closing Date, concerning the Employment Agreement to which Raymond
H. Lear is a party and the Noncompetition Agreement to which
Triumph is a party, addressed to Buyer and in form and content
reasonably acceptable to the Buyer and its counsel, substantially
to the effect that the Employment Agreement as to Raymond H. Lear,
and the Noncompetition Agreement as to Triumph, have been duly
executed and delivered, are enforceable in accordance with their
respective terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting the enforcement of creditors' rights
generally and general equitable principles, or as such
Noncompetition Agreement may be limited by a court as to duration
or geographic scope.
Section 8.15 Approval of Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement, or
incidental thereto, and all other related legal matters shall have
been approved as to form and substance by Maguire, Voorhis & Wells,
P.A., counsel to the Buyer, which approval shall not be
unreasonably withheld or delayed.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of the Seller to effect the transactions
contemplated hereby will be subject to the satisfaction or the
waiver by the Seller at or prior to the Closing Date, of the
following conditions (Seller hereby acknowledges that all
conditions precedent to the Closing of the transactions
contemplated by this Agreement which have not been performed by
Buyer prior to Closing shall be deemed to be waived by the Seller
as of the Closing):
Section 9.01 Representations and Warranties. The
representations and warranties of the Buyer contained in this
Agreement or in any document delivered by the Buyer pursuant hereto
shall have been true and correct in all material respects on the
date such representations and warranties were made, and at the
Closing, as though made on and as of the Closing Date. The Buyer's
Board of Directors shall have approved the consummation of the
transactions contemplated by this Agreement.
Section 9.02 Performance of Covenants, Agreements and
Obligations. Each of the covenants, agreements and obligations of
the Buyer to be performed by it on or before the Closing Date
pursuant to the terms of this Agreement will have been duly
performed and complied with on or before the Closing Date.
Section 9.03 Certificate. The Seller shall have received a
certificate in the form annexed hereto as Exhibit 9.03 dated the
Closing Date, signed by the Chairman of the Board of the Buyer as
to the satisfaction of the conditions contained in Sections 9.01
and 9.02, with such additional disclosures as shall be required to
make such certificate true and accurate in all material respects.
Disclosures in such certificates shall be deemed to be disclosures
hereunder for all purposes of this Agreement, but the Seller shall
nevertheless retain the right to refuse to close the transactions
contemplated hereby if any such additional disclosure is not
acceptable to the Seller.
Section 9.04 Prohibitions. No claim, action, suit,
investigation, arbitration or legal or other proceeding or
governmental investigation will be pending or threatened before any
court or governmental agency which presents a substantial risk of
the restraint or prohibition of the transactions contemplated by
this Agreement or the obtaining of material damages or other relief
in connection therewith.
Section 9.05 Opinion of Buyer's Counsel. The Seller will
have been furnished with an opinion of Buyer's counsel, Maguire,
Voorhis & Wells, P.A., dated the Closing Date, addressed to the
Seller and in form and content reasonably acceptable to the Seller
and its counsel, substantially to the effect that:
(a) the Buyer is a Florida corporation duly organized
and in good standing under the laws of the State of Florida;
(b) the Buyer has the requisite corporate power and
authority to execute, deliver, and perform the Agreement, and has
duly executed and delivered the Agreement, and any other agreement
required to be executed by Buyer in connection with the Closing of
the transactions contemplated by this Agreement. The Agreement
and, to our knowledge the Employment Agreement attached as Exhibit
3.04(b), the Escrow Agreement attached as Exhibit 8.13, are legal,
valid and binding obligations of the Buyer enforceable against the
Buyer in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally and general equitable
principles;
(c) To our knowledge, after reasonable inquiry, the
consummation of the transactions contemplated by the Agreement does
not and will not:
(i) contravene any provision of the Articles of
Incorporation or Bylaws of the Buyer; or
(ii) violate, conflict with, or constitute a default
under, result in the termination of, cause the acceleration of any
payments pursuant to, or otherwise impair the good standing,
validity, or effectiveness of any agreement, contract, indenture,
lease, or mortgage applicable to the Buyer and known to us;
(d) No consent, waiver, approval, authorization or
exemption which has not been obtained by the Buyer from a
governmental authority or third party is required in connection
with the consummation by the Buyer of the transactions contemplated
by this Agreement; and
(e) The shares of Common Stock issued as part of the
Base Price will be, when issued, validly authorized and issued,
fully paid and nonassessable and will be free and clear of all
manner of liens, charges, encumbrances and claims, and at Closing
will be registered in accordance with the Securities Act and all
applicable state securities laws, and fully transferable, subject
to the provisions set forth in Article X of this Agreement.
Section 9.06 Authority. All actions required to be taken
by, or on the part of, the Buyer to authorize the execution,
delivery and performance of this Agreement and all agreements
executed and delivered in connection herewith, and the consummation
of the transactions contemplated hereby and thereby will have been
duly and validly taken by the Board of Directors and the Seller
shall have received copies of all such resolutions certified by the
Secretary of the Buyer.
Section 9.07 Other Documents. On the Closing Date, the
Seller will have been provided with such other documents as it may
have reasonably requested from the Buyer.
Section 9.08 Registration Statement. Subject to the
provisions of Article X of this Agreement, the Buyer shall have
caused the Registration Statement (as defined in Article X) to
become effective.
Section 9.09 No Material Change. There will not have
occurred between the date hereof and the Closing Date any material
adverse change in the business of the Buyer.
Section 9.10 Employment Agreements. The Buyer and Ray Lear
shall have entered into the Employment Agreement in the form of
Schedule 3.04(b) hereto.
Section 9.11 Escrow Agreement. At the Closing, Buyer,
Seller, and the Escrow Agent shall have entered into an escrow
agreement substantially in the form annexed hereto as Exhibit 8.13,
and pursuant thereto, Buyer shall have deposited the Escrowed
Proceeds (as determined in accordance with Section 2.01(v) of this
Agreement). The Escrowed Proceeds shall be held by the Escrow
Agent and shall be held for disbursement in accordance with the
terms of such Escrow Agreement.
Section 9.12 Promissory Note. At the Closing, the Buyer
shall have delivered to the Seller the Promissory Note in the
original principal amount of One Million Five Hundred Twenty Five
Thousand Dollars ($1,525,000). The Promissory Note shall be in the
form attached hereto as Exhibit 2.01(i)(b), shall bear interest at
the lower of (x) the rate imputed by the Internal Revenue Service,
or (y) the cost of funds to the Buyer under its line of credit
agreement with Trust Company Bank. Except as otherwise provided in
this Agreement, all sums due under the Promissory Note shall be due
and payable on April 1, 1996.
Section 9.13 Approval of Counsel to the Seller. All
actions, proceedings, instruments and documents required to carry
out this Agreement or incidental thereto, and all other related
legal matters shall have been approved as to form and substance by
D'Ancona & Pflaum, counsel to the Seller, which approvals shall not
be unreasonably withheld or delayed.
ARTICLE X
REGISTRATION STATEMENT
The parties hereto do hereby agree that with respect to the
preparation and filing of the registration statement for the Common
Stock as referenced in Section 2.01(i) of this Agreement, the
parties hereto do hereby agree as follows:
(a) Between the date hereof and Closing, the Buyer will
file a registration statement (the "Registration Statement") with
the SEC to register the Common Stock being issued to Seller
hereunder, and Buyer shall keep such Registration Statement
effective for a period of not less than two (2) years following
Closing. The Seller shall cooperate with Buyer and its
representatives and upon request shall promptly furnish such
information as is reasonably requested by Buyer for inclusion in
the Registration Statement, or any amendment or supplement thereto.
Except as otherwise provided herein, each party shall bear its own
costs in complying with this Article X, and the Buyer shall pay all
costs associated with the filing of the Registration Statement.
(b) Seller agrees in connection with any underwritten
registration of the Common Stock to enter into an appropriate
underwriting agreement containing terms and provisions (including
reasonable provisions as to opinions of counsel, comfort letters,
and indemnification) customary in such agreements.
(c) Buyer shall prepare and file with the SEC all
amendments, post-effective amendments, and supplements to the
Registration Statement as may be necessary under the Securities Act
and the regulations of the SEC to permit the sale of the Common
Stock to the public. In addition, the Buyer shall provide the
Seller with sufficient copies of the Registration Statement, and
the Prospectus included therein.
(d) Unless an exemption is available, Buyer shall
register or qualify the Common Stock covered by the Registration
Statement under blue sky or other state securities laws in such
states or jurisdictions as shall be reasonably requested by Seller,
and do any and all other reasonable acts or things which may be
necessary to enable Seller to consummate the public sale or other
disposition of the Common Stock in such jurisdictions; provided,
however, that Buyer shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in
which it is not then qualified or to file any general consent to
service of process.
(e) Seller shall bear all underwriting discounts and
commissions and the fees and disbursements of its legal counsel and
accountants in connection with any registration or qualification of
the Common Stock pursuant to this Section.
(f) With respect to the Registration Statement effected
pursuant to this Article X, Buyer agrees to indemnify and hold
harmless Seller, and its respective successors, assigns, heirs,
estates, and representatives, against any and all losses, claims,
damages, or liabilities to which Seller may become subject under
the Securities Act or any other statute or common law, and to
reimburse Seller for any reasonable legal or other expenses
actually and reasonably incurred by any of them in connection with
investigating any claims and defending any actions, insofar as such
losses, claims, damages, liabilities, or actions arise out of or
are based upon any untrue statement, or alleged untrue statement,
of a material fact contained in or incorporated by reference in any
preliminary prospectus included in the Registration Statement or
filed with the SEC pursuant to Rule 424(a) of the Securities Act
(the "Preliminary Prospectus"), the Registration Statement or the
final prospectus filed pursuant to Rule 424(b) of the Securities
Act (the "Prospectus"), or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the
indemnification provisions contained in this Article X,
subparagraph (f), shall not apply to such losses, claims, damages,
liabilities, or actions arising out of, or based upon, any
information provided to Buyer by Seller pursuant to the Agreement
or any document delivered in connection with the Closing of the
transactions contemplated by this Agreement, or any untrue
statement or alleged untrue statement, or any omission or alleged
omission, if such statement or omission was made in reliance upon
and in conformity with information furnished in connection with the
preparation of the Registration Statement or such Preliminary
Prospectus or Prospectus contained in the Registration Statement or
any such amendments thereof or supplement thereto.
(g) Seller agrees (in the same manner and to the same
extent as set forth in subparagraph (f) of this Article X), to
indemnify and hold harmless Buyer and each Person, if any, who
controls Buyer within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, its directors and those
officers of Buyer who shall have signed the Registration Statement
or any post-effective amendment thereof for any untrue statement,
or alleged untrue statement, of a material fact contained in or
incorporated by reference in the Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment thereof
or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case to the
extent that such untrue statement or alleged untrue statement or
alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment thereof
or supplement thereto in reliance upon and in conformity with any
written information provided to Buyer by Seller pursuant to this
Agreement or any document delivered in connection with the Closing
of the transactions contemplated by this Agreement, or with any
information furnished to Buyer by or on behalf of Seller
specifically for use in connection the preparation of the
Registration Statement or such Preliminary Prospectus or Prospectus
or any such amendment thereof or supplement thereto.
(h) Each indemnified party shall, promptly after the
receipt of notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought from
an indemnifying party on account of an indemnity agreement
contained in this Article X, notify the indemnifying party in
writing of the commencement thereof; provided, however, that the
omission to so notify the indemnifying party shall not relieve the
indemnifying party from any other liability which it may have to
such indemnified party except to the extent that the indemnified
party's failure to notify caused additional damages to be sustained
by such party or materially prejudiced the ability of such party to
defend against or prevent any loss, damage, or liability. If any
such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it elects by delivering written notice to the
indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with
any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such
indemnified party, provided that such counsel shall not be deemed
unsatisfactory solely because it will also assume the defense of
one or more other indemnified parties. After notice from the
indemnifying party to such indemnified party of its election to
assume the defense thereof, the indemnifying party shall not be
responsible to such indemnified party under this Article X for any
legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof except as provided
below. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the
indemnified party has reasonably concluded (based on advice of
counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential
conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will have the right to assume the
defense of such action on behalf of the indemnified party) or (4)
the indemnifying party has not in fact employed counsel to assume
the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of such
counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties
shall not, in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm
admitted to practice in such jurisdiction at any one time for all
such indemnified parties. An indemnifying party will not be liable
for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
(i) If the indemnification provided for in this Article
X from the indemnifying party is unavailable to an indemnified
party for any loss, claim, damage, liability, or expense covered
thereby, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage,
liability, or expense. The contribution of such indemnifying party
shall be limited to the proportionate share of the amount paid or
payable that reflects the relative fault of the indemnifying party
with respect to such loss, claim, damage, liability, or expense.
The relative fault shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of material
fact or any omission or alleged omission of a material fact was
made by or relates to information supplied by the indemnifying
party. The parties to this Agreement agree that it would not be
just and equitable to determine contribution under this Article X
by pro-rata allocation or by any other method which does not take
into account the equitable consideration referred to above.
Notwithstanding anything to the contrary in this Article X no
Person found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not found guilty of
fraudulent misrepresentation.
(j) For a period of two (2) years following the Closing,
the Seller shall have the right to include the Common Stock, as
part of any other applicable registration statement filed by the
Buyer; provided, however, that Buyer shall bear all registration
statement related expenses (except that the Seller shall pay any
and all underwriting discounts and commissions and the fees and
disbursements of its legal counsel and accountants in connection
with any registration or qualification of the Common Stock pursuant
to this Section); provided, further, that if, in the written
opinion of the Buyer's managing underwriter or underwriters, if
any, for such offering, the inclusion of the Common Stock, when
added to the securities being registered by the Buyer or the
selling shareholder(s), will exceed the maximum amount of the
Buyer's securities which can be marketed (i) at a price reasonably
related to their then current market value; or (ii) without
materially and adversely affecting the entire offering, then the
Buyer may exclude from such offering all or any portion of the
Common Stock requested to be so registered; but provided, further,
that if any such Common Stock is so excluded, then the number of
securities to be sold by all shareholders in such public offering
shall be apportioned pro rata among all such selling shareholders,
including the Seller, according to the total amount of securities
of the Buyer owned by said selling shareholders, including the
Seller. The Buyer shall cause any registration statement filed
pursuant to these "piggyback" rights to remain effective for at
least ninety (90) days from the date that the Seller is first given
the opportunity to sell any part of the Common Stock registered
hereunder.
(k) For purposes of subparagraphs (c) through (i) above,
the term "Registration Statement" will also include any
registration statement filed pursuant to subparagraph (j) above
which may register the Common Stock.
(l) The indemnification provisions of this Article X are
in no way affected by, or to be interpreted in connection with, the
provisions of Article XI.
ARTICLE XI
INDEMNIFICATION
Section 11.01 Indemnification by the Seller. The Seller,
regardless of any prior knowledge, inspection or investigation on
the part of the Buyer, hereby agrees to indemnify and hold harmless
the Buyer against and in respect of:
(a) Any loss, claim, liability, obligation, or damage
suffered or incurred by the Buyer resulting from or arising in
connection with any material misrepresentation, omission to state
a material fact necessary to make a statement made herein not
misleading, breach of warranty, or non-fulfillment of any covenant
or agreement on the part of the Seller contained in this Agreement;
(b) Any liability or claim which may be asserted against
the Buyer arising at any time in connection with the Seller's
ownership or operation of the Purchased Assets on or prior to the
Effective Time, including, without limitation, any liability
incurred by Buyer for sums accrued for on the Valuation Date
Financial Statements but which later prove to be inadequate;
(c) All liabilities and obligations of the Seller, or
claims against the Seller accruing prior to the Effective Time or
against the Buyer (to the extent the same arises out of the
transactions contemplated by this Agreement), of every kind and
description, regardless of how or when the same may have arisen,
including the Excluded Obligations, except for the Assumed
Obligations;
(d) All claims against, or claims of any interest in, or
of a lien upon, any or all of the Purchased Assets, which arise in
connection with events, acts, omissions, or circumstances occurring
or existing on or prior to the Effective Time; and
(e) All actions, suits, investigations, proceedings,
demands, assessments, judgments, attorneys' fees, costs and
expenses incident to the foregoing, including, but not limited to,
any audit or investigation by any governmental entity.
Section 11.02 Indemnification by the Buyer. The Buyer,
regardless of any prior knowledge, inspection or investigation on
the part of the Seller, hereby agrees to indemnify and hold
harmless the Seller against and in respect of:
(a) Any loss, claim, liability, obligation or damage
suffered or incurred by the Seller resulting from or arising in
connection with any material misrepresentation, omission to state
a material fact necessary to make a statement made herein not
misleading, breach of warranty, or non-fulfillment of any covenant
or agreement on the part of the Buyer contained in this Agreement;
(b) Any liability or claim asserted against the Seller
arising in connection with the Buyer's failure to perform its
obligations with respect to the Assumed Obligations;
(c) Any liability or claim which may be asserted against
the Seller arising at any time in connection with the Buyer's
ownership or operation of the Purchased Assets subsequent to the
Effective Time; and
(d) All actions, suits, proceedings, demands,
assessments, judgments, attorneys' fees, costs and expenses
incident to the foregoing.
Section 11.03 Survival of Obligation to Indemnify. The
obligation of each party hereto to indemnify the other party hereto
shall survive the Closing, the transfer of the Purchased Assets and
the payment of the consideration therefor until April 1, 1996, and
shall continue thereafter with respect to matters which the party
seeking indemnity hereunder shall have given the other party
written notice of as provided herein prior to April 1, 1996. The
Buyer shall be entitled to set-off against the Promissory Note any
indemnity claims which may arise under this Agreement. In the
event that the party seeking indemnity hereunder is the Buyer, then
any notice to the Seller for an indemnifiable claim under this
Agreement shall state an amount estimated by the Buyer to be
reasonably necessary to satisfy such claim, together with all
reasonable costs and attorneys' fees associated therewith. This
amount, as claimed by the Buyer, together with all accrued interest
on such amount, shall be withheld by the Buyer from any payments
due the Seller on April 1, 1996 under the Promissory Note pending
a resolution of the claim. Upon final resolution of any claim, the
principal amount of the Promissory Note shall be reduced by the
amount of the finally resolved claim amount and the remaining
principal amount of the Promissory Note shall be paid by the Buyer
to the Seller when due.
Section 11.04 Notice and Procedure. Any party claiming
indemnity hereunder (hereinafter referred to as the "Indemnified
Party") shall give the party against whom indemnity is sought
(hereinafter referred to as the "Indemnifying Party") prompt
written notice after obtaining knowledge of any claim or the
existence of facts as to which recovery may be sought against in
connection with the Indemnifying Party because of the indemnity
provisions set forth in this Article XI. If such claim for
indemnity arises in connection with a legal action instituted by a
third party (hereinafter a "Third Party Claim"), the Indemnified
Party hereby agrees that, within five (5) business days after it is
served with notice of the assertion of any Third Party Claim for
which it may seek indemnity hereunder, the Indemnified Party will
notify the Indemnifying Party in writing of such Third Party Claim.
The Indemnifying Party shall, within five (5) business days
after the date that the Indemnified Party gives notice of a claim
(whether a Third Party Claim or otherwise) as provided above,
notify the Indemnified Party whether it accepts or contests its
obligation of indemnity hereunder as claimed by the Indemnified
Party.
If the claim for indemnity arises in connection with a Third
Party Claim and the Indemnifying Party accepts its indemnity
obligation hereunder, the Indemnifying Party shall have the right,
after conceding in writing its obligation of indemnity hereunder,
to conduct the defense of such action at its sole expense through
counsel reasonably acceptable to the Indemnified Party. The
Indemnified Party shall cooperate in such defense as reasonably
necessary to enable the Indemnifying Party to conduct its defense,
including providing the Indemnifying Party with reasonable access
to such records as may be relevant to its defense. The
Indemnifying Party shall be entitled to settle any such Third Party
Claim without the prior written consent of the Indemnified Party
provided that the Indemnifying Party provides the Indemnified Party
with reasonable assurances that the Indemnified Party will be fully
indemnified by the Indemnifying Party in connection with any such
Third Party Claim. The Indemnified Party shall be entitled to
retain its own counsel at its own expense in connection with any
Third Party Claim that the Indemnifying Party has elected to
defend. If the Indemnifying Party accepts its indemnity
obligations hereunder in connection with a Third Party Claim but
elects not to conduct the defense thereof, the Indemnified Party
may defend and/or settle such Third Party Claim and shall be
entitled to be indemnified for the full amount of such claim and
all costs and expenses, including attorneys' fees, incurred in
connection therewith pursuant to this Article XI.
If the claim for indemnity arises in connection with a Third
Party Claim and the Indemnifying Party contests or does not accept
its indemnity obligation hereunder, the Indemnified Party shall
have the right to defend and/or settle such Third Party Claim and
thereafter seek indemnity from the other party pursuant to this
Article XI; provided, however, that the Indemnified Party shall not
settle any such claim without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably
withheld.
If the claim for indemnity arises other than in connection
with a Third Party Claim and the Indemnifying Party accepts its
indemnity obligation hereunder, the Indemnifying Party shall, upon
the request of the Indemnified Party, pay the full amount of such
claim to the Indemnified Party or to the third party asserting such
claim as directed by the Indemnified Party. If the claim for
indemnity arises other than in connection with a Third Party Claim
and the Indemnifying Party contests its indemnity obligation
hereunder, the Indemnified Party shall have the right to defend,
settle or take any other action with respect to such claim and
thereafter seek indemnity pursuant to this Article XI; provided,
however, that the Indemnified Party shall not settle any such claim
without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
Section 11.05 Limitation on Indemnification Obligations. An
Indemnified Party shall not be entitled to recover from an
Indemnifying Party any amounts under this Article XI until the
total amount under which the Indemnified Party would seek a
recovery exceeds the sum of $50,000 (the "Threshold Amount"), and
then the Indemnified Party may recover only such sums which are in
excess of the Threshold Amount, but in no event may the Indemnified
Party be entitled to an amount in excess of $1,525,000 (the
"Indemnity Amount"), except as otherwise provided herein.
Notwithstanding anything to the contrary contained herein, the
Buyer shall not be entitled to recovery under this Article XI if
the subject matter of the claim is covered by title insurance.
Section 11.06 Indemnification Exclusive Remedy. Except for
fraud, or indemnity obligations set forth in Article X of this
Agreement, or the obligations of each of the parties set forth in
Section 15.20 of this Agreement, indemnification pursuant to the
provisions of this Article XI shall be the exclusive remedy of the
parties hereto for any misrepresentation or breach of any warranty,
covenant or agreement contained herein or in any closing document
executed and delivered pursuant to the provisions hereof.
Section 11.07 Waiver of Bulk Sales and Indemnity. The
parties hereby waive compliance with all applicable bulk sales
laws. The Seller, however, agrees to indemnify the Buyer and hold
the Buyer harmless from and against any and all loss, cost or
expense in connection with any claim (other than in respect of the
Assumed Obligations) that would have been barred by the proper
implementation of the practices and procedures called for under any
applicable bulk sales laws. The indemnity provided by the Seller
under this Section 11.07 shall be in addition to and (i) not in
lieu of any indemnity provided to the Buyer under Section 11.01,
but the Buyer shall not be entitled to collect from the Seller more
than once for the same loss, cost or expense, and (ii) shall not be
subject to (x) the time limitations (set forth in Section 11.03) or
(y) the claims limitation amount which is equal to the Indemnity
Amount (set forth in Section 11.05).
ARTICLE XII
CONDUCT OF THE PARTIES AFTER CLOSING
Section 12.01 Cooperation. The Buyer and the Seller will
cooperate upon and after the Closing Date in effecting the orderly
transfer of the Purchased Assets to the Buyer. Without limiting
the generality of the foregoing, the Seller, at the request of the
Buyer and at the Buyer's expense, but without additional
consideration, will execute and deliver from time to time such
further instruments of assignment, conveyance and transfer, will
sign any documents necessary or useful to ensure that all of the
right, title and interest in and to the Purchased Assets, the
Assumed Leases and the Assumed Contracts vests in the Buyer, will
cooperate in the conduct of litigation and the processing and
collection of insurance claims, and will take such other actions as
may reasonably be required to convey and deliver more effective to
the Buyer the Purchased Assets, the Assumed Leases and the Assumed
Contracts or to confirm and perfect the Buyer's title thereto, as
contemplated by this Agreement. The Seller shall take all actions
to cause the Buyer to be subrogated to any rights the Seller may
have under the insurance policies of Seller which cover the
Purchased Assets prior to Closing.
Section 12.02 Access to Books and Records. As long as the
Buyer retains the books and records of the Group's business
acquired by the Buyer hereunder, it will provide the Seller with
reasonable access during customary business hours to such books and
records and as long as the Seller retains the books and records of
the Group's business retained by the Seller hereunder, it will
provide the Buyer with reasonable access during customary business
hours to such books and records. All such books and records shall
be maintained in accordance with all applicable laws, rules and
regulations. Prior to the disposal of any such books and records
by any party hereto, such party shall provide sixty (60) days'
prior written notice to the other party and shall relinquish
possession of such books and records to such other party upon
receipt of a written request therefor within the sixty (60) day
time period.
Section 12.03 Manufacturers' Warranties. After the Closing,
the Seller will cooperate with and assist the Buyer, at the Buyer's
expense, to pursue any manufacturers' warranty claims pending as of
the Closing Date or that may arise thereafter with respect to the
Purchased Assets.
Section 12.04 Use of License Tags. After the Closing, the
Buyer will use its reasonable best efforts to obtain new license
tags at the earliest practicable date for all of the Rolling Stock
included in the Purchased Assets that require license tags. Until
the earlier of (a) the date the new license tags are issued or (b)
five (5) Business Days after the Closing Date, the Buyer shall be
entitled to operate the Rolling Stock included in the Purchased
Assets using the Seller's license tags. The Buyer covenants and
agrees that as long as the Buyer operates using the Seller's
license tags it shall have insurance policies in place, including
umbrella policies providing motor vehicle liability coverage for
all owned, non-owned and hired vehicles operated by the Buyer in an
amount not less than One Million Dollars ($1,000,000) with
deductibles aggregating not more than One Thousand Dollars ($1,000)
per vehicle. The Buyer covenants and agrees to indemnify and hold
harmless the Seller from and against all loss, cost or expense,
including reasonable attorneys' fees, by reason of any suit, claim
or demand arising out of or resulting from the Buyer's operation of
the Rolling Stock after the Effective Time using the Seller's
license tags.
Section 12.05 Use of Name. The Seller shall permanently
discontinue the use of the name "The Treaty Company" or any name
derived therefrom or similar thereto effective upon the Closing
Date. Within five (5) Business Days after the Closing Date, the
Seller shall amend its Articles of Incorporation to change its
corporate name to a name other than "The Treaty Company" or any
name derived therefrom or similar thereto, which new name shall be
approved in advance by the Buyer, and shall provide proof of such
name change to the Buyer no later than fifteen (15) days after the
Closing Date.
Section 12.06 Collection and Disposition of Accounts and
Notes Receivable. All accounts and notes receivables transferred
to Buyer hereunder as part of the Purchased Assets and which have
prior to Closing been written off as uncollectible, but which are
later collected by Buyer, shall remain the property of the Buyer.
Section 12.07 Covenant not to Compete and Confidentiality.
As a material inducement to the Buyer to enter into this Agreement,
the Seller shall deliver to the Buyer the Noncompetition Agreements
for Seller, M. Mead Montgomery and Triumph, substantially in the
form attached hereto as Exhibit 3.04(a).
Section 12.08 Arrangements with Suppliers. In the event that
a vendor to the Group which is listed on Schedule 5.26 attached
hereto, between the date hereof and the Closing, terminates its
relationship with Seller because of the acts or omissions of
Seller, other than the execution of this Agreement, it shall be
deemed a material adverse change in the business of the Group.
Section 12.09 Filings with SEC. Following Closing, the Buyer
may have to make certain filings with the SEC. To the extent that
information concerning the Seller and the Group for matters which
arose prior to Closing is required to be included in such filings,
the Seller and the Group will supply such information, in the
manner and form requested by Buyer, and the Seller shall bear the
cost of complying with such request.
ARTICLE XIII
BROKERAGE; EXPENSES
Section 13.01 Brokerage. The Seller agrees to hold the Buyer
harmless with respect to any liability for brokerage fees,
commissions, finders' fees, or other such fees claimed by any
broker, agent, finder, or consultant engaged by the Seller in
connection with the transactions contemplated herein. The Buyer
agrees to hold the Seller harmless with respect to any liability
for brokerage fees, commissions, finders' fees, or other such fees
claimed by any broker, agent, finder, or consultant engaged by the
Buyer in connection with the transactions contemplated herein.
Section 13.02 Transactional Expenses. Except as otherwise
expressly provided in this Agreement, the parties agree to bear
their fees and expenses incident to the negotiation, preparation,
execution, delivery and performance hereof, including without
limitation, the fees and expenses of their counsel, accountants and
other experts.
ARTICLE XIV
TERMINATION
Section 14.01 Termination by Mutual Consent. On or prior to
the Closing Date, the Buyer and the Seller may terminate this
Agreement by joint execution of an instrument to such effect.
Subject to the provisions of any such instrument terminating this
Agreement, no party will have any liability to the other party
hereunder in the event of any termination of this Agreement
pursuant to this Section, except that the Buyer will continue to be
subject to the provisions of Section 6.03(c) of this Agreement
relating to confidentiality.
Section 14.02 Termination Due to Casualty or Condemnation.
The Buyer may terminate this Agreement by reason of casualty or
condemnation but only in accordance with the provisions of Sections
7.01 and 7.02, respectively, by giving written notice to the Seller
of such termination. In the event of a termination of this
Agreement pursuant to this Section, no party will have any
liability to the other party hereunder, except that the Buyer will
continue to be subject to the provisions of Section 6.03(c) of this
Agreement relating to confidentiality.
Section 14.03 Termination Attributable to Default. If either
the Buyer, on the one hand, or the Seller on the other hand, breach
any warranties or default in the due and timely performance of any
covenants, or agreements under this Agreement in any material
respect, the non-defaulting party may on or before the Closing give
notice of termination to the defaulting party in the manner
provided in Section 15.01. The notice shall specify with
particularity the default(s) on which this notice is based. The
termination shall be effective five (5) Business Days after service
unless the specified default(s) have been cured on or before the
effective date of termination. Termination pursuant to this
Section shall relieve the non-defaulting party from any obligations
under this Agreement but shall not relieve the defaulting party
from liability for damages or other available remedies by reason of
the breach of this Agreement prior to termination.
Section 14.04 Termination Due to Failure to Satisfy
Conditions. Either party hereto may terminate this Agreement in
the event that the conditions precedent to such party's obligation
to effect the transactions contemplated hereby which are contained
in this Agreement are not satisfied on or before the Closing Date.
ARTICLE XV
MISCELLANEOUS
Section 15.01 Notices. All notices, requests, demands and
other communications hereunder will be in writing and will be
deemed given if delivered personally or mailed, certified or
registered mail, postage prepaid, and shall be deemed given when so
delivered personally, or if mailed, two (2) days after the date of
mailing, as follows:
If to Buyer: Hughes Supply, Inc.
20 North Orange Avenue
Orlando, Florida 32801
Attn: David H. Hughes
Chairman of the Board
With copy to: Maguire, Voorhis & Wells, P.A.
Two South Orange Avenue
Orlando, Florida 32801
Attn: Robert N. Blackford, Esq.
If to Seller: Montgomery, Shelton & Company
560 Green Bay Road
Winnetka, Illinois 60093
Attn: M. Mead Montgomery
Chairman of the Board
With copy to: D'Ancona & Pflaum
Suite 2900
30 North Lasalle
Chicago, Illinois 60602
Attn: Michel J. Feldman, Esq.
The parties may change the person and addresses to which the
notices or other communications are to be sent by giving written
notice of any such change in the manner provided herein for giving
notice.
Section 15.02 Assignability and Parties in Interest. No
party may assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of the
other party. Notwithstanding the foregoing, however, this
Agreement may be assigned by Buyer to a wholly owned subsidiary of
Buyer, in which event the Buyer shall guarantee each of the
obligations of such subsidiary; provided, however, that the Buyer
may not deliver to the Seller any common stock other than the
Common Stock of the Buyer. This Agreement binds, inures to the
benefit of and is enforceable by the respective successors and
permitted assigns of the parties and it does not confer any rights
on any other persons or entities.
Section 15.03 Governing Law. This Agreement will be governed
by, and construed and enforced in accordance with the laws of the
State of Florida, without giving effect to its conflicts of laws
provisions.
Section 15.04 Exclusive Jurisdiction. The parties agree that
any legal action or proceeding with respect to or arising out of
this Agreement shall be brought in the applicable federal or state
court having jurisdiction over Orange County, Florida. By
execution of this Agreement, the parties hereby submit to the
exclusive jurisdiction of such courts and agree to accept the
process of such courts.
Section 15.05 Counterparts. This Agreement may be executed
in any number of counterparts and any party hereto may execute any
such counterpart, each of which when executed and delivered will be
deemed to be an original and all of which counterparts taken
together will constitute but one and the same instrument. The
execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the
parties hereto. It will not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any
of the other counterparts.
Section 15.06 Waiver. The failure of any party to insist
upon strict performance of any of the terms or conditions of this
Agreement will not constitute a waiver of any of its rights
hereunder.
Section 15.07 Publicity. The Buyer and the Seller agree that
press releases and other announcements to be made by any of them
with respect to the transactions contemplated hereby will be
subject to mutual agreement, except as required by applicable law
or regulations.
Section 15.08 Complete Agreement. This Agreement, the
Exhibits hereto and the Schedules hereto delivered pursuant to this
Agreement contain the entire agreement between the parties hereto
with respect to the transactions contemplated herein and, except as
provided herein, supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, writings and
understandings relating to the subject matter hereof.
Section 15.09 Modifications, Amendments and Waivers. At any
time prior to the Closing Date or termination of this Agreement,
the Buyer, on the one hand, and the Seller, on the other hand, may,
by written agreement:
(a) extend the time for the performance of any of the
obligations or other acts of the other party hereto;
(b) waive any inaccuracies in the representations and
warranties made by the other party contained in this Agreement or
in the Schedules hereto or any other document delivered pursuant to
this Agreement; and
(c) waive compliance with any of the covenants or
agreements of the other party contained in this Agreement.
Section 15.10 Interpretation. The headings contained in this
Agreement are for reference purposes only and will not affect in
any way the meaning or interpretation of this Agreement.
Section 15.11 Severability. If any provision of this
Agreement is held illegal, invalid, or unenforceable, such
illegality, invalidity, or unenforceability will not affect any
other provision hereof. This Agreement will, in such
circumstances, be deemed modified to the extent necessary to render
enforceable the provisions hereof.
Section 15.12 Time of Essence. The parties to this Agreement
acknowledge and agree that time is of the essence with respect to
the consummation of the transactions contemplated by this
Agreement.
Section 15.13 Gender, Number. Words of gender may be read as
masculine, feminine, or neuter, as required by context. Words of
number may be read as singular or plural, as required by context.
All terms such as "herein," "hereby" or "hereunder" refer to this
Agreement as a whole.
Section 15.14 Exhibits and Schedules. Each Exhibit and
Schedule referred to herein is incorporated into this Agreement by
such reference.
Section 15.15 Limitation on Warranties. Except as expressly
set forth in this Agreement, the Exhibits and Schedules hereto, or
in any other agreement or document delivered by Seller in
connection with the Closing of the transactions contemplated by
this Agreement, the Seller makes no express or implied warranty of
any kind whatsoever, including, without limitation, any
representation as to the physical condition or value of any of the
Purchased Assets or the future profitability or future earnings
performance of the business conducted by the Group. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, THE EXHIBITS AND SCHEDULES
HERETO, OR IN ANY OTHER AGREEMENT OR DOCUMENT DELIVERED BY SELLER
IN CONNECTION WITH THE CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
Section 15.16 Definition of Seller's Knowledge. For the
purposes of this Agreement, the knowledge of Seller shall be deemed
to be limited to the actual knowledge of M. Mead Montgomery,
Raymond H. Lear and Michael Tinka as of the date hereof, and as of
the Closing Date those individuals identified on Schedule 15.16
attached hereto.
Section 15.17 Facts Concerning the Group. To the extent that
any representation, warranty, covenant or agreement set forth in
this Agreement references the Group or the business operations of
the Group, such reference includes any fact or circumstance known
to the Seller to affect the Group and its operation, or the
Purchased Assets, and the ability of the Buyer to realize on the
benefit of its bargain as set forth in this Agreement.
Section 15.18 Definition of Buyer's Knowledge. For the
purposes of this Agreement, the knowledge of the Buyer shall be
deemed to be limited to those individuals who hold the office of
Chairman of the Board, President, and Chief Financial Officer for
the Buyer.
Section 15.19 No Benefit to Others. The representations,
warranties, covenants and agreements contained in this Agreement
are for the sole benefit of the parties hereto and their successors
and permitted assigns, and they will not be construed as conferring
and are not intended to confer any rights on any other persons.
Section 15.20 Attorneys' Fees. In the event any party hereto
institutes litigation to enforce its rights or remedies under this
Agreement, the party prevailing in such litigation shall be
entitled to receive an award from the non-prevailing party of the
prevailing party's reasonable attorneys' fees and costs incurred in
connection with such litigation. The foregoing shall include
reasonable attorneys' fees and costs (including paralegals' fees)
incurred at trial, on any appeal and in any proceeding in
bankruptcy. The agreement of the parties represented by this
Section 15.20 is in addition to, and not in lieu of, any other
agreement or obligation of the parties contained in this Agreement.
Section 15.21 Certain Defined Terms. Except as otherwise
defined in this Agreement, the following defined terms whether used
in upper or lower case shall have the respective meanings set forth
below:
(a) The term "Affiliate" shall mean any controlled groups
(within the meaning of Section 414(b) of the Internal Revenue Code
of 1986, as amended (the "Code")) of which any party to this
Agreement is a member, all trades or businesses, whether or not
incorporated, under common control (within the meaning of Section
414(c) of the Code) and of which any party to this Agreement is a
member, and all affiliated service groups (within the meaning of
Section 414(m) of the Code of which any party to this Agreement is
a member).
(b) The term "Business Days" shall mean any day which is not
a Saturday, Sunday or a permitted or required bank holiday in the
States of Florida, Ohio or Indiana.
(c) The term "Common Stock" shall mean the $1.00 par value
common capital stock of the Buyer.
(d) The term "Executive Officers" shall mean those officers
holding the office of Chairman of the Board, President, Vice
President, Secretary and Treasurer.
(e) The term "material" when referring to representations or
warranties with respect to the financial statements shall be deemed
to mean an effect or variance with respect to the Company the
magnitude of which would result in an after tax net effect or
variance of Fifty Thousand Dollars ($50,000) or more, whether
individually or in the aggregate, or when related to any other
representation, warranty, covenant or agreement, shall be deemed to
mean any effect or variance which results in an after tax net
effect of Five Thousand Dollars ($5,000) or more, whether
individually or in the aggregate.
(f) The term "Person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, or a federal,
state, local or foreign governmental body or agency.
(g) The term "Records" shall mean any paper, document, file
or record of any kind, whether recorded in writing or on magnetic,
optical, or any other storage medium, and including without
limitation all computer records in whatever form.
(h) The term "Rolling Stock" shall mean automobiles, trucks,
trailers, forklifts, loaders, tractors and other motorized vehicles
of every type and nature.
(i) The term "Tax" shall mean any federal, state, local or
foreign tax assessment, fee, interest, penalty or other
governmental charge of any kind.
(j) The term "Triumph" shall include Triumph Capital, a
Delaware limited partnership, and Triumph Capital II, L.P., a
Delaware limited partnership.
Section 15.22 Survival of Agreement. This Agreement shall
survive the Closing of the transactions contemplated hereby.
Section 15.23 Recitals. The recitals set forth at the
beginning of this Agreement, as well as the definitions contained
therein, are by this reference incorporated herein and made a part
of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
"BUYER"
HUGHES SUPPLY, INC., a Florida
corporation
Attest:_____________________ By:___________________________
Robert N. Blackford David H. Hughes
Secretary Chairman of the Board
"SELLER"
THE TREATY COMPANY, an Ohio
corporation
Attest:_____________________ By:___________________________
Paul Reiss, M. Mead Montgomery,
Assistant Secretary Chairman of the Board
Exhibit 11.1
HUGHES SUPPLY, INC.
SUMMARY SCHEDULE OF EARNINGS PER SHARE CALCULATIONS
(in thousands, except per share amounts)
Potentially dilutive securities:
a) Options for common stock, issued under stock option plan.
b) 7% Convertible subordinated debentures, due May 1, 2011.
Three Months
Ended October 31,
1994 1993
Line
- ----
SHARES
------
1 Average shares outstanding 5,790 4,553
2 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at average market price
during the period 108 112
---------- ----------
3 Shares used in calculating Earnings Per
Common and Common Equivalent Share 5,898 4,665
4 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at the higher of the
average market price during the period or the
market price at the end of the period; and
that options exercised during the period were
exercised at the beginning of the period(or
time of issuance, if later) and the proceeds
were used to purchase shares at the market
price at the date of exercise 1 1
5 Incremental shares (debentures) -
Assuming debentures were converted at
beginning of period (or time of issuance, if
later) at most advantageous (for security
holder) conversion rate that becomes
effective within 10 years - 1,085
---------- ----------
6 Shares used in calculating Earnings Per
Common Share - Assuming Full Dilution 5,899 5,751
========== ==========
EARNINGS
--------
7 Net income per financial statements, used in
calculating Earnings Per Common Share and
Earnings Per Common and Common Equivalent
Share $ 2,778 $ 1,843
8 Incremental earnings (debentures) -
Assuming interest charges applicable to
convertible debentures (and nondiscretionary
adjustments that would have been made based
on net income) are taken into account in
determining balance of income applicable to
common stock - 249
---------- ----------
9 Earnings used in calculating Earnings Per
Common Share - Assuming Full Dilution $ 2,778 $ 2,092
========== ==========
Three Months
Ended October 31,
1994 1993
Line
- ----
RESULTING PER SHARE DATA
------------------------
10 Earnings per common share (Line 7/Line 1) $ .48 $ .40
=========== ===========
11 Earnings per common share and common
equivalent share (Line 7/Line 3) $ .47 $ .40
=========== ===========
12 Dilution 2.1% 0.0%
=========== ===========
13 Earnings per common share - assuming full
dilution (Line 9/Line 6) $ .47 $ .36
=========== ===========
14 Dilution 2.1% 10.0%
=========== ===========
15 Used in statements of income:
[ ] Line 10, if dilution less than 3%, or antidilution, exists for all
periods.
[ X ] Lines 11 and 13, if dilution >= 3% for any period.
Nine Months
Ended October 31,
1994 1993
Line
- ----
SHARES
------
1 Average shares outstanding 5,546 4,552
2 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at average market price
during the period 154 79
---------- ----------
3 Shares used in calculating Earnings Per
Common and Common Equivalent Share 5,700 4,631
4 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at the higher of the
average market price during the period or the
market price at the end of the period; and
that options exercised during the period were
exercised at the beginning of the period(or
time of issuance, if later) and the proceeds
were used to purchase shares at the market
price at the date of exercise 4 28
5 Incremental shares (debentures) -
Assuming debentures were converted at
beginning of period (or time of issuance, if
Nine Months
Ended October 31,
1994 1993
Line
- ----
later) at most advantageous (for security
holder) conversion rate that becomes
effective within 10 years 240 1,085
---------- ----------
6 Shares used in calculating Earnings Per
Common Share - Assuming Full Dilution 5,944 5,744
========== ==========
EARNINGS
--------
7 Net income per financial statements, used in
calculating Earnings Per Common Share and
Earnings Per Common and Common Equivalent
Share $ 7,456 $ 4,260
8 Incremental earnings (debentures) -
Assuming interest charges applicable to
convertible debentures (and nondiscretionary
adjustments that would have been made based
on net income) are taken into account in
determining balance of income applicable to
common stock 166 747
---------- ----------
9 Earnings used in calculating Earnings Per
Common Share - Assuming Full Dilution $ 7,622 $ 5,007
========== ==========
RESULTING PER SHARE DATA
------------------------
10 Earnings per common share (Line 7/Line 1) $ 1.34 $ .94
=========== ===========
11 Earnings per common share and common
equivalent share (Line 7/Line 3) $ 1.31 $ .92
=========== ===========
12 Dilution 2.2% 2.1%
=========== ===========
13 Earnings per common share - assuming full
dilution (Line 9/Line 6) $ 1.28 $ .87
=========== ===========
14 Dilution 4.5% 7.4%
=========== ===========
15 Used in statements of income:
[ ] Line 10, if dilution less than 3%, or antidilution, exists for all
periods.
[ X ] Lines 11 and 13, if dilution >= 3% for any period.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF OCTOBER
31, 1994, AND THE RELATED STATEMENT OF INCOME FOR THE NINE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049029
<NAME> HUGHES SUPPLY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-27-1995
<PERIOD-END> OCT-31-1994
<CASH> 1,981
<SECURITIES> 0
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<PP&E> 103,227
<DEPRECIATION> 50,327
<TOTAL-ASSETS> 287,302
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<COMMON> 6,149
0
0
<OTHER-SE> 118,188
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<SALES> 597,104
<TOTAL-REVENUES> 597,104
<CGS> 478,325
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<OTHER-EXPENSES> 103,025
<LOSS-PROVISION> 1,957
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<INCOME-PRETAX> 12,562
<INCOME-TAX> 5,106
<INCOME-CONTINUING> 7,456
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,456
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.28
</TABLE>
