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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report : December 24, 1996
JOTAN, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 0-24188
(State of other jurisdiction of (Commission File Number)
incorporation)
59-3181162
(IRS Employer Identification No.)
118 West Adams Street, Suite 900, Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 355-2592
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ITEM 5. Other Events
On December 19, 1996, JOTAN, Inc., a Florida corporation, announced the
signing of a definitive agreement to acquire 100% of the stock of Southland
Holding Company, pursuant to the terms of a share purchase agreement by and
among JOTAN, Inc., Southland Holding Company and the Shareholders of
Southland Holding Company. The transaction is expected to close in the first
quarter of 1997. The total purchase price of the stock of Southland was
$34,070,249, including payments under certain Non-Competition Agreements.
Southland is a leading distributor of packaging products to the moving
and storage industry and also serves significant packaging market segments
in both the air freight and perishable packaging areas. Southland has eleven
distribution centers located in California, Washington, Colorado,
Massachusetts, New York, New Jersey, Maryland, North Carolina, Georgia and
Florida. Southland provides packaging materials to virtually all of the major
moving and storage companies in the United States.
EXHIBITS
5.0 Share Purchase Agreement dated December 19, 1996 by and among JOTAN,
Inc., Southland Holding Company, and the Shareholders of Southland
Holding Company.
5.1 Jotan Press Release announcing agreement to acquire Southland Holding
Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JOTAN, Inc.
By: ___________________________________
Shea Ralph, President
By: ___________________________________
David Freedman, Vice President
and Chief Financial Officer
December 24, 1996
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SHARE PURCHASE AGREEMENT
BY AND AMONG
JOTAN, INC.,
SOUTHLAND HOLDING COMPANY,
AND
THE SHAREHOLDERS OF
SOUTHLAND HOLDING COMPANY
DATED DECEMBER 19, 1996
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CONTENTS
Background .......................................................... 1
Agreement ........................................................... 1
ARTICLE I
SALE AND PURCHASE OF SHARES
1.01 Sale and Purchase of Shares ................................... 1
1.02 Purchase Price ................................................ 1
1.03 Purchase Price Adjustment ..................................... 2
1.04 Closing Date Financial Statements ............................. 3
1.05 Closing; Effectiveness of Closing; Deliveries ................. 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS AND THE COMPANY
2.01 Title to Shares; Other Rights ................................. 4
2.02 Capacity and Validity ......................................... 4
2.03 Organization .................................................. 5
2.04 Capitalization ................................................ 5
2.05 No Conflict ................................................... 5
2.06 Subsidiaries .................................................. 5
2.07 Financial Statements .......................................... 6
2.08 Absence of Changes ............................................ 6
2.09 Tax Matters ................................................... 7
2.10 Title to Assets; Encumbrances; Condition ...................... 7
2.11 Real Property ................................................. 8
2.12 Personal Property ............................................. 9
2.13 Intellectual Property ......................................... 9
2.14 Computer Software and Databases ...............................10
2.15 Accounts Receivable ...........................................10
2.16 Insurance .....................................................10
2.17 Bonds, Letters of Credit and Guarantees .......................11
2.18 Compliance with Law ...........................................11
2.19 Environmental .................................................12
2.20 Litigation and Claims .........................................14
2.21 Benefit Plans .................................................15
2.22 Contracts .....................................................17
2.23 Suppliers and Customers .......................................18
2.24 Labor Matters .................................................19
2.25 Prospective Changes ...........................................20
2.26 Brokers and Finders ...........................................20
2.27 Interested Transactions .......................................20
2.28 Officers, Directors and Bank Accounts .........................20
2.29 Inventories ...................................................20
2.30 Compliance with the Immigration and Reform and Control Act ....21
2.31 Statements True and Correct ...................................21
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Organization ..................................................21
3.02 Capacity and Validity .........................................21
3.03 No Conflict ...................................................22
3.04 Brokers and Finders ...........................................22
3.05 Investment Representative .....................................22
3.06 Statements True and Correct ...................................22
ARTICLE IV
COVENANTS AND ADDITIONAL AGREEMENTS OF THE COMPANY, THE SHAREHOLDERS
AND PURCHASER
4.01 Conduct of Business ...........................................22
4.02 Right of Inspection; Access ...................................23
4.03 Other Offers and Exclusive Dealing ............................23
4.04 Confidentiality ...............................................24
4.05 Waivers, Consents and Approvals ...............................24
4.06 Supplying of Financial Statements .............................25
4.07 Qualification and Corporate Existence .........................25
4.08 Public Announcements ..........................................25
4.09 Closing Conditions ............................................25
4.10 Supplements to Schedules ......................................25
4.11 Certain Tax Matters ...........................................26
4.12 Expenses ......................................................26
4.13 Further Assurances ............................................27
4.14 Delivery of Books and Records .................................27
4.15 Noninterference Agreements ....................................27
4.16 Environmental Reports .........................................27
ARTICLE V
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATIONS
5.01 Survival of Representations and Warranties; Acknowledgment of
Purchaser Reliance ............................................28
5.02 Obligation of the Company and the Shareholders to Indemnify ...29
5.03 Obligation of Purchaser to Indemnify ..........................30
5.04 Relationship of Purchaser, the Shareholders and the Company ...30
5.05 Limitations on Indemnification ................................30
5.06 Notice of Loss or Asserted Liability ..........................31
5.07 Opportunity to Contest ........................................32
5.08 Disputes with Customers or Suppliers ..........................32
5.09 Subrogation Rights ............................................33
5.10 Indemnification Payments ......................................33
5.11 Allocation of Tax Liability ...................................33
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
6.01 Representations True and Covenants Performed at Closing .......34
6.02 Incumbency Certificate ........................................34
6.03 Certified Copies of Resolutions ...............................34
6.04 Opinions of Counsel ...........................................34
6.05 No Material Adverse Change ....................................34
6.06 No Injunction, Etc. ...........................................35
6.07 Approval of Legal Matters .....................................35
6.08 Hart-Scott Approval ...........................................35
6.09 Environmental Report ..........................................35
6.10 Estoppel Certificates of Real Property Lessors ................35
6.11 Financing Obtained by Purchaser ...............................35
6.12 Non-Competition Agreements ....................................35
6.13 Resignations; Releases ........................................36
6.14 Absence of New Debt ...........................................36
6.15 Financial Statements ..........................................36
6.16 Accountants' Comfort Letter ...................................36
6.17 License of Name ................................................36
6.18 Amendment of Certain Leases ...................................37
6.19 FIRPTA Certificate ............................................37
6.20 Consents and Approvals ........................................37
6.21 Payoff Letters ................................................37
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
7.01 Representations True and Covenants Performed at Closing .......39
7.02 Incumbency Certificate ........................................39
7.03 Certified Copies of Resolutions ...............................39
7.04 No Injunction, Etc. ...........................................39
7.05 Hart-Scott Act Approval .......................................39
ARTICLE VIII
TERMINATION
8.01 Cause for Termination .........................................40
8.02 Notice of Termination .........................................40
8.03 Effect of Termination .........................................40
8.04 Risk of Loss ..................................................41
ARTICLE IX
ARBITRATION
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ARTICLE X
DEFINITIONS
Accounts Receivable .................................................43
Act .................................................................43
Affiliate ...........................................................43
Agreement ...........................................................43
Balance Sheet .......................................................43
Balance Sheet Date ..................................................43
Business ............................................................43
Closing .............................................................43
Closing Date ........................................................43
Code ................................................................43
Computer Software ...................................................43
Contract ............................................................43
Databases ...........................................................44
Default .............................................................44
Dividend Payment ....................................................44
Employee Benefit Plan ...............................................44
Environmental Laws ..................................................44
Environmental Litigation ............................................45
Environmental Matter ................................................45
ERISA ...............................................................45
ERISA Affiliate .....................................................45
ERISA Plan ..........................................................45
Financial Statements ................................................45
GAAP ................................................................45
Governmental Authority ..............................................45
Hart-Scott Act ......................................................45
Hazardous Substance .................................................45
Improvements ........................................................45
Intellectual Property ...............................................45
Inventory ...........................................................46
IRS .................................................................46
Knowledge ...........................................................46
Law .................................................................46
Leased Personal Property ............................................46
Leased Real Property ................................................46
Liability ...........................................................46
License .............................................................46
Lien ................................................................46
Litigation ..........................................................46
Loss ................................................................46
Material or Materially ..............................................47
Material Adverse Change or Material Adverse Effect ..................47
Order ...............................................................47
Other Agreements ....................................................47
Owned Personal Property .............................................47
Owned Real Property .................................................47
Permitted Liens .....................................................47
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Person ..............................................................47
Personal Property ...................................................47
Purchase Price ......................................................47
Real Property .......................................................48
Related Person ......................................................48
Shares ..............................................................48
Subsidiary ..........................................................48
Tax or Taxes ........................................................48
Tax Returns .........................................................48
Third Party or Third Parties ........................................48
Undisclosed Liabilities .............................................48
ARTICLE XI
MISCELLANEOUS
11.01 Notices ......................................................49
11.02 Entire Agreement .............................................50
11.03 Modifications, Amendments and Waivers ........................50
11.04 Successors and Assigns .......................................50
11.05 Table of Contents; Captions; References ......................50
11.06 Governing Law ................................................51
11.07 Pronouns .....................................................51
11.08 Severability .................................................51
11.09 Sole and Exclusive Remedy; Waiver and Release;
Confirmation of Company Indemnity. ...........................51
11.10 Counterparts .................................................51
11.11 Interpretations ..............................................51
11.12 Shareholder Representative ...................................51
11.13 No Intention to Benefit Third Parties ........................52
11.14 Texas Deceptive Trade Practices Act Waiver ...................52
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EXHIBITS AND SCHEDULES
Exhibit 1.02 -- Form of Escrow Agreement
Exhibit 6.04 -- Form of Opinion of Counsel to the Company and the
Shareholders
Exhibit 6.12 -- Form of Non-Competition and Non-Disclosure Agreements
Exhibit 6.12(b) -- Geographic Scope on Non-Competition Covenants
Exhibit 6.29 -- Southland Container, Inc. Agreement Terms
Schedule 2.01 -- Shareholders' Ownership
Schedule 2.03 -- Organization, Standing & Foreign Qualification
Schedule 2.05 -- Conflicts
Schedule 2.06 -- Subsidiaries
Schedule 2.07 -- Financial Statements
Schedule 2.08 -- Absence of Changes
Schedule 2.09 -- Tax Matters
Schedule 2.10 -- Title to Assets; Encumbrances
Schedule 2.11 -- Real Property
Schedule 2.12 -- Personal Property
Schedule 2.13 -- Intellectual Property
Schedule 2.14 -- Computer Software and Databases
Schedule 2.16 -- Insurance
Schedule 2.17 -- Bonds, Letters of Credit and Guarantees
Schedule 2.18 -- Compliance With Law
Schedule 2.19 -- Environmental
Schedule 2.20 -- Litigation and Claims
Schedule 2.21 -- Benefit Plans
Schedule 2.22(a)(i) -- Real Property Contracts
Schedule 2.22(a)(ii) -- Personal Property Contracts
Schedule 2.22(a)(iii) -- Purchase Orders--Non-Capital Assets
Schedule 2.22(a)(iv) -- Purchase Orders--Capital Assets
Schedule 2.22(a)(v) -- Sales Contracts
Schedule 2.22(a)(vi) -- Employment; Other Affiliate Contracts
Schedule 2.22(a)(vii) -- Sales Representatives Contracts
Schedule 2.22(a)(viii) -- Powers of Attorney
Schedule 2.22(a)(ix) -- Any Other Contracts
Schedule 2.23 -- Suppliers and Customers
Schedule 2.24 -- Labor Matters
Schedule 2.25 -- Prospective Changes
Schedule 2.26 -- Brokers and Finders
Schedule 2.27 -- Interested Transactions
Schedule 2.28 -- Officers, Directors and Bank Accounts
Schedule 3.03 -- Purchaser -- Conflicts
Schedule 3.04 -- Purchaser -- Brokers and Finders
Schedule 6.26 -- Atlanta Property
Schedule 6.28 -- Proprietery Rights Restriction
Schedule X -- Permitted Liens
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") dated as of the ____
day of December, 1996, is made and entered into by and among JOTAN, INC., a
Florida corporation ("Purchaser"), SOUTHLAND HOLDING COMPANY, a Texas
corporation (the "Company"), LESTER G. GEGENHEIMER, an individual residing in
Texas ("Gegenheimer"), JOHN L. SANDERS, JR., an individual residing in Texas
("Sanders"), and WILLIAM P. BLINCOE, an individual ("Blincoe") (Gegenheimer,
Sanders and Blincoe are referred to individually as a "Shareholder" and
collectively as the "Shareholders").
BACKGROUND:
The Shareholders are the owners, of record and beneficially, of 100% of
the issued and outstanding Shares of the Company. This Agreement sets forth
the terms and conditions upon which the Shareholders shall sell to Purchaser,
and upon which Purchaser shall purchase, all of the issued and outstanding
Shares of the Company. Certain terms used in this Agreement are defined in
Article X hereof.
AGREEMENT:
In consideration of the foregoing, the mutual agreements, covenants,
representations and warranties contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and subject to the terms and conditions hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.01 Sale and Purchase of Shares. On the terms and subject to the
conditions set forth in this Agreement, the Shareholders shall sell, convey,
assign, transfer and deliver to Purchaser at the Closing, and Purchaser shall
purchase and accept from the Shareholders, all of the issued and outstanding
Shares, free and clear of any and all Liens, except for restrictions on resale
pursuant to applicable state and federal securities laws.
1.02 Purchase Price. The total Purchase Price for the acquisition of
all of the issued and outstanding Shares from the Shareholders shall be
Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000). The
Purchase Price shall be adjusted at the Closing pursuant to Section 1.03. At
the Closing, Purchaser shall pay the Purchase Price (net of any necessary
adjustment pursuant to Section 1.03) to the Shareholders, against delivery to
Purchaser of a certificate or certificates, registered in its name or the name
of its designees, representing the Shares sold pursuant to this Agreement. At
Closing, the Purchase Price shall be paid as follows: (i) $3,000,000 of the
Purchase Price shall be paid to an escrow agent (the "Escrow Agent") (which
shall be a trust company or bank having trust powers acceptable to Purchaser
and the Shareholders) pursuant to an escrow agreement substantially in the
form of Exhibit 1.02 and (ii) $24,500,000.00 shall be paid in cash by wire
transfer of immediately available funds, or in such other form and manner as
may be mutually satisfactory, to an account or accounts designated in writing
by the Shareholders at least two (2) business days prior to the Closing. The
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$3,000,000 of the Purchase Price held by the Escrow Agent (the "Escrow Funds")
shall be held by the Escrow Agent for a period of three (3) years after the
Closing Date and shall be used to satisfy any claims that Purchaser may have
against the Shareholders, including without limitation, claims for
indemnification pursuant to Article V; provided, however, that on each of the
first three anniversaries of the Closing Date, the Escrow Agent shall
distribute to each Shareholder his pro rata portion of any Escrowed Funds held
by the Escrow Agent in excess of the amount set forth below:
Anniversary of the Closing Date Remaining Escrow Funds
First $2,400,000 plus the amount, if any,
of any Losses and Asserted
Liabilities that are the subject of
a claim by Purchaser for
indemnification pursuant to Article
V and that have not yet been paid to
Purchaser or to other Persons for
Purchaser's account
Second $1,500,000 plus the amount, if any,
of any Losses and Asserted
Liabilities that are the subject of
a claim by Purchaser for
indemnification pursuant to Article
V and that have not yet been paid to
Purchaser or to other Persons for
Purchaser's account
Third $-0- plus the amount, if any, of any
Losses and Asserted Liabilities that
are the subject of a claim by
Purchaser for indemnification
pursuant to Article V and that have
not yet been paid to Purchaser or to
other Persons for Purchaser's
account
1.03 Purchase Price Adjustment. On or prior to the Closing Date, the
Purchase Price shall be increased or decreased by the amount, if any, that the
Aggregate Acquisition Amount in respect of the minority interests in the
Company's subsidiaries at the Closing (collectively, the "Minority Interests")
is less than or exceeds, respectively, $1,500,000. The term "Aggregate
Acquisition Amount" means the aggregate purchase price of such Minority
Interest as calculated under the buy-sell agreements relating to such Minority
Interests if a purchase event (other than death) were to take place on the
Closing Date; provided, however, that the holders of the Minority Interests
may not be required by such buy-sell agreements to sell such Minority
Interests as a result of or in connection with the transactions contemplated
by this Agreement, and the acquisition price may not reflect the actual market
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value of the Minority Interests. Nothing set forth herein is intended to
require that Purchaser purchase, or be able to purchase, the Minority
interests or any part thereof at the Aggregate Acquisition Amount. Further,
where the purchase price in such contracts is based on the Company's or any of
its Subsidiaries' book value, such book value shall be determined by reference
to the Interim Financial Statements (as defined in Section 1.04).
1.04 Closing Date Financial Statements.
(a) Before the Closing Date and at the expense of Purchaser
or the Company after the Closing Date, the Company shall prepare and cause
Ernst & Young, L.L.P. to review an unaudited balance sheet as of the day on
which the Closing is deemed to be effective pursuant to Section 1.05 together
with an unaudited income statement for the period beginning on May 1, 1996 and
ended on the day on which the Closing is deemed to be effective pursuant to
Section 1.05 (collectively, the "Interim Financial Statements"). The
Shareholders and Purchaser acknowledge that the Purchase Price Adjustment
described in Section 1.03 and the Dividend Payment referred to in Section
4.01(g) will be based on the Interim Financial Statements. Accordingly,
within one hundred and twenty (120) days after the Closing Date, the Company
shall prepare and cause Ernst & Young, L.L.P. to audit a balance sheet as of
the day on which the Closing is deemed to be effective pursuant to
Section 1.05 and an income statement for the period beginning May 1, 1996 and
ended on the day on which the Closing is deemed to be effective pursuant to
Section 1.05 (the "Closing Date Financial Statements"). The Purchase Price
shall be increased or decreased to the extent that the Aggregate Acquisition
Amount as calculated based on the Closing Date Financial Statements differs
from the Aggregate Acquisition Amount as calculated based on the Interim
Financial Statements. Similarly, the Dividend Payment shall be increased or
decreased to the extent that the calculation of the Dividend Payment based on
the Closing Date Financial Statements differs from the calculation of the
Dividend Payment based on the Interim Financial Statements.
(b) The Closing Date Financial Statements shall be prepared
in accordance with GAAP consistently applied and shall be audited in
accordance with generally accepted auditing standards. The Closing Date
Financial statements shall be delivered to Purchaser and the Shareholders on
or before the one hundred twentieth (120th) day after the Closing Date.
Purchaser and the Shareholders shall have ten (10) days from the receipt of
the Closing Date Financial Statements to review such Closing Date Financial
Statements, and each party at its own expense may have the Closing Date
Financial Statements reviewed by an independent accountant. In the event that
any party does not agree with the Closing Date Financial Statements, then
prior to the expiration of such ten (10) day period, the objecting party shall
deliver a written objection (the "Objection") to the other party hereto (for
purposes of this paragraph the Shareholders shall be deemed to be one party
and the Company and Purchaser shall be deemed to be one party), which shall
specify in reasonable detail the basis for the Objection. The parties shall
negotiate in good faith to resolve the Objection, but if the Objection cannot
be resolved by negotiation between the parties within thirty (30) days after
the non-objecting party's receipt of the Objection, Purchaser shall cause the
Closing Date Financial Statements, the Objection and all work papers related
thereto (collectively, the "Determination Materials"), to be submitted to
Coopers & Lybrand or such other independent Big Six accounting firm as the
parties may select. Coopers & Lybrand shall review the Determination Materials
and determine the correct Closing Date Financial Statements and notify the
parties of its determination within thirty (30) days following the receipt of
the Determination Materials, which determination shall be final and
conclusive. The fees and expenses of Coopers & Lybrand shall be borne by the
party whose position was not chosen by Coopers & Lybrand.
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(c) If the total of the Dividend Payment and the Purchase
Price Adjustment as calculated based on the Closing Date Financial Statements
pursuant to this Section 1.04 (the "Final Payments") is greater than the total
of the Dividend Payment and the Purchase Price Adjustment as calculated based
on the Interim Financial Statements paid at Closing (the "Initial Payments"),
Purchaser shall pay the difference between such amounts to the Shareholders.
If the Final Payments are less than the Initial Payments, the Shareholders
shall pay the difference between such amounts to Purchaser. The payments
required by this subsection shall be made by wire transfer in immediately
available funds to an account or accounts designated in writing by the
recipient within ten (10) days after (i) the delivery of the Closing Date
Financial Statements as provided in this Section 1.04 or (ii) the resolution
of any Objection thereto, if any.
1.05 Closing; Effectiveness of Closing; Deliveries. The Closing
shall occur at 10:00 a.m. local time on the Closing Date at the offices of
Alston & Bird in Atlanta, Georgia. The Closing shall be effective as of the
close of business on the day preceding the Closing Date, unless Purchaser
reasonably determines that the Closing shall be effective as of the last day
of the month immediately prior to the Closing Date, based on such effective
date not having a Material financial impact to Purchaser. All deliveries,
payments and other transactions and documents relating to the Closing
(i)shall be interdependent and none shall be effective unless and until all
are effective (except to the extent that the party entitled to the benefit
thereof has waived satisfaction or performance thereof as a condition recedent
to Closing), and (ii)shall be deemed to be consummated in the order set forth
in this Agreement and, to the extent the order is not specified, shall be
deemed to be consummated simultaneously.
ARTICLE II
REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS AND THE COMPANY
Each of the Shareholders and the Company, jointly and severally,
hereby represent and warrant to Purchaser as follows:
2.01 Title to Shares; Other Rights. Each of the Shareholders is
the owner of all right, title and interest (legal and beneficial) in and to
that number of Shares set forth next to his name on Schedule 2.01, free and
clear of all Liens, except for restrictions on resale pursuant to applicable
state and federal securities laws. Collectively, the Shareholders own all
right, title and interest (legal and beneficial) in and to all of the issued
and outstanding shares of the Company's capital stock. Except as specifically
contemplated by this Agreement and except as set forth on Schedule 2.01, no
Person has any Contract or option or any right or privilege (whether
preemptive or contractual) capable of becoming a Contract or option for the
purchase from the Shareholders of any of the Shares or for the purchase,
subscription or issuance of any securities of the Company.
2.02 Capacity and Validity. Each of the Shareholders has the full
power, capacity and authority necessary to enter into and perform his or its
obligations under this Agreement and the Other Agreements to which he is a
party and to consummate the transactions contemplated hereby and thereby. The
Company has the full corporate power, capacity and authority necessary to
enter into and perform its obligations under this Agreement and the Other
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of
this Agreement and the Other Agreements have been approved by all necessary
action of the Board of Directors and Shareholders of the Company, if any.
This Agreement has been, and the Other Agreements to which the Company or any
of the Shareholders is a party will be when executed and delivered, duly
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executed and delivered by the Shareholders and by duly authorized officers of
the Company, and each such agreement constitutes, or will constitute when
executed and delivered, a legal, valid and binding obligation of the Company
and the Shareholders, as the case may be, enforceable against the Company and
the Shareholders, as the case may be, in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally.
2.03 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has full corporate power and authority to own, lease and operate its assets
and to carry on its Business. Each of the Company's Subsidiaries listed on
Schedule 2.03 is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions listed on Schedule
2.03 next to the name of each such Subsidiary. Each of the Company's
Subsidiaries has full corporate power and authority to own, lease and operate
its assets and to carry on its Business. The Company and each of its
Subsidiaries is duly qualified or licensed to transact business as a foreign
corporation in good standing in the jurisdictions listed in Schedule 2.03 next
to the Company's and each of its Subsidiaries' names, and the character of the
Company's and each of its Subsidiaries' assets or the nature of the Company's
and each of its Subsidiaries' business do not require such qualification or
licensing in any other jurisdiction except where the failure to so qualify or
be so licensed would not have a Material Adverse Effect on the Company or any
of its Subsidiaries. Complete and correct copies of the Articles of
Incorporation, and all amendments thereto, of the Company and each of its
Subsidiaries (certified by the Secretary of State of the jurisdiction of
incorporation of each) and By-Laws of the Company and each of its
subsidiaries, and all amendments thereto, (certified by the Secretary of the
Company and each of its Subsidiaries) have been delivered to the Purchaser.
Copies of all records of the proceedings of incorporators, shareholders and
directors of the Company and each of its Subsidiaries, which are set forth in
the Company's and each of its Subsidiaries' minute books (the "Minute Books"),
are correct and complete and accurately reflect all proceedings of the
Company's and each of its Subsidiaries' incorporators, shareholders and Board
of Directors and all committees thereof. The stock record books of the Company
and each of its Subsidiaries (the "Stock Record Books") are correct and
complete and accurately reflect the stock ownership of its shareholders. The
Minute Books and the Stock Record Books have been made available to Purchaser
for review.
2.04 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of $1.00 par value Common Stock, of which
819,513 are duly and validly issued and outstanding, are fully paid and
nonassessable and were issued pursuant to a valid exemption from registration
under the Securities Act of 1933, as amended, and all applicable state
securities laws. No Shares are reserved for issuance. Except as set forth on
Schedule 2.01, the Company has no obligation to issue any additional Shares or
securities convertible or exchangeable for Shares, or options or warrants for
the purchase of (a) any Shares or (b) any securities convertible into or
exchangeable for any Shares. There are no outstanding rights to either demand
registration of any Shares under the Securities Act of 1933, as amended, or to
sell any Shares in connection with such a registration of Shares.
2.05 No Conflict. Except as disclosed on Schedule 2.05, neither
the execution, delivery and performance of this Agreement or the Other
Agreements to which it or he is a party by either the Company or any of the
Shareholders nor the consummation by the Company or any of the Shareholders of
the transactions contemplated hereby or thereby will (i)conflict with or
result in a violation, contravention or breach of any of the terms, conditions
or provisions of the Articles of Incorporation, as amended, or the By-Laws, as
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amended, of the Company or any of its Subsidiaries, (ii)result in a Default
under, or require the consent or approval of any party to, any Contract or
License of the Company or any of the Shareholders, (iii)result in the
violation of any Law or Order, or (iv)result in the creation or imposition of
any Lien on the Shares or on any assets of the Company.
2.06 Subsidiaries. Except as disclosed on Schedule 2.03, the
Company has not in the past had, and does not currently have, any
Subsidiaries. Except as disclosed on Schedules 2.03 or 2.06, the Company has
not in the past owned and does not currently own, directly or indirectly, any
capital stock or other equity, ownership, proprietary or voting interest in
any Person. The authorized and the issued and outstanding capital stock or
shares of each of the Company's Subsidiaries together with the name of each
shareholder of each such Subsidiary and the number of shares owned by each
such shareholder is set forth on Schedule 2.03. All of the issued and
outstanding capital stock or shares of each Subsidiary of the Company is duly
and validly issued and outstanding, is fully paid and nonassessable and was
issued pursuant to a valid exemption from registration under the Securities
Act of 1933, as amended, and all applicable state securities laws. No capital
stock or shares of any Subsidiary of the Company are reserved for issuance.
None of the Company's Subsidiaries has any obligation to issue any additional
shares or capital stock or securities convertible or exchangeable for capital
stock or shares, or options or warrants for the purchase of (a) any capital
stock or shares or (b) any securities convertible into or exchangeable for any
capital stock or shares. There are no outstanding rights to either demand
registration of any capital stock or shares of any of the Company's
Subsidiaries under the Securities Act of 1933, as amended, or to sell any
capital stock or shares in connection with such a registration of capital
stock or shares. Except as specifically set forth on Schedule 2.06, no Person
has any Contract or option or any right or privilege (whether preemptive or
contractual) capable of becoming a Contract or option for the purchase of any
of the capital stock or shares of any of the Company's Subsidiaries or for the
purchase, subscription or issuance of any securities of any of the Company's
Subsidiaries.
2.07 Financial Statements. The Financial Statements, correct and
complete copies of which are included in Schedule 2.07, (i)are in accordance
with the books and records of the Company and its Subsidiaries, which are
correct and complete and which have been maintained in accordance with good
business practices; (ii)present fairly the consolidated financial position of
the Company and its Subsidiaries as of the dates indicated and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended; (iii)have been prepared in accordance with GAAP; and
(iv)reflect reserves that are adequate for all Known Liabilities and
reasonably anticipated Losses, in each case to the extent required by GAAP and
in conformity with GAAP. The unaudited monthly financial statements for the
periods ending May 31, 1996, June 30, 1996, July 31, 1996, August 31, 1996,
September 30, 1996 and October 31, 1996 and the monthly statements of income
to be delivered to Purchaser pursuant to Section 4.06 shall be prepared in the
format historically utilized internally by the Company and its Subsidiaries
and are subject to normal adjustments and lack footnotes and other
presentation items. The audited, consolidated Financial Statements for each
complete fiscal year contain all adjustments, which are solely of a normal
recurring nature, necessary to present fairly the consolidated financial
condition and the consolidated results of operations, changes in Shareholders'
equity and changes in financial position or cash flows of the Company and its
Subsidiaries.
2.8 Absence of Changes. Except as disclosed on Schedule 2.08,
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since the Balance Sheet Date, (i)the Business has been carried on only in the
ordinary course consistent with past practice, (ii)there has been no Material
Adverse Change, and there has been no event or circumstance that is reasonably
anticipated to result in a Material Adverse Change with respect to the Company
or any of its Subsidiaries or any of their assets or businesses, (iii)another
the Company nor any of its Subsidiaries has directly or indirectly declared,
paid or authorized any dividends or other distributions or payments in respect
of its shares or securities, (iv)neither the Company nor any of its
Subsidiaries has made any change in any method of accounting or accounting
practice, and (v)neither the Company nor any of its Subsidiaries has
canceled, modified or waived, without receiving payment or performance in
full, any (a)liability owed to the Company or any of its Subsidiaries, as the
case may be, including without limitation, any receivable of the Company or
any of its Subsidiaries from any Affiliate or any Related Person to an
Affiliate, (b)litigation the Company or any of its Subsidiaries may have
against other Persons, or (c)other rights of the Company or any of its
Subsidiaries, as the case may be.
2.09 Tax Matters. Except as set forth on Schedule 2.09:
(a) The Company and each of its Subsidiaries has timely
filed with the appropriate Governmental Authorities all required Tax Returns
in all jurisdictions in which Tax Returns are required to be filed, and such
Tax Returns are correct and complete in all Material respects. Neither the
Company nor any of its Subsidiaries is the beneficiary of any extension of
time within which to file any Tax Return. All Taxes (whether or not shown on
any Tax Return) for all periods ending on or before the Balance Sheet Date,
have been fully paid or appropriate deposits or adequate accruals have been
made therefor on the Balance Sheet.
(b) The reserves for Taxes in the Balance Sheet are
sufficient for the payment of all unpaid Liabilities for Taxes of the Company
and each of its Subsidiaries (whether or not disputed) for all activities
which occurred and all assets owned during the periods ended on or before the
Balance Sheet Date. Since the Balance Sheet Date, neither the Company nor any
of its Subsidiaries has incurred any Liability for Taxes other than in the
ordinary course of business and no such Tax Liability so incurred is Material.
Since 1990, neither the Company nor any of its Subsidiaries has been
delinquent in the payment of any Tax, assessment, deposit or other charge by
any Governmental Authority and no Liability is pending or has been assessed,
asserted or threatened against the Company, any of its Subsidiaries or any of
their respective assets in connection with any Tax. Neither the Company nor
any of its Subsidiaries has received any notice of assessment or proposed
assessment in connection with any Tax Returns and there are no pending Tax
examinations of or Tax claims asserted against the Company, any of its
Subsidiaries or any of their respective assets, including without limitation,
any claim by any Governmental Authority in any jurisdiction where the Company
or any of its Subsidiaries did not file Tax Returns that the Company or any of
its Subsidiaries is or may be subject to or liable for Taxes imposed by any
Governmental Authority in such jurisdiction. There are no Liens for any Taxes
(other than any Lien for current real property or ad valorem Taxes not yet due
and payable) on any of the Company's or any of its Subsidiaries' assets.
(c) Since 1990, none of the Company's or its Subsidiaries'
Tax Returns have ever been audited by the IRS or any other Governmental
Authority and neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to a Tax assessment or
deficiency. Neither the Company nor any of its Subsidiaries has filed any
consent under Section 341(f) of the Code relating to collapsible corporations.
No Tax is required to be withheld pursuant to Section l445 of the Code as a
result of any of the transfers contemplated by this Agreement and the Company
will provide any certificate requested by Purchaser at Closing with respect
thereto.
2.10 Title to Assets; Encumbrances; Condition.
(a) The Company and each of its Subsidiaries has good,
valid and marketable (and, in the case of the Owned Real Property, if any,
insurable) title to all of its assets free and clear of any and all Liens,
except Permitted Liens. Schedule 2.10 contains copies of all documents
evidencing the Liens upon the Company's or any of its Subsidiaries' assets and
copies of all title insurance policies relating to any of the Owned Real
Property.
(b) Each of the Improvements and each item of Personal
Property is in good condition and repair, reasonable wear and tear excepted,
and is usable in the ordinary course of business consistent with past
practices. Each Improvement and each item of Personal Property is adequate
for its present uses and operation and neither the Company nor any of its
Subsidiaries has any intention to use or operate any Improvement or any item
of Personal Property other than as presently used or operated. The Company's
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and its Subsidiaries' assets (including the Company's and its Subsidiaries'
interest in all leased assets) include all assets required to operate the
Business as presently conducted.
2.11 Real Property.
(a) Schedule 2.11 contains a correct and complete
description (including, without limitation, a legal description) of all of the
Real Property. To the Knowledge of the Company or any of the Shareholders,
any and all rights and easements for public vehicular ingress thereto and
egress therefrom (including curb cut rights from all adjacent public streets)
necessary for the Business as presently conducted by the Company and its
Subsidiaries is available to the Real Property. To the Knowledge of the
Company or any of the Shareholders, no facts or circumstances exist which do,
or potentially may, adversely affect any of the ordinary rights of access to
and from the Real Property, from and to the existing public highways and
roads, and there is no pending or threatened denial, revocation, modification
or restriction of such access.
(b) To the Knowledge of the Company or any of the
Shareholders, all public and private utilities required for the operation of
the Real Property and the Business either enter the Real Property through
adjoining public streets or, if they enter through adjoining private land, do
so in accordance with valid recorded public easements or private easements
that will inure to the benefit of Purchaser and all of such public and private
utilities are installed and operating and all installations and connection
charges have been paid in full.
(c) To the Knowledge of the Company or any of the
Shareholders, no zoning or similar land use restrictions are presently in
effect or proposed by any Governmental Authority that would impair the
operation of the Business as presently conducted by the Company or its
Subsidiaries or that would impair the use, occupancy and enjoyment of any of
the Real Property. To the Knowledge of the Company or any of the
Shareholders, all of the Real Property is in compliance with all applicable
zoning or similar land use restrictions of all Governmental Authorities having
jurisdiction thereof and with all recorded restrictions, covenants and
conditions affecting any of the Real Property and the Company and each of its
Subsidiaries have performed all affirmative covenants relating to the Real
Property and required to be performed by the Company or its Subsidiaries.
Neither the Company nor any of its Subsidiaries has received any notice from
any Governmental Authority with regard to encroachments on or off the Real
Property, violations of building codes, zoning, subdivision or other similar
Laws or other material defects in the good, valid, marketable and insurable
title of said Real Property.
(d) Except as set forth on Schedule 2.11, as of the Closing
Date, there will be no Contracts to which the Company or any of its
Subsidiaries is a party or, to the Knowledge of the Company or any of the
Shareholders, any other Contracts affecting the Company's ownership or use of
the Real Property or any part thereof, and there will be no Persons in
possession of the Real Property or any part thereof other than the Company and
its Subsidiaries.
(e) No claim or right of adverse possession by any Third
Party has been claimed or, to the Knowledge of the Company or any of the
Shareholders, threatened with respect to the Real Property and none of such
property is subject to any Order for its sale, condemnation, expropriation or
taking (by eminent domain or otherwise) by any Governmental Authority nor, to
the Knowledge of the Company or any of the Shareholders, has any such sale,
condemnation, expropriation or taking been proposed or threatened.
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(f) Schedule 2.11 contains a correct and complete
description of all Leased Real Property. Each of the Contracts of the Company
and its Subsidiaries relating to such Leased Real Property is fully and
accurately identified and described (including, without limitation, duration
and details of purchase options, if any) in Schedule 2.22(a)(i) and each such
Contract is in full force and effect. Except as disclosed on Schedule 2.11,
the Leased Real Property is not affected by any Lien, prior interests or
superior interests of any nature whatsoever that will, or potentially could,
terminate or otherwise adversely affect such Leased Real Property or any of
the Company's or any of its Subsidiaries' rights, title or interests therein.
2.12 Personal Property.
(a) Schedule 2.12 contains a correct and complete list of
each item of Personal Property, other than Inventory (excluding office
furniture, equipment, supplies and miscellaneous items of personal property
with an individual cost of less than $2,500).
(b) Schedule 2.12 contains a correct and complete
description of all Leased Personal Property. Each of the Contracts of the
Company and its Subsidiaries relating to such Leased Personal Property is
fully and accurately identified and described on Schedule 2.22(a)(ii)
(including, without limitation, duration and details of purchase options, if
any) and each such Contract is in full force and effect.
2.13 Intellectual Property.
(a) Schedule 2.13 contains a correct and complete list of
all of the Company's and its Subsidiaries' respective Intellectual Property,
including all license agreements relating thereto. None of the Company, its
Subsidiaries, or any of their respective predecessors or Affiliates (or any
goods or services sold by any of them) has violated, infringed upon or
unlawfully or wrongfully used the Intellectual Property of any Third Party and
none of the Company's or its Subsidiaries' Intellectual Property or any
related rights or any customer lists, supplier lists or mailing lists, as used
in the Business or in the other businesses now or heretofore conducted by the
Company or its Subsidiaries, infringes upon or otherwise violates the rights
of any Third Party, nor has any Person asserted a claim of such infringement
or misuse. The Company and its Subsidiaries have taken all reasonable
measures to enforce, maintain and protect their respective interests and, to
the extent applicable, the rights of Third Parties, in and to the Company's
Intellectual Property. The Company and its Subsidiaries have all right, title
and interest in, or are licensed to use in the Business or in other businesses
now or heretofore conducted by the Company or any of its Subsidiaries, the
Intellectual Property identified on Schedule 2.13. The consummation of the
transactions contemplated by this Agreement will not alter or impair any
Intellectual Property rights of the Company or any of its Subsidiaries or
result in a Default under any Contract of the Company or any of its
Subsidiaries. Except as set forth in Schedule 2.13, neither the Company nor
any of its Subsidiaries is obligated to make, nor has the Company or any of
its Subsidiaries incurred any Liability to make, any payments for royalties,
fees or otherwise to any Person in connection with any of the Company's or any
of its Subsidiaries' Intellectual Property. All patents, trademarks, trade
names, service marks, assumed names, and copyrights and all registrations
thereof included in or related to the Company's or any of its Subsidiaries'
Intellectual Property are valid, subsisting and in full force and effect.
Neither the Company nor any of its Subsidiaries is aware of any infringement
of the Company's or any of its Subsidiaries' Intellectual Property, and there
are no pending infringement actions against another for infringement of the
Company's or any of its Subsidiaries' Intellectual Property or theft of the
Company's or any of its Subsidiaries' trade secrets.
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(b) No present or former officer, director, partner or
employee of the Company or any of its Subsidiaries owns or has any
proprietary, financial or other interest, direct or indirect, in any of the
Company's or any of its Subsidiaries' Intellectual Property, except as
described on Schedule 2.13. No officer, director, partner or employee of the
Company or any of its Subsidiaries has entered into any Contract that requires
such officer, director, partner or employee to assign any interest to
inventions or other Intellectual Property or keep confidential any trade
secrets, proprietary data, customer lists or other business information or
which restricts or prohibits such officer, director, partner or employee from
engaging in competitive activities with or the solicitation of customers from
any competitor of the Company or any of its Subsidiaries.
2.14 Computer Software and Databases. Schedule 2.14 accurately
identifies, and describes the functions of, all Computer Software and
Databases owned, licensed, leased or internally developed by the Company or
any of its Subsidiaries or otherwise used in connection with the Business,
other than generally commercially available standard software programs
licensed under shrink-wrap licenses. The Company and its Subsidiaries have
use of or the ability to freely acquire, without costs in excess of $10,000 to
the Company or any of its Subsidiaries for such acquisition, all Computer
Software and Databases that are necessary to conduct the Business as presently
conducted by the Company and its Subsidiaries and all documentation relating
to all such Computer Software and Databases, except where the failure to
acquire such Computer Software Databases or documentation would not have a
Material Adverse Effect on the Company. The Computer Software and Databases
perform in accordance with the documentation related thereto or used in
connection therewith and, to the Knowledge of the Company or any of the
Shareholders, are free of defects in programming and operation. Schedule 2.14
identifies each Person to whom the Company or any of its Subsidiaries, in the
last two (2) years, has sold, licensed, leased or otherwise transferred or
granted any interest or rights to any of the Computer Software and Databases
of the Company or any of its Subsidiaries and the date of each such sale,
license, lease or other transfer or grant. The Company has previously
delivered to Purchaser complete and accurate copies of all documents relating
to each such sale, license, lease or other transfer or grant.
2.15 Accounts Receivable. The Accounts Receivable are (i) validly
existing, (ii) enforceable by the Company or its Subsidiaries in accordance
with the terms of the instruments or documents creating them, and (iii) to the
Knowledge of the Company or any of the Shareholders, collectible within ninety
(90) days after billing at the full recorded amount thereof less an allowance
for collection losses disclosed in the Balance Sheet, or in the case of
Accounts Receivable arising after the Balance Sheet Date, an allowance for
collection losses accrued on the books of the Company or its Subsidiaries in
the ordinary course of business consistent with past practices and in
accordance with GAAP. The allowance for collection losses on the Balance
Sheet was established in the ordinary course of business consistent with past
practices and in accordance with GAAP. The Accounts Receivable represent
monies due for, and have arisen solely out of, bona fide sales and deliveries
of goods, performance of services and other business transactions in the
ordinary course of business consistent with past practices. None of the
Accounts Receivable represent monies due for goods either sold on consignment
or sold on approval. There are no refunds, discounts or other adjustments
payable with respect to any such Accounts Receivable, and there are no
defenses, rights of set-off, counterclaims, assignments, restrictions,
encumbrances, or conditions enforceable by Third Parties on or affecting any
Account Receivable.
2.16 Insurance. All of the assets and the operations of the
Company, its Subsidiaries and the Business of an insurable nature and of a
character usually insured by companies of similar size and in similar
businesses are insured by the Company and its Subsidiaries in such amounts and
against such losses, casualties or risks as is (i) usual in such companies and
for such assets, operations and businesses, (ii) required by any Law
applicable to the Company, any of its Subsidiaries or the Business, or
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(iii) required by any Contract of the Company or any of its Subsidiaries.
Schedule 2.16 contains a complete and accurate list of all insurance policies
now in force and held or owned by the Company and each of its Subsidiaries and
such Schedule indicates the name of the insurer, the name of the insured, the
type of policy, the risks covered thereby, the amount of the premiums, the
term of each policy, the policy number and the amounts of coverage and
deductible in each case and all outstanding claims thereunder. Correct and
complete copies of all such policies have been delivered to Purchaser by the
Company on or before the date of this Agreement. All such policies are in
full force and effect and enforceable in accordance with their terms. Neither
the Company nor any of its Subsidiaries is now in Default regarding the
provisions of any such policy, including, without limitation, failure to make
timely payment of any premiums due thereon, and neither the Company nor any of
its Subsidiaries has failed to give any notice or present any claim thereunder
in due and timely fashion. Since January 1, 1990, neither the Company nor any
of its Subsidiaries has been refused or denied renewal of, any insurance
coverage in connection with the Company, its Subsidiaries, the ownership or
use of the Company's or its Subsidiaries assets or the operation of the
Business.
2.17 Bonds, Letters of Credit and Guarantees. Schedule 2.17
contains a complete and accurate list of all bonds (whether denominated bid,
litigation, performance, fidelity, or otherwise), letters of credit, and
guarantees issued by the Company, any of its Subsidiaries, the Shareholders or
others for the benefit of the Company or any of its Subsidiaries and now in
force or outstanding. Such Schedule 2.17 also contains a summary of the
terms, amount, cost and reason for issuance of each such bond, letter of
credit and guarantee, correct and complete copies of which have been delivered
to Purchaser by the Company on or before the date of this Agreement. The
bonds, letters of credit and guarantees listed in Schedule 2.17 satisfy all
requirements for bonds, letters of credit or guarantees set forth in (i)any
Law applicable to the Company, any of its Subsidiaries or the Business and
(ii)any Contracts of the Company or any of its Subsidiaries. All such
bonds, letters of credit and guarantees are in full force and effect and
enforceable in accordance with their terms. Neither the Company nor any of
its Subsidiaries is in Default regarding the provisions of any bond, letter of
credit or guarantee, including, without limitation, the failure to make timely
payment of all premiums and fees due thereon, and neither the Company nor any
of its Subsidiaries has failed to give any notice or present any claim
thereunder in due and timely fashion.
2.18 Compliance with Law.
(a) The Company and each of its Subsidiaries have complied
with and are in compliance with all Laws, Licenses and Orders applicable to,
required of or binding on the Company, any of its Subsidiaries, any of their
assets or their Businesses, and neither the Company nor any of the
Shareholders has Knowledge of any basis for any claim of current or past non-
compliance with any such Law, License or Order. No notices from any
Governmental Authority with respect to any failure or alleged failure of the
Company, any of its Subsidiaries, any of their assets or the Business to
comply with any Law, License or Order have been received by the Company, any
of its Subsidiaries or any of the Shareholders, nor, to the Knowledge of the
Company or any of the Shareholders, are any such notices proposed or
threatened. Schedule 2.18 contains a complete and correct list and copies of
all Licenses and Orders applicable to, required of or binding on the Company,
any of its Subsidiaries, any of their assets or the Business.
(b) The Company and each of its Subsidiaries hold all
Material Licenses necessary for or used in the operations of the Business, and
each such Material License is, in full force and effect. Schedule 2.18(b)
contains a true and complete list of all such Material Licenses (showing, in
each case, the expiration date). No application, action or proceeding is
pending for the renewal or modification of any of such Material Licenses, and
no application, action or proceeding is pending or, to the Knowledge of the
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Company or any of the Shareholders, threatened that may result in the denial
of the application for renewal, the revocation, modification, nonrenewal or
suspension of any of such Licenses, the issuance of a cease-and-desist order,
or the imposition of any administrative or judicial sanction with respect to
the Business that may Materially and adversely affect the rights of Purchaser,
the Company or any of its Subsidiaries under any such Material License. To
the Knowledge of the Company and any of the Shareholders, all Material
returns, reports and statements required to be filed by the Company or any of
its Subsidiaries with any Governmental Authority relating to the Business have
been filed and complied with and are complete and correct in all Material
respects as filed.
(c) Except as described in Schedule 2.18, there are no
Material capital expenditures that the Company or any of the Shareholders
anticipates will be required to be made in connection with the Company's or
any of its Subsidiaries' assets or the Business as now conducted in order to
comply with any Law applicable to the Company, any of its Subsidiaries, any of
their assets or the Business as now conducted.
2.19 Environmental. Except as set forth in Schedule 2.19:
(a) There is no Environmental Litigation (or any Litigation
against any Person whose Liability, or any portion thereof, for Environmental
Matters or under any Environmental Laws the Company or any of its Subsidiaries
has or may have retained or assumed contractually or by operation of Law)
pending or, to the Knowledge of the Company or any of the Shareholders,
threatened with respect to (i)the ownership, use, condition or operation of
the Business, the Real Property or any other asset of the Company or any of
its Subsidiaries or any asset formerly held for use or sale by the Company or
any of its Subsidiaries or any of their respective predecessors or any of
their respective former Subsidiaries, or (ii) any violation or alleged
violation of or Liability or alleged Liability under any Environmental Law or
any Order related to Environmental Matters except where such violation would
not have a Material Adverse Effect on the Company. To the Knowledge of the
Company or any of the Shareholders, there are no existing, and there have not
been any prior, violations of (i)any Environmental Law, or (ii)any Order
related to Environmental Matters, with respect to the ownership, use,
condition or operation of the Business, the Real Property or any other asset
of the Company or any of its Subsidiaries or any asset formerly held for use
or sale by the Company or any of its Subsidiaries or any of their respective
predecessors or any of their respective former Subsidiaries except where such
violation would not have a Material Adverse Effect on the Company. To the
Knowledge of the Company or any of the Shareholders, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, any Environmental Matter, that will result in
(i)any Environmental Litigation against the Company or any of its
Subsidiaries, or (ii)any Litigation against any Person whose Liability (or
any portion thereof) for Environmental Matters or under any Environmental Laws
the Company or any of its Subsidiaries has or may have retained or assumed
contractually or by operation of Law. To the Knowledge of the Company or any
of the Shareholders, none of the Company, any of its Subsidiaries, any of
their respective predecessors or any of their respective former Subsidiaries
nor anyone Known to the Company has used any assets or premises of the Company
or any of its Subsidiaries or any of their respective predecessors or any of
their respective former Subsidiaries or any part thereof for the handling,
treatment, storage, or disposal of any Hazardous Substances. The disclosure
of facts set forth in Schedule 2.19 shall not relieve the Company or any of
the Shareholders of any of its or his obligations under this Agreement,
specifically including, without limitation, the obligation to indemnify
Purchaser as set forth in Article V hereof.
(b) To the Knowledge of the Company or any of the
Shareholders, no release, discharge, spillage or disposal of any Hazardous
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Substances has occurred or is occurring at any assets owned, leased, operated
or managed, directly or indirectly, by the Company or any of its Subsidiaries
or any of their respective former Subsidiaries or any part thereof while such
assets were owned, leased, operated or managed, directly or indirectly, by the
Company or any of its Subsidiaries.
(c) No soil or water in, under or adjacent to any assets
owned, leased, operated or managed, directly or indirectly, by the Company or
any of its Subsidiaries or assets formerly held for use or sale by the Company
or any of its Subsidiaries or, in either case, any of their respective former
Subsidiaries has been contaminated by any Hazardous Substance while or before
such assets were owned, leased, operated or managed, directly or indirectly,
by the Company, any of its Subsidiaries or any of their respective
predecessors or any of their respective former Subsidiaries as a direct result
of the activities of the Company or its Subsidiaries.
(d) All waste containing any Hazardous Substances
generated, used, handled, stored, treated or disposed of (directly or
indirectly) by the Company or any of its Subsidiaries or any of their
respective former Subsidiaries has been released or disposed of in compliance
with all applicable reporting requirements under any Environmental Laws and
there is no Environmental Litigation with respect to any such release or
disposal.
(e) To the Knowledge of the Company or any of the
Shareholders, all underground tanks and other underground storage facilities
presently or previously located at any Real Property owned, leased, operated
or managed by the Company or any of its Subsidiaries or any of their
respective predecessors or any of their respective former Subsidiaries or any
such tanks or facilities located at any Real Property while such Real Property
was owned, leased, operated, or managed by the Company or any of its
Subsidiaries or any of their respective predecessors or any of their
respective former Subsidiaries are listed together with the capacity and
contents (former and current) of each such tank or facility in Schedule 2.19.
To the Knowledge of the Company or any of the Shareholders, none of such
underground tanks or facilities is leaking or has ever leaked, and neither the
Company nor any of its Subsidiaries holds any responsibility or Liability for
any underground tanks or underground facilities at any other location.
(f) To the Knowledge of the Company or any of the
Shareholders, all waste, hazardous or otherwise, has been removed from all
Real Property of the Company or any of its Subsidiaries or any of their
respective predecessors or any of their respective former Subsidiaries.
(g) To the Knowledge of the Company or any of the
Shareholders, the Company, each of its Subsidiaries and each of their
respective predecessors and each of their respective former Subsidiaries have
complied with all applicable reporting requirements under all Environmental
Laws concerning the disposal or release of Hazardous Substances and none of
the Company or any of its Subsidiaries or any of their respective predecessors
or any of their respective former Subsidiaries has made any such reports
concerning any Real Property of the Company or any of its Subsidiaries or
concerning the operations or activities of the Company or any of its
Subsidiaries or any of their respective predecessors or any of their
respective former Subsidiaries.
(h) To the Knowledge of the Company or any of the
Shareholders, no building or other Improvement or any Real Property owned,
leased, operated or managed, directly or indirectly, by the Company or any of
its Subsidiaries contains any asbestos-containing materials.
(i) Without limiting the generality of any of the
foregoing, (i)all on-site and off-site locations where the Company or any of
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its Subsidiaries or any of their respective former Subsidiaries has stored,
disposed or arranged for the disposal of Hazardous Substances are identified
in Schedule 2.19, (ii) none of the on-site or off-site locations identified in
Schedule 2.19 is listed on any federal, state or local government lists of
abandoned disposal sites or sites where Hazardous Substances have or may have
occurred, and (iii)no polychlorinated biphenyls ("PCB's") are used or stored
on or in any real property owned, leased, operated or managed, directly or
indirectly, by the Company or any of its Subsidiaries or any of their
respective former Subsidiaries.
(j) Schedule 2.19 contains a correct and complete list of
all environmental site assessments and other studies relating to the
investigation of the possibility of the presence or existence of any
Environmental Matter with respect to the Company, any of its Subsidiaries, the
Business, any assets owned, leased, operated or managed, directly or
indirectly, by the Company or any of its Subsidiaries or any of their
respective predecessors or any of their respective former Subsidiaries, and
the Company has previously delivered to Purchaser a correct and complete copy
of each such assessment and study.
2.20 Litigation and Claims. Except as disclosed on Schedule 2.20:
(a) There is no Litigation pending or, to the Knowledge of
the Company or any of the Shareholders, threatened and none of the Company or
any of the Shareholders has any Knowledge of any basis for any such
Litigation, any uninsured Loss from which would reasonably be expected to
exceed $1,000,000 or any facts or the occurrence of any event which might give
rise to any Litigation, any uninsured Loss from which would reasonably be
expected to exceed $1,000,000.
(b) There are no outstanding Orders binding upon the
Company, any of its Subsidiaries, any of their respective assets, the Business
or the Shares.
(c) There are no pending or, to the Knowledge of the
Company or any of the Shareholders, threatened investigations or inquiries
regarding the Company, any of its Subsidiaries, any of their respective assets
or the Business by any Governmental Authority. Schedule 2.20 describes all
inspection reports, questionnaires, inquiries, demands, requests for
information, and claims of violations or non-compliance with any Law received
by the Company, any of its Subsidiaries or any of the Shareholders from any
Governmental Authority and all written statements or responses of the Company,
any of its Subsidiaries or any of the Shareholders with respect thereto in the
five (5) year period preceding the Closing Date.
(d) No Litigation has been pending during the three (3)
years prior to the date hereof that, individually or in the aggregate resulted
in a Loss (including, without limitation, insured Losses) in excess of
$500,000 or granted any injunctive relief against the Company or any of its
Subsidiaries.
(e) Except as disclosed on Schedule 2.20, neither the
Company nor any of its Subsidiaries has been advised by any attorney
representing it that there are any "loss contingencies" (as defined in
Statement of Financing Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975 ("FASB 5"), which would be required
by FASB 5 to be disclosed or accrued in financial statements of the Company,
were such financial statements prepared as of the date hereof.
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2.21 Benefit Plans.
(a) Schedule 2.21 lists every Employee Benefit Plan (i)
currently maintained by, sponsored in whole or in part by, or contributed to
by the Company or its Subsidiaries and (ii) each other Employee Benefit Plan
under which the Company or its Subsidiaries has or potentially has any
Liability. Schedule 2.21 separately identifies whether the Employee Benefit
Plans listed on Schedule 2.21 comes within subparagraph (a)(i) or
subparagraph (a)(ii) of this Section 2.21. Schedule 2.21 lists the
approximate annual aggregate cost to the Company and its Subsidiaries of such
Employee Benefit Plans for the fiscal year ended April 30, 1996 and for the
current fiscal year up to the end of the calendar month immediately prior to
the calendar month that includes the Closing Date. For purposes of
determining the aggregate cost, employee pre-tax deferrals to an Employee
Benefit Plan subject to Code Section 408(k) and employee pre-tax deferrals
under Code Section 125 to a medical expense reimbursement account or dependent
care reimbursement account may be ignored. On or after September 26, 1980,
none of the Company, its Subsidiaries nor any entity aggregated with the
Company or its Subsidiaries under Code Section 414 (for purposes of this
Section, an "ERISA Affiliate") has had an "obligation to contribute" (as
defined in ERISA Section 4212) to a "multiemployer plan" (as defined in ERISA
Sections 4001(a)(3) and 3(37)(A)). No Employee Benefit Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA. In addition,
no Employee Benefit Plan is or has been intended to be a tax qualified plan
described in Code Section 401(a) and no such plan is or has been subject to
the minimum funding rules of Code Section 412, ERISA Section 302, or Title IV
of ERISA.
(b) The Employee Benefit Plans listed on Schedule 2.21 have
been delivered to Purchaser for review, including (to the extent applicable)
correct and complete copies of: (i) all trust agreements or other funding
arrangements for such Employee Benefit Plans (including insurance contracts),
and all amendments thereto, (ii) with respect to any such Employee Benefit
Plans or amendments, all determination letters, rulings, opinion letters,
information letters, or advisory opinions issued by the IRS, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after
December 31, 1974, (iii) annual reports or returns, audited or unaudited
Financial Statements, actuarial valuations and reports, and summary annual
reports prepared for any Employee Benefit Plan with respect to the most recent
three (3) plan years, and (iv) the most recent summary plan descriptions and
any material modifications thereto.
(c) Except as disclosed in Schedule 2.21, all the Employee
Benefit Plans and the related trusts subject to ERISA comply with and have
been administered in compliance with, (i) the applicable provisions of ERISA,
(ii) all applicable provisions of the Code, (iii) all applicable state and
federal securities Laws, and (iv) all other applicable Laws and any collective
bargaining agreements, and neither the Company nor any of its Subsidiaries has
received any notice from any Governmental Authority questioning or challenging
such compliance. All available determination letters and required
registrations under federal and state securities Laws ("Permits") for the
Employee Benefit Plans have been obtained and all such Permits continue in
full force and effect. No event has occurred or failed to occur with respect
to an Employee Benefit Plan which will or could give rise to the loss of
intended tax consequences under the Code or to any Tax under Section 511 of
the Code. Neither Company nor any of its ERISA Affiliates have ever
established, maintained or contributed to a trust associated with or operated
in conjunction with an ERISA Plan.
(d) Except as disclosed in Schedule 2.21, no oral or
written representation or communication with respect to any aspect of the
Employee Benefit Plans has been made to employees of the Company or any of its
Subsidiaries prior to the Closing Date that is not in accordance with the
written or otherwise preexisting terms and provisions of such plans. None of
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the Company, its Subsidiaries or any administrator or fiduciary of any
Employee Benefit Plan (or any agent of any of the foregoing) has engaged in
any transaction, or acted or failed to act in any manner that could subject
the Company, any of its Subsidiaries or Purchaser to any direct or indirect
Liability (by indemnity or otherwise) for breach of any fiduciary, co-
fiduciary or other duty under ERISA. There are no unresolved claims or
disputes under the terms of, or in connection with, the Employee Benefit Plans
other than claims for benefits which are payable in the ordinary course and,
to the Knowledge of the Company or its Subsidiaries, their lawyers and any
service provider to an Employee Benefit Plan, no Litigation has been commenced
or has been threatened with respect to any Employee Benefit Plan.
(e) Except as disclosed in Schedule 2.21, all Employee
Benefit Plan documents and annual reports or returns, audited or unaudited
financial statements, actuarial valuations, summary annual reports, and
summary plan descriptions issued with respect to the Employee Benefit Plans
are correct and complete, have been timely filed as required by Law with the
IRS and the United States Department of Labor, have been timely distributed as
required by Law to participants in the Employee Benefit Plans, and there have
been no changes in the information set forth therein.
(f) No "party in interest" (as defined in Section 3(14) of
ERISA) or "disqualified person" (as defined in Code Section 4975) of any
Employee Benefit Plan has engaged in any nonexempt "prohibited transaction"
(described in Code Section 4975 or ERISA Section 406). Neither the Company
nor any of its Subsidiaries has incurred any Liability under Title IV of
ERISA, including any Liability that could arise under Title IV of ERISA as a
result of the Company's or any of its Subsidiaries' membership in a
"controlled group" as defined in ERISA 4001(a)(14) and 4001(b)(1).
(g) For any ERISA Plan that is an employee pension benefit
plan as defined in ERISA 3(2) ("ERISA Pension Plan"), the fair market value
of such Plan's assets equals or exceeds the present value of all benefits
(whether vested or not) accrued to date by all present or former participants
in such ERISA Pension Plan.
(h) Neither the Company nor any of its Subsidiaries has
maintained, and neither does maintain, an Employee Benefit Plan providing
welfare benefits (as defined in ERISA Section 3(1)) to employees after
retirement or other separation of service except to the extent required under
Part 6 of Title I of ERISA or Code Section 4980B or their successors. No Tax
under Code Sections 4980B or 5000 has been incurred with respect to any
Employee Benefit Plan and no circumstances exist which could give rise to such
Taxes.
(i) Except as disclosed on Schedule 2.21, neither the
execution and delivery of this Agreement or the Other Agreements nor the
consummation of the transactions contemplated by this Agreement will (1)
entitle any current or former employee of the Company or any of its
Subsidiaries to severance pay, unemployment compensation or any payment
contingent upon a change in control or ownership of the Company or (2)
accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such employee or former employee.
(j) Except as disclosed on Schedule 2.21, all individuals
participating in (or eligible to participate in) any Employee Benefit Plan
maintained (or contributed to) by the Company or any of its Subsidiaries are
common-law employees.
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2.22 Contracts.
(a) Description.
(i) Real Property. Schedule 2.22(a)(i) is a list or
brief description of all Contracts currently in effect that affect or relate
to the Real Property, including, without limitation, Contracts evidencing
Liens and including those referred to in Schedule 2.10.
(ii) Personal Property. Schedule 2.22(a)(ii) is a list
or brief description of all Contracts currently in effect that affect or
relate to the Personal Property, including, without limitation, Contracts
evidencing Liens and including those referred to in Schedule 2.10 (other than
Contracts affecting rights in the Personal Property each of which does not
involve the payment by the Company of more than $10,000 per month or $100,000
per year).
(iii) Purchase Orders -- Non-Capital Assets. Schedule
2.22(a)(iii) is a list of all outstanding Contracts of the Company and each of
its Subsidiaries or that relate to the Business, for the acquisition or sale
of goods, assets or services (other than such Contracts that do not exceed
$50,000 each and other than purchase orders, or other commitments, for the
acquisition of capital assets).
(iv) Purchase Orders -- Capital Assets. Schedule
2.22(a)(iv) is a list of all outstanding Contracts of the Company and each of
its Subsidiaries or that relate to the Business, for the acquisition of
capital assets (other than such Contracts that do not exceed $10,000 each).
(v) Sales Contracts. Schedule 2.22(a)(v) is a list or
brief description of all Contracts of the Company and each of its Subsidiaries
or that relate to the Business, for the sale of products or the performance of
services by the Company and its Subsidiaries and that exceed $250,000 each and
that are unfilled or uncompleted as of January 1, 1997.
(vi) Employment; Other Affiliate Contracts. Schedule
2.22(a)(vi) contains a list or brief description of all Contracts of the
Company and each of its Subsidiaries or that relate to the Business, with any
employee, officer, agent, consultant, independent contractor, employee leasing
company, temporary employee provider or Affiliate of the Company and its
Subsidiaries.
(vii) Sales Representative Contracts. Schedule
2.22(a)(vii) is a list or brief description of all Contracts of the Company
and each of its Subsidiaries or that relate to the Business, with any agent,
broker, distributor, dealer, or sales representative of, or any Person in a
similar representative capacity for, the Company or any of its Subsidiaries.
(viii) Powers of Attorney. Schedule 2.22(a)(viii) is a
list or brief description of all powers of attorney given by the Company or
any of its Subsidiaries, whether limited or general, to any Person continuing
in effect.
(ix) Intellectual Property Contracts. Schedule
2.22(a)(ix) is a list of all Contracts relating to the Intellectual Property,
including, without limitation, Contracts evidencing Liens and including those
referred to in Schedule 2.10.
(x) Any Other Contracts. Schedule 2.22(a)(x) is a list
or brief description of any other Contracts of the Company and each of its
Subsidiaries or that relate to the Business that are not otherwise described
on Schedules 2.22(a)(i) through 2.22(a)(x) and that: (A) provide for monthly
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payments in excess of $10,000, (B) provide for payments, or under which
payments actually made were, by or to the Company or any of its Subsidiaries
in any calendar year or fiscal year in excess of $50,000, (C) require
performance by the Company or any of its Subsidiaries of any obligation for a
period of time extending beyond six (6) months from the Closing Date or that
is not terminable by the Company or any of its Subsidiaries without penalty
upon sixty (60) days or less notice, (D) evidence, create, guarantee or
service indebtedness of the Company or any of its Subsidiaries, (E) establish
or provide for any joint venture, partnership or similar arrangement involving
a Shareholder or the Company or any of its Subsidiaries, or (F) guarantee or
endorse the Liabilities of any other Person.
The lists or descriptions in all Schedules referred to above are correct
and complete as of the date hereof unless otherwise noted thereon.
(b) Copies. Correct and complete copies of all the written
Contracts, and correct and complete descriptions of all oral Contracts,
referred to in Section 2.22(a) have been delivered to Purchaser on or before
the date hereof.
(c) No Default. Neither the Company or any of its
Subsidiaries nor any other party is in Default under any of the Contracts or
any Liens referred to in Section 2.22(a) and there is no basis for any claim
of Default under any such Contract.
(d) Assurances. Except as set forth on Schedules
2.22(a)(i) through 2.22(a)(x), each of the Contracts referred to in this
Section 2.22 (i) is in full force and effect, (ii) constitutes a valid, legal
and binding agreement of the parties thereto, enforceable in accordance with
its terms except for bankruptcy, insolvency, reorganization, moratorium or
other Laws affecting creditors' rights generally and as otherwise set forth in
Schedules 2.22(a)(i) through Schedule 2.22(a)(x) and (iii) was executed in the
ordinary course of business consistent with past practice by the Company or
any of its Subsidiaries. Except as set forth on Schedule 2.22(d) and other
than as may be the result of a Default by the Company or any of its
Subsidiaries, neither the Company nor any of its Subsidiaries is a party to or
bound by any Contract or Contracts that, either separately or in the aggregate
has had or through the Closing Date will have had a Material Adverse Effect
with respect to the Company, any of its Subsidiaries, their respective assets,
or the Business. Except for those Contracts listed in Schedule 2.05, the
continuation, validity and effectiveness of each of the Contracts referred to
in this Section 2.22 will not, as a matter of Law, be affected in any way by
the consummation of the transactions contemplated by this Agreement.
2.23 Suppliers and Customers. Schedule 2.23 sets forth each
supplier to whom payments were made that equaled or exceeded five percent (5%)
of the Company's and its Subsidiaries' consolidated cost of goods sold for
the fiscal year ended April 30, 1996 or to whom payments are projected to
equal or exceed such percentage for the current fiscal year (the "Large
Suppliers"). Schedule 2.23 sets forth each customer or group of related
customers from whom payments were received that equaled or exceeded five
percent (5%) of the Company's and its Subsidiaries' consolidated gross sales
for the fiscal year ended April 30, 1996 or from whom payments are projected
to equal or exceed such percentage for the current fiscal year (the "Large
Customers") and the percentage of the Company's and its Subsidiaries'
consolidated gross sales allocable to each of such Large Customers for each
such fiscal year. Except as reflected on Schedule 2.23, no supplier is a sole
source of supply of any good or service to the Company or any of its
Subsidiaries. To the Knowledge of the Company or any of the Shareholders, the
relationships of the Company and each of its Subsidiaries with its Large
Suppliers and Large Customers are good commercial working relationships and,
except as set forth on Schedule 2.23, neither (i) any of the Large Suppliers
or any of the Large Customers, nor (ii) any supplier who at any time during
1995 was or now is the sole source of supply of any good or service, has
terminated, or threatened to terminate, its relationship with the Company or
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any of its Subsidiaries or has during the last twelve (12) months decreased or
limited, or threatened to decrease or limit, its services, supplies or
materials to the Company or any of its Subsidiaries or its usage or purchase
of the goods or services of the Company or any of its Subsidiaries, as the
case may be. Without inquiry of any of the Large Suppliers or any of the
Large Customers, none of the Company or any of the Shareholders has any
Knowledge that any of the Large Suppliers or any of the Large Customers
intends to terminate or otherwise modify adversely to the Company or any of
its Subsidiaries its relationship with the Company or any of its Subsidiaries
or to decrease or limit its services, supplies or materials to the Company or
any of its Subsidiaries or its usage or purchase of the goods or services of
the Company or any of its Subsidiaries, and neither the Company nor any of the
Shareholders has Knowledge of any communication to the effect that the
acquisition of the Shares by Purchaser may adversely affect the relationship
of the Business or of the Company or any of its Subsidiaries with any of the
Large Suppliers or any of the Large Customers.
2.24 Labor Matters. Schedule 2.24 contains a correct and complete
list of all employees of the Company and each of its Subsidiaries whose direct
annual compensation exceeds $50,000. Except as disclosed on Schedule 2.24,
the employment of all employees of the Company and each of its Subsidiaries is
terminable at will by the Company or its Subsidiary, as the case may be,
without any penalty or severance obligation incurred by the Company or such
Subsidiary. Except as set forth on Schedule 2.24, neither the Company nor any
of its Subsidiaries will owe any amounts to any of its employees as of the
Closing Date, including, without limitation, any amounts incurred for wages,
bonuses, vacation pay, sick leave or any severance obligations. Except as and
to the extent set forth in Schedule 2.24, (i) neither the Company nor any of
its Subsidiaries is a party to any union agreement or collective bargaining
agreement or work rules or practices agreed to with any labor organization or
employee association applicable to any employees of the Company or any of its
Subsidiaries and no attempt to organize any of the employees of the Business
has been made, proposed or, to the Knowledge of the Company or any of the
Shareholders, threatened, (ii) since January 1, 1991, neither the Company nor
any of its Subsidiaries has had any Equal Employment Opportunity Commission
charges or other claims of employment discrimination, harassment or wrongful
discharge made against it or any of its employees, (iii) since January 1,
1991, no state or federal Wage and Hour Department investigations have been
made of the Company or any of its Subsidiaries and no claims or charges
relating to wage and hour issues have been filed, or to the Knowledge of the
Company or the Shareholders, threatened, (iv) no labor strike, dispute,
slowdown, stoppage or lockout is pending or threatened against or affecting
the Company, any of its Subsidiaries, their respective assets or the Business
and during the past five (5) years there has not been any such action, (v) no
unfair labor practice charge or complaint against the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company or any of the
Shareholders, threatened before the National Labor Relations Board or any
similar Governmental Authority, (vi) since January 1, 1991, no Office of
Federal Contract Compliance Programs compliance review or investigation or
other United States Department of Labor or state department of labor
compliance review or investigation has been made of the Company and the
Company has not received notice of any such compliance review or
investigation, (vii) the Company is not bound by any consent decree or
settlement agreement relating to employment decisions or relations with
employees or applicants for employment, (viii) no Occupational Safety and
Health Administration investigations have been made of the Company in the past
five (5) years, and (ix) since January 1, 1991, neither the Company nor any of
its Subsidiaries has received any notice that any of the officers, employees,
consultants, agents, or other Persons performing services for the Business,
will terminate or contemplates terminating his or her employment currently or
at any time within sixty (60) days after the Closing Date or will otherwise
not be available to the Company or any of its Subsidiaries. Since the
enactment of the Worker Adjustment and Retraining Notification Act (the "WARN
Act"), neither the Company nor any of its Subsidiaries has effectuated (a) a
"plant closing" (as defined in the WARN Act) affecting any site of employment
or one or more facilities or operating units within any site of employment or
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facility of the Company or any of its Subsidiaries; or (b) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of the
Company or any of its Subsidiaries; nor has either the Company or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local Law. Except as set forth in Schedule 2.24, none of the
Company's or any of its Subsidiaries employees has suffered an "employment
loss" (as defined in the WARN Act) since six (6) months prior to the date
hereof.
2.25 Prospective Changes. Except as described in Schedule 2.25,
none of the Company or any of the Shareholders has actual knowledge of any
changes (other than changes occurring generally in the corrugated box
distribution industry) reasonably expected to occur within one (1) year from
the date of this Agreement to the Company, any of its Subsidiaries, their
respective assets or Liabilities, the Business, relations with employees,
relations with customers, competitive situation or relations with suppliers
affecting the Company, any of its Subsidiaries or the Business, which, if they
occur, would have a Material Adverse Effect with respect to the Company, any
of its Subsidiaries or the Business.
2.26 Brokers and Finders. Except as set forth on Schedule 2.26,
no finder or any agent, broker or other Person acting pursuant to authority of
the Company, any of its Subsidiaries or any of the Shareholders is entitled to
any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
2.27 Interested Transactions. Except as set forth in
Schedule 2.27, neither the Company nor any of its Subsidiaries is a party to
any Contract or other transaction with any Affiliate of the Company or any of
its Subsidiaries, any Related Party of any Affiliate of the Company or any of
its Subsidiaries (other than as a Shareholder or employee of the Company or
any of its Subsidiaries), or any Person in which any of the foregoing
(individually or in the aggregate) beneficially or legally owns, directly or
indirectly, five percent (5%) or more of the equity or voting interests. Each
of such Contracts and other transactions described in the preceding sentence
contains pricing terms that reflected fair market value at the time entered
into and otherwise contains terms and conditions comparable to those
customarily contained in similar transactions between unrelated parties.
Except as described in Schedule 2.27, none of the Persons described in the
first sentence of this Section 2.27 owns, or during the last three (3) years
has owned, directly or indirectly, beneficially or legally, (individually or
in the aggregate) five percent (5%) or more of the equity or voting interests
of any Person that competes with the Company, any of its Subsidiaries or the
Business.
2.28 Officers, Directors and Bank Accounts. Schedule 2.28 lists
(i) the names of all officers and directors of the Company and each of its
Subsidiaries and (ii) the name and location of each bank or other institution
in which the Company or any of its Subsidiaries has any deposit account or
safe deposit box in which the Company or any of its Subsidiaries has any
interest or access, all account numbers and names of all Persons authorized to
draw thereon or to have access thereto.
2.29 Inventories.
(a) All items of Inventory of the Company and each of its
Subsidiaries consist of items of a quality, quantity and condition usable and
salable in the ordinary course of the Business within ninety (90) days after
the Closing Date without discount or reduction and conform to generally
accepted standards in the industry of which the Company and its Subsidiaries
are a part. The value of each item of Inventory reflected on the Balance
Sheet, was, in each instance, valued at a reasonable amount in accordance with
GAAP and based on the ordinary course of the Business consistent with the
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historical valuation policy of the Company and its Subsidiaries and is not
subject to any write-down or write-off in excess of the Inventory reserves
stated in the Balance Sheet.
(b) Contracts for the purchase of raw materials, parts and
services are not in excess of $50,000, and none of such purchase Contracts are
at prices in excess of the prevailing market prices at the time of the
purchase. Sales Contracts for finished goods are at prices in excess of the
prices used in valuing Inventory items or of estimated costs of manufacture or
purchase, as the case may be, for items not in Inventory, after allowing for
reasonable selling expenses and production overhead. There are no pending or,
to the Knowledge of the Company or any of the Shareholders, threatened claims
against the Company or any of its Subsidiaries seeking return of, credit for,
or reimbursement for merchandise with an aggregate original sales price in
excess of $5,000, by reason of alleged overshipments, defective merchandise,
or otherwise, including, without limitation, merchandise held by customers of
the Company or any of its Subsidiaries pursuant to a Contract providing that
such merchandise is or would be returnable.
2.30 Compliance with the Immigration Reform and Control Act. The
Company and each of its Subsidiaries is in full compliance with and has not
violated the terms and provisions of the Immigration Reform and Control Act of
1986, and all related regulations promulgated thereunder (the "Immigration
Laws"). With respect to each employee (as defined in Section 274a.1(f) of
Title 8, Code of Federal Regulations) of the Company or any of its
Subsidiaries for whom compliance with the Immigration Laws by an employer (as
defined in Section 274a.1(g) of Title 8, Code of Federal Regulations) is
required, the Company and each of its Subsidiaries has supplied, or shall
supply prior to the Closing Date, to Purchaser such employee's Form I-9
(Employment Eligibility Verification Form) and all other applicable records,
documents or other papers which are retained with the Form I-9 by the employer
pursuant to the Immigration Laws. Neither the Company nor any of its
Subsidiaries has ever been the subject of any inspection or investigation
relating to its compliance with or violation of the Immigration Laws, nor has
it been warned, fined or otherwise penalized by reason of any failure to
comply with the Immigration Laws, nor is any such proceeding pending or
threatened.
2.31 Statements True and Correct. No representation or warranty
made by the Company or the Shareholders, nor any statement, certificate or
instrument furnished or to be furnished to Purchaser pursuant to this
Agreement or any other document, agreement or instrument referred to herein or
therein, including, without limitation, the Financial Statements, contains or
will contain any untrue statement of fact or omits or will omit to state a
fact necessary to make the statements contained therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company and the
Shareholders that:
3.01 Organization. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Florida,
with the corporate power and authority to carry on its business and to own,
lease and operate its assets.
3.02 Capacity and Validity. Purchaser has the full corporate
power, capacity and authority necessary to enter into and perform its
obligations under this Agreement and the Other Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the Other Agreements
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will have been approved by all necessary action of Purchaser's Board of
Directors on or before Closing. This Agreement has been, and the Other
Agreements will be when executed and delivered, duly executed and delivered by
duly authorized officers of Purchaser and each constitutes, or will constitute
when executed and delivered, the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other Laws affecting creditors' rights generally.
3.03 No Conflict. Except as disclosed on Schedule 3.03, neither
the execution, delivery and performance of this Agreement and the Other
Agreements to which it is a party by Purchaser nor the consummation of the
transactions contemplated hereby or thereby, will (i)conflict with or result
in a violation, contravention or breach of any of the terms, conditions or
provisions of the Articles of Incorporation, as amended, or Bylaws, as
amended, of Purchaser, (ii)result in a Default under, or require the consent
or approval of any party to, any Contract or License of Purchaser,
(iii)result in the violation of any Law or Order, or (iv)result in the
creation or imposition of any Lien.
3.04 Brokers and Finders. Except as set forth in Schedule 3.04,
no finder or any agent, broker or other Person acting pursuant to authority of
Purchaser is entitled to any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
3.05 Investment Representation. Purchaser is acquiring the Shares
pursuant to this Agreement for its own account with the present intention of
holding such securities for purposes of investment, and Purchaser has no
present intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws.
3.06 Statements True and Correct. No representation or warranty
made by Purchaser, nor any statement, certificate or instrument furnished or
to be furnished to the Company or the Shareholders pursuant to this Agreement
or any other document, agreement or instrument referred to herein or therein,
contains or will contain any untrue statement of fact or omits or will omit to
state a fact necessary to make the statements contained therein not
misleading.
ARTICLE IV
COVENANTS AND ADDITIONAL AGREEMENTS OF THE COMPANY, THE SHAREHOLDERS AND
PURCHASER
4.01 Conduct of Business. Prior to the Closing Date, except with
the prior written consent of Purchaser and except as necessary to effect the
transactions contemplated in this Agreement, the Company and each of its
Subsidiaries shall, and the Shareholders shall cause the Company and each of
its Subsidiaries to:
(a) conduct the Business in substantially the same manner
as presently being conducted, and refrain from entering into any transaction
or Contract other than in the ordinary course of business consistent with past
practice, except as otherwise contemplated by this Agreement;
(b) confer on a regular and frequent basis with Purchaser
to report Material operational matters and to report the general status of
ongoing operations;
(c) notify Purchaser of any unexpected emergency or other
change in the normal course of the Business or the operation of the assets of
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the Company or any of its Subsidiaries, and of any pending or threatened
Litigation (or communications indicating that the same may be contemplated),
affecting the Company, the Business or any Material assets, and keep Purchaser
fully informed of such events and permit its representatives prompt reasonable
access to all materials prepared in connection therewith;
(d) except in the ordinary course of business consistent
with past practice, not make any capital expenditure;
(e) not take any action, or omit to take any action, that
would cause the representations and warranties contained in Article II hereof
to be incorrect or incomplete;
(f) pay to Messrs. Gegenheimer, Sanders, and Blincoe one or
more salary or bonus payments for services rendered during the 1996-1997
fiscal year in an aggregate amount of $535,000 to each Shareholder in addition
to amounts previously paid through the date of this Agreement;
(g) declare a cash dividend payable to Messrs. Gegenheimer,
Sanders, and Blincoe (the "Dividend Payment") in an aggregate amount equal to
the earnings of the Company after Taxes and after the impact of the Minority
Interests for the period from May 31, 1996 through the Closing Date as set
forth on the Closing Date Financial Statements, assuming that there have been
no changes in the assets or liabilities set forth on the balance sheet
included in the Closing Date Financial Statements from the assets and
liabilities set forth on the Balance Sheet, other than changes in the ordinary
course of business and consistent with past practice;
(h) promptly notify Purchaser in writing of any Material
Adverse Change with respect to the Company or any of its Subsidiaries, or any
condition or event which threatens to result in a Material Adverse Change with
respect to the Company or any of its Subsidiaries; and
(i) not make any agreement or commitment which will result
in or cause to occur a Default of any of the items contained in paragraphs (a)
through (g) above.
4.02 Right of Inspection; Access. In order to allow Purchaser to
conduct its due diligence investigation, including, without limitation,
environmental due diligence, the Company and each of its Subsidiaries shall
give to Purchaser and its designees, during normal working hours, reasonable
access to all of its assets, Contracts, reports and other records of the
Business and shall furnish to Purchaser and its designees all additional
financial, legal and other information with respect to the Company and each of
its Subsidiaries, their respective assets and the Business that Purchaser may
reasonably request. The Company and each of its Subsidiaries shall also allow
and arrange for Purchaser and its designees reasonable access and opportunity,
during normal business hours, to consult and meet with the officers,
directors, employees, attorneys, accountants and other agents of the Company
and each of its Subsidiaries. The Company and each of its Subsidiaries shall
instruct such individuals to cooperate fully with Purchaser and its designees.
Purchaser and its designees shall have the right to make copies of any of the
records referred to above.
4.03 Other Offers and Exclusive Dealing. Unless and until this
Agreement is terminated prior to Closing pursuant to Section 8.01, the
Company, each of its Subsidiaries and each of the Shareholders shall deal
exclusively with Purchaser with respect to the sale of the Shares or any
assets or properties of the Company. In addition, unless and until this
Agreement is terminated prior to Closing pursuant to Section 8.01, none of the
Company, any of its Subsidiaries or any of the Shareholders, acting in any
capacity, shall, and the Company, each of its Subsidiaries and the
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Shareholders shall direct the officers, directors, financial advisors,
accountants and counsel of the Company, each of its Subsidiaries and the
Shareholders not to, either directly or indirectly, through the Company, any
of its Subsidiaries, any or their respective officers, directors, employees,
agents or otherwise, (a) solicit, initiate or encourage submission of
proposals or offers from any Person relating to any purchase of the Shares, or
any merger, sale of substantial assets, or purchase of securities or similar
transaction involving the Company or any of its Subsidiaries, (b) participate
in any discussions or negotiations regarding, or, except as required by a
legal or judicial process, furnish to any other Person any information with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other Person to
purchase the assets of the Company or any of its Subsidiaries, or engage in a
merger, purchase of substantial assets or purchase of stock or similar
transaction involving the Company or any of its Subsidiaries, or (c) approve
or undertake any such transaction. The Company and each of the Shareholders
shall promptly communicate to Purchaser the existence and terms of any such
proposal or offer upon Knowledge or receipt of such proposal or offer.
4.04 Confidentiality. For a period of three (3) years from and
after the date hereof without the prior written consent of the other parties
hereto, each of Purchaser, the Company and the Shareholders agrees that it or
he will not, and will use reasonable efforts to ensure that none of its or his
representatives or Affiliates will, use in the conduct of its business (except
as contemplated by this Agreement), or disclose to or file with any other
Person (other than a permitted assignee of some or all of Purchaser's rights
or obligations hereunder and other than financing sources, financial advisors,
accountants and attorneys for the foregoing), (a) any confidential or non-
public information relating to the other parties to this Agreement or (b) the
existence of this Agreement or the facts of the transactions contemplated
hereby, except (i) for a disclosure that is required by Law or by a
Governmental Authority or is reasonably believed to be so required, including,
without limitation, disclosures to the Department of Justice for purposes of
obtaining consents to the transactions contemplated hereby and disclosures to
the Securities and Exchange Commission and related public disclosures (in
connection with public offerings or otherwise); (ii) information that is
ascertainable or obtained from public or published information; (iii)
information received from a Third Party not known to the disclosing party to
be under an obligation to keep such information confidential; (iv) information
independently developed by the disclosing party; or (v) information disclosed
to or filed with any Persons necessary to obtaining the consents, the equity
and debt financing relating to the transactions contemplated by this
Agreement. Notwithstanding the foregoing, (i) neither Purchaser nor its
assignees, in the course of any investigation it shall deem necessary and
desirable in connection with the transactions contemplated by this Agreement,
shall be prohibited from discussing the Company, its assets and the Business
with others having business dealings with the Company, and (ii) the foregoing
provisions of this Section 4.04 shall not apply to Purchaser or any of its
representatives or Affiliates after consummation of the transactions
contemplated hereby at the Closing. If the transaction contemplated by this
Agreement is not consummated, each party will return or destroy as much of
such written information as the party furnishing such information may
reasonably request.
4.05 Waivers, Consents and Approvals. The Company and the
Shareholders shall use its or his commercially reasonable efforts to obtain
the waiver, consent and approval of all Persons whose waiver, consent or
approval (i) is required in order to consummate the transactions contemplated
by this Agreement, or (ii) is required by any Contract, Order, Law or License
to which the Company, any of its Subsidiaries or any of the Shareholders is a
party or subject on the Closing Date, and (x) which would prohibit, or require
the waiver, consent or approval of any Person to, such transactions or
(y) under which such transactions would, without such waiver, consent or
approval, constitute an occurrence of Default under the provisions thereof.
All written waivers, consents and approvals obtained by the Company and the
Shareholders shall be produced at Closing in form and content reasonably
satisfactory to Purchaser.
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4.06 Supplying of Financial Statements. The Company shall, and
the Shareholders shall cause the Company to, deliver to Purchaser within
fifteen (15) days following the end of each month true and complete copies of
all unaudited monthly financial statements of the Company and each of its
Subsidiaries for each calendar month ending subsequent to August 31, 1996 and
prior to the Closing Date in the format historically utilized internally by
the Company and its Subsidiaries.
4.07 Qualification and Corporate Existence. The Company shall
deliver to Purchaser (i) certificates of the Secretary of State of each
jurisdiction of incorporation, dated within ten (10) days prior to the Closing
Date, stating that the Company and each of its Subsidiaries, as the case may
be, is a corporation in good standing under the laws of such jurisdiction, and
has paid all applicable franchise and other fees and Taxes due to such
jurisdiction and (ii) certificates of the appropriate officials of the states
and foreign jurisdictions listed on Schedule 2.03, each dated not more than
ten (10) days prior to the Closing Date, stating that the Company and each of
its Subsidiaries is duly qualified and in good standing to transact business
as a foreign corporation as stated in Section 2.03 in each such state and
foreign jurisdiction and has paid all applicable franchise and other fees and
Taxes due to each such state and foreign jurisdiction. Purchaser shall
deliver to the Shareholders a certificate of the Secretary of State for the
State of Florida dated within ten (10) days prior to the Closing Date, stating
that the Purchaser is a corporation in good standing under the laws of such
jurisdiction.
4.08 Public Announcements. Except as permitted by Section 4.04,
none of Purchaser, the Company, its Subsidiaries or the Shareholders, nor any
of their representatives or Affiliates, shall make any public announcement
with respect to this Agreement or the transactions contemplated hereby without
the prior consent of the other parties hereto unless required by Law or
judicial process, in which case notification shall be given to the other
parties hereto prior to such disclosure.
4.09 Closing Conditions. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to take, or cause to be
taken, all commercially reasonable actions to consummate the transactions
contemplated by this Agreement and to satisfy the conditions precedent to
Closing set forth in Article VI and Article VII of this Agreement; provided,
however, that neither the Company nor the Shareholders shall be required to
incur any additional debt or liability to satisfy such conditions precedent.
4.10 Supplements to Schedules. The Company and the Shareholders
shall from time to time after the date hereof, supplement or amend the
Schedules referred to in Article II with respect to any matter arising after
the date hereof which, if existing or occurring at the date hereof, would have
been required to be set forth or described in such Schedules. Purchaser may
unilaterally extend the Closing Date if necessary to allow Purchaser ten (10)
business days to review such supplements to the Schedules prior to the Closing
Date. If, in Purchaser's reasonable determination, the matter or information
disclosed in a supplement or amendment Materially and adversely varies from,
or Materially and adversely to Purchaser's interest changes, the information
previously disclosed to Purchaser in such Schedules on the date hereof, the
Schedules shall be deemed to not be amended or supplemented by the matter or
information so disclosed and, unless the acts or circumstances giving rise to
the matter or information so disclosed that constitutes such Material
variation or change are corrected or abated prior to the Closing to the
reasonable satisfaction of Purchaser, Purchaser shall have the right to
terminate this Agreement pursuant to Section 8.01. If, however, Purchaser
does not so terminate this Agreement, then consummation of the transactions
contemplated by this Agreement by Purchaser with knowledge of such matter or
information shall be deemed to constitute a waiver of any inaccuracy in any
representation or warranty caused by or arising out of such matter or
information unless Purchaser has requested that the Company and the
Shareholders agree that the transactions contemplated by this Agreement may be
consummated on the condition that the Shareholders indemnify the Persons
indemnified pursuant to Section 5.02 with regard to any Loss arising from such
matter of information and the Shareholders have agreed in writing to so
indemnify such Persons indemnified pursuant to Section 5.02.
4.11 Certain Tax Matters.
(a) Purchaser, on the one hand, and the Company, its
Subsidiaries and the Shareholders, on the other hand, shall provide the other
parties to this Agreement, at the expense of the requesting party, such
assistance as may reasonably be requested by any of them in connection with
the preparation of any Tax Return, any audit or other examination by any
Governmental Authority, or any judicial or administrative proceedings relating
to Liability for Taxes, and each will retain and provide the requesting party
with any records or information that may be relevant to any of the foregoing.
(b) The Company and the Shareholders shall cause the
Company and each of its Subsidiaries to file all Tax Returns required to be
filed by each of them on or before the Closing Date.
(c) Purchaser shall not, and shall cause the Company and
its Subsidiaries not to, amend, refile or otherwise modify any Tax Return
filed prior to the Closing Date unless such amendment is required to correct
erroneous factual information or to correct reporting of an item for which
there is not substantial authority. The Shareholders shall be given notice of
any amended Tax Return, along with the reasons Purchaser believes such
amendment must be filed, and the opportunity to comment on the same prior to
filing.
(d) Any Tax Returns to be filed which include or are based
upon operations of the Company or its Subsidiaries prior to the Closing Date
shall be submitted to the Shareholders for their review and approval prior to
the filing of any such Tax Returns, which approval will not be unreasonably
withheld.
4.12 Expenses.
(a) Except as provided below or otherwise set forth in this
Agreement, regardless of whether the transactions contemplated by this
Agreement are consummated, the Shareholders shall be responsible for all
expenses and fees incurred by them and by the Company and its Subsidiaries in
connection with the transactions contemplated hereby. In no event shall any
of the Company's or any of its Subsidiaries' assets be utilized for or reduced
by the payment of any such fees or expenses; provided, however, that the
Company shall be responsible for, and the assets of the Company shall be
utilized to satisfy, any normal expenses of the Company properly paid by the
Company including, but not limited to, the preparation of Financial Statements
and all attorneys' fees of the Company not incurred directly in connection
with the negotiation of the transaction contemplated by this Agreement or the
drafting of the documents required hereby. The Company and each of the
Shareholders hereby, jointly and severally, represent and warrant that no such
fees or expenses have been paid by the Company or any of its Subsidiaries from
their respective assets prior to the date of this Agreement, and hereby,
jointly and severally, covenant that neither the Company nor any of its
Subsidiaries will so pay any such fees or expenses prior to the Closing, and
each Shareholder hereby covenants that any such fees or expenses paid by the
Company or any of its Subsidiaries from their respective assets shall be
reimbursed by the Shareholders to the Company.
(b) The Shareholders shall file all necessary documentation
and Tax Returns required to be filed by them with respect to real estate
transfer Taxes, if any, relating to the transfer of the Shares to Purchaser,
and Shareholders shall allow Purchaser sufficient time and opportunity to
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review and approve all such documentation and Tax Returns, which approval
shall not be unreasonably withheld. Purchaser represents and warrants to the
Shareholders that no sales, real estate transfer or stock transfer Taxes in
Georgia relating to the transfer of the Shares to Purchaser will result from
the transactions contemplated hereby. In the event any real estate transfer
Taxes are due in any other jurisdiction, the party who customarily pays such
Taxes under the applicable Law will pay such Taxes.
(c) The Shareholders shall pay all costs and fees relating
to the environmental reports or reports required by Sections 4.16 and 6.10.
4.13 Further Assurances. At any time and from time to time after
the Closing, the Company and the Shareholders shall, at the request of
Purchaser, take any and all reasonable actions necessary to fulfill its
obligations hereunder, to put Purchaser in actual possession and control of
the Shares and execute and deliver such further instruments of conveyance,
sale, transfer and assignment, and take such other actions necessary or
desirable to effectuate, record or perfect the transfer of the Shares to
Purchaser free and clear of all Liens, to confirm the title of the Shares to
Purchaser, to assist Purchaser in exercising rights relating thereto, or to
otherwise effectuate or consummate any of the transactions contemplated
hereby.
4.14 Delivery of Books and Records. The Company and the
Shareholders shall deliver to Purchaser at the Closing all original documents,
books and records pertaining to the Company, each of its Subsidiaries, the
Business and the Shares, including without limitation, the original Minute
Books and Stock Record Books. The Company and the Shareholders may retain
copies of any of the foregoing for their own use. Without limiting the
generality of the foregoing, the Company and the Shareholders shall deliver to
Purchaser at the Closing all documents and records relating to the
Intellectual Property, including without limitation, Certificates of
Registration for all letters patent, trademarks, trade names and service marks
listed on Schedule 2.13 and all such documents relating thereto.
4.15 Noninterference Agreements. Each Shareholder hereby agrees
until the Closing Date to not, either directly or indirectly, (i)(A) solicit,
divert, or hire away, or (B) attempt to solicit, divert, or hire away, to any
competitor of the Company or any of its Subsidiaries, any employee of the
Company or any of its Subsidiaries; or (ii) solicit, divert, or appropriate
to or for any competitor of the Company any Person that is a current or
actively sought prospective customer of the Company on the date hereof.
4.16 Environmental Reports. Purchaser shall contact and arrange
for a Phase I Environmental Report which shall provide independent
verification that no condition exists with respect to the assets previously or
currently owned, leased, operated, or controlled by the Company or any of its
Subsidiaries, any of their respective predecessors or any of their respective
former Subsidiaries that has resulted in, or would reasonably be expected to
result in, any violation of an Environmental Law, any Environmental Claim, or
in any Liability relating to an Environmental Matter. Such independent
verifications shall include an estimate of the total cost of remedying any
such condition reported therein. The third party providing the Phase I
Environmental Report (the "Consultant") shall be engaged by Purchaser after
consultation with, and the consent of, the Company, which consent is not to be
unreasonably withheld. The Consultant shall coordinate all aspects of its
review with the Company including, but not limited to, the scope of the
review, the scope and timing of any physical inspection of the facilities, its
access to officers, employees, attorneys or other agents of the Company and
the content of its final report.
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ARTICLE V
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
5.01 Survival of Representations and Warranties; Acknowledgment of
Purchaser Reliance.
(a) All representations, warranties, agreements and
covenants made or undertaken by the parties in this Agreement and the Other
Agreements are material, have been relied upon by the other parties hereto,
shall survive the Closing hereunder, and shall not merge in the performance of
any obligation by any party hereto and (1)shall terminate and expire (i)with
respect to any "General Claim" (as herein defined) with respect to which
notice has not been given pursuant to Section 5.06, on the later of (x)ninety
(90) days after the receipt by the Company of its audited financial statements
for the second full year after the Closing Date or (y)the second anniversary
of the date on which such covenant or agreement is to be performed hereunder
or thereunder; (ii)with respect to any "Tax Claim" (as herein defined) with
respect to which notice has not been given pursuant to Section 5.06, on the
later of (x)the date upon which the Liability to which any such Tax Claim may
relate is barred by all applicable statutes of limitation, taking into account
any extensions or waivers thereof, and (y)the date upon which any claim for
refund or credit related to such Tax Claim is barred by all applicable
statutes of limitation; (iii)with respect to any "Third Party Liability
Claim" (as herein defined) with respect to which notice has not been given
pursuant to Section 5.06, on the date upon which the Liability to which any
such Third Party Liability Claim may relate is barred by all applicable
statutes of limitation; and (iv)with respect to any "Environmental Claim" (as
herein defined) with respect to which notice has not been given pursuant to
Section 5.06, on the sixth (6th) anniversary of the Closing Date, and
(2)shall not terminate or expire with respect to any "Ownership Claim" (as
herein defined); provided, however, that the sole and exclusive remedy in
respect of any breach of the representations and warranties set forth at
Section 2.09, Section 2.18 and Section 2.19 shall be the indemnification set
forth at Section 5.02(e), Section 5.02(c) and Section 5.02(d), respectively.
As used in this Agreement, the following terms have the following meanings:
(1) "General Claim" means any claim based upon,
arising out of or otherwise in respect of any inaccuracy in any representation
or warranty or any breach of any covenant or agreement made or to be performed
by the Company, the Shareholders or Purchaser pursuant to this Agreement or
the Other Agreements, provided that a "General Claim" shall not include any
Tax Claim, Environmental Claim, Ownership Claim or Third Party Liability
Claim;
(2) "Tax Claim" means any claim based upon, arising
out of or otherwise in respect of any inaccuracy in any representation or
warranty or any breach of any covenant or agreement made or to be performed by
the Company or the Shareholders or, after the Closing, by the Shareholders
pursuant to this Agreement or the Other Agreements, related to any Taxes,
including, without limitation, those representations, warranties, covenants
and agreements made by the Company or the Shareholders in Section 2.09, 4.11
or 5.11, any claim made under Section 5.02(c) that relates to Taxes, any claim
made under Section 5.02(e) and any claim made under Section 5.02(f);
(3) "Environmental Claim" means any claim as to which
(and to the extent) the Shareholders have agreed to indemnify Purchaser
pursuant to Section 5.02(d);
(4) "Ownership Claim" means any claim arising out of
or in respect of any inaccuracy in any representation or warranty made by the
Company or the Shareholders in Section 2.01; and
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(5) "Third Party Liability Claim" means any claim made
under Section 5.02(c), other than a Tax Claim.
(b) Subject to the supplements provided pursuant to Section
4.10, the representations and warranties made by the Company and the
Shareholders and contained in Article II of this Agreement and the
representations and warranties made by Purchaser and contained in Article III
of this Agreement are deemed by the parties hereto to have been made by the
Company and Shareholders and Purchaser, as the case may be, on and as of both
the date hereof and the Closing Date with the same force and effect as if this
Agreement were executed by the Company, the Shareholders and Purchaser on each
of the date hereof and the Closing Date. The Company and the Shareholders
acknowledge and agree that Purchaser has performed an investigation of the
Company, its assets and the Business; however, no investigation by Purchaser
will diminish or obviate any of the representations, warranties, covenants,
indemnities or agreements made or to be performed by the Company or the
Shareholders pursuant to this Agreement or the Other Agreements or Purchaser's
right to fully rely upon such representations, warranties, covenants,
indemnities and agreements.
5.02 Obligation of the Company and the Shareholders to Indemnify.
Subject to the limitations contained in Section 5.05, each of the
Shareholders, jointly and severally, and, prior to the Closing, the Company
and each of the Shareholders, jointly and severally, hereby agree to indemnify
Purchaser and its officers, directors, shareholders, employees, counsel,
agents, Affiliates and assigns and, after the Closing, all of the foregoing
together with the Company, each of its Subsidiaries and each of their
respective officers, directors, shareholders, employees, counsel, agents,
Affiliates and assigns, against, and hold each of them harmless from, all
Losses asserted against, imposed upon or incurred by any of the foregoing by
reason of, resulting from, arising out of, based upon or otherwise in respect
of the following notwithstanding any actual or alleged negligence of any of
the Persons indemnified hereunder:
(a) any inaccuracy in any representation or warranty made
by the Company or the Shareholders pursuant to this Agreement or the Other
Agreements;
(b) any breach of any covenant or agreement made or to be
performed by the Company prior to the Closing, or made or to be performed by
the Shareholders prior to or following the Closing, pursuant to this Agreement
or the Other Agreements;
(c) any claim or other Litigation by a Third Party with
respect to an Undisclosed Liability;
(d) any of the following conditions or occurrences relating
to the environment: (i) any cleanup, corrective removal or remedial actions
required to be performed pursuant to applicable Laws in existence as of the
Closing Date and that arise out of any condition existing prior to the Closing
Date; (ii) Third Party claims for personal injury to the extent the exposure,
incident or condition out of which the claim arises occurred in whole or in
part on or prior to the Closing Date; (iii) any transportation or disposition
commenced, arranged or initiated on or before the Closing Date, by or on
behalf of the Company, any of its predecessors or any of its former
Subsidiaries of any substance owned or controlled by the Company, any of its
predecessors or any of its former Subsidiaries or any substance from any
premises owned or operated by the Company, any of its predecessors or any of
its former Subsidiaries for any purpose, including, but not limited to,
treatment, storage, disposal or recycling; (iv) fines or penalties on account
of the ownership, use, condition or operation of the Business or any of the
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assets or Real Property of the Company, any of its predecessors or any of its
former Subsidiaries at any time prior to the Closing Date; (v) any Liability
to modify, restore, change or improve any of the assets of the Company, any of
its predecessors or any of its former Subsidiaries in order to effectuate
compliance with any applicable Law or Order, in each case as in effect and
required to be performed as of the Closing Date; or (vi) the removal of any
and all asbestos or asbestos-containing materials that existed on or before
the Closing Date and that was required to be removed on or prior to such date
in any premises owned, leased, operated or managed on or before the Closing
Date by the Company, any of its respective predecessors or any of its former
Subsidiaries;
(e) any Liability for any Taxes of the Company that either
accrued on or before the Closing Date or arose out of or relate to the Company
or the operations of the Business on or before the Closing Date; and
(f) any of the following: (i) any Loss or Tax arising out
of an Employee Benefit Plan's failure to comply with Code Section 105(h) or
any monetary amounts the Company voluntarily pays to its employees to
compensate such employees for additional taxes, interest and penalties payable
by such employees (including any additional taxes on such Company payments) on
account of the Employee Benefit Plan's failure to comply with Code Section
105(h) or (ii) any Loss or Tax arising out of a failure of the representations
or warranties made pursuant to Section 2.21 hereof or any other monetary
amounts the Company voluntarily pays to its employees to compensate such
employees for additional taxes, interest and penalties payable by such
employees (including additional taxes on such Company payments) on account of
a failure of the representations and warranties made pursuant to Section 2.21.
5.03 Obligation of Purchaser to Indemnify. Subject to the
limitations contained in Section 5.05, Purchaser agrees to indemnify the
Shareholders and each of their counsel, agents, Affiliates and assigns and,
prior to the Closing, the foregoing together with the Company and its
officers, directors, employees, counsel, agents, Affiliates and assigns,
against, and hold each of them harmless from, all Losses asserted against,
imposed upon or incurred by any of the foregoing by reason of, resulting from,
arising out of, based upon or otherwise in respect of the following
notwithstanding any actual or alleged negligence of any of the Persons
indemnified hereunder:
(a) any inaccuracy in any representation or warranty made
by Purchaser pursuant to this Agreement or the Other Agreements; and
(b) any breach of any covenant or agreement made or to be
performed by Purchaser pursuant to this Agreement or the Other Agreements.
5.04 Relationship of Purchaser, the Shareholders and the Company.
Notwithstanding any other provision of this Agreement to the contrary, after
the Closing the Company shall not be liable to the Shareholders for any
inaccuracy in any representation or warranty or any breach of any covenant or
agreement made or to be performed by the Company pursuant to this Agreement
and the Shareholders shall have no right of contribution from, or any other
claim of action against, the Company as a result thereof; provided, however,
that the Company shall be obligated to pay the Dividend Payment declared by
the Company pursuant to Section 4.01(g).
5.05 Limitations on Indemnification.
(a) Pursuant to Sections 5.02 and 5.03, none of the
Shareholders, the Company or Purchaser shall be required to indemnify any of
the Persons specified in Sections 5.02 and 5.03, as the case may be, with
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respect to a Loss related to a General Claim, a Third Party Liability Claim or
an Environmental Claim until the amount of such Loss, when aggregated with all
other such Losses, shall exceed $250,000 (the "Minimum Aggregate Liability
Amount"), and then only in the amount of any Losses in excess of the Minimum
Aggregate Liability Amount; provided, however, that the foregoing Minimum
Aggregate Liability Amount shall not (i) apply to any Loss that results from
or arises out of fraud or a willful breach of representations or warranties on
the part of any of the Shareholders, the Company or Purchaser in this
Agreement or the Other Agreements or (ii) operate to excuse a party from
performing its covenants and agreements hereunder (other than covenants to
indemnify) or apply to any Loss that results from such non-performance.
(b) Pursuant to Section 5.02, the Shareholders and the
Company shall be required to indemnify the Persons specified in Section 5.02
for each dollar of Loss arising out of any Tax Claim or any Ownership Claim
without regard to the limitations set forth in the other provisions of this
Section 5.05.
(c) No Person otherwise entitled to indemnification under
this Agreement shall be indemnified pursuant to this Agreement to the extent
that such Person's Losses are increased or extended by the willful misconduct,
violation of Law or bad faith of such Person.
(d) No party shall be liable for indemnification under
Section 5.02 or 5.03 in an amount, in the aggregate for all matters as to
which indemnification is sought, in excess of the sum of (i)Five Million
Dollars ($5,000,000) and (ii)one-half of the amount of aggregate Losses for
which indemnification is sought under Section 5.02 or 5.03 in excess of
$5,000,000 and less than or equal to $10,000,000; and in no event shall a
party be liable for indemnification in an amount in excess of $7,500,000 in
the aggregate.
(e) All indemnification payments hereunder shall be
computed after taking into account the Tax consequences of the Loss and the
receipt of indemnification payments hereunder.
(f) Notwithstanding any of the foregoing provisions, this
Section 5.05 shall in no respect limit Purchaser's obligation to pay the
Shareholders the Purchase Price.
5.06 Notice of Loss or Asserted Liability. Promptly after (a)
becoming aware of circumstances that have resulted in a Loss for which any
Person or Persons entitled to indemnification pursuant to Section 5.02 or
Section 5.03 intends to seek indemnification under such Section (the
"Indemnified Party") or (b) receipt by the Indemnified Party of written notice
of any demand, claim or circumstances that, with the lapse of time, the giving
of notice or both, would give rise to a claim or the commencement (or
threatened commencement) of any Litigation that may result in a Loss (an
"Asserted Liability"), the Indemnified Party shall give notice thereof (the
"Claims Notice") to any other party or parties obligated to provide
indemnification pursuant to Section 5.02 or Section 5.03 (individually and
collectively referred to as the "Indemnifying Party"). The Claims Notice
shall describe the Loss or the Asserted Liability in reasonable detail, and
shall indicate the amount (estimated, if necessary) of the Loss that has been
or may be suffered by the Indemnified Party. The Claims Notice may be amended
on one or more occasions with respect to the amount or description of the
Asserted Liability or the Loss at any time prior to final resolution of the
obligation to indemnify relating to the Asserted Liability or the Loss. If a
Claims Notice is not provided promptly as required by this Section 5.06, the
Indemnified Party nonetheless shall be entitled to indemnification by the
Indemnifying Party to the extent that the Indemnifying Party has not
established that it has been prejudiced by such late receipt of the Claims
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Notice; provided, however, that no Claims Notice shall be enforceable
hereunder if it is not received by the Indemnifying Party prior to the
expiration of the survival period set forth in Section 5.01 hereof.
5.07 Opportunity to Contest. Subject to the provisions of Section
5.08, the Indemnifying Party may elect to compromise or contest, at its own
expense and with counsel reasonably acceptable to the Indemnified Party, any
Asserted Liability. If the Indemnifying Party elects to compromise or contest
such Asserted Liability, it shall within thirty (30) days after receipt of the
Claims Notice (or sooner, if the nature of the Asserted Liability so requires)
notify the Indemnified Party of its intent to do so by sending a notice to the
Indemnified Party (the "Contest Notice"), and the Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, in the compromise or
contest of such Asserted Liability. If a Contest Notice is not provided
within the time period provided by this Section 5.06, the Indemnifying Party
may still elect to compromise or contest such Asserted Liability provided that
the Indemnifying Party agrees in writing to also indemnify the Indemnified
Party for any Losses resulting from the failure timely to provide the Contest
Notice and provided the interests of the Indemnified Party will not be
prejudiced by such late election. If the Indemnifying Party elects not to
compromise or contest the Asserted Liability, fails to notify the Indemnified
Party of its election as herein provided or contests its obligation to
indemnify under this Agreement, the Indemnified Party (upon further notice to
the Indemnifying Party) shall have the right to pay, compromise or contest
such Asserted Liability on behalf of and for the account and risk of the
Indemnifying Party. Anything in this Section 5.07 to the contrary
notwithstanding, (i) the Indemnified Party shall have the right, at its own
cost and for its own account, to compromise or contest any Asserted Liability,
and (ii) the Indemnifying Party shall not, without the Indemnified Party's
written consent, settle or compromise any Asserted Liability or consent to
entry of any judgment that does not include an unconditional term releasing
the Indemnified Party from all Liability in respect of such Asserted
Liability. In any event, the Indemnified Party and the Indemnifying Party may
participate, at their own expense, in the contest of such Asserted Liability.
Each of the Company, the Shareholders and Purchaser shall cooperate fully with
the others as to all Asserted Liabilities, shall make available to the others
as reasonably requested all information, records, and documents relating to
all Asserted Liabilities and shall preserve all such information, records, and
documents until the termination of any Asserted Liability. Each of the
Company, the Shareholders and Purchaser also shall make available to the
others, as reasonably requested, its personnel, agents, and other
representatives who are responsible for preparing or maintaining information,
records, or other documents, or who may have particular knowledge with respect
to any Asserted Liability. In addition, with respect to any Tax Claim,
Purchaser shall have the right to participate in and attend any meeting or
proceeding (at Purchaser's own cost and expense) with respect thereto, shall
be provided with copies of any written communication or information regarding
any oral communication with respect thereto as soon as possible after the
receipt thereof (including, but not limited to, information with respect to
any proposed meeting or proceeding) and shall have the right to approve any
settlement thereof if the terms of such settlement could increase, directly or
indirectly, any Liability for Taxes of Purchaser or the Company in any period
following the Closing, which approval shall not be unreasonably withheld,
unless the Shareholders agree in writing to indemnify Purchaser and the
Company from any direct or indirect increased Liability for Taxes resulting
from such settlement.
5.08 Disputes with Customers or Suppliers. Anything in Section
5.07 to the contrary notwithstanding, in the case of any Asserted Liability by
any present supplier or customer of the Company in connection with which
Purchaser may make a claim against the Company or the Shareholders for
indemnification pursuant to Section 5.02, Purchaser shall give a Claims Notice
with respect thereto but, unless Purchaser and the Indemnifying Party
otherwise agree, Purchaser shall have the exclusive right at its option to
defend, at its own expense, any such matter, subject to the duty of Purchaser
to consult with the Indemnifying Party and its attorneys in connection with
such defense and provided that no such matter shall be compromised or settled
by Purchaser (other than compromises or settlements at Purchaser's expense and
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for its account) without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. All Losses incurred (other
than Purchaser's expenses) in connection with any such Asserted Liability
pursuant to the determination of any court, governmental or regulatory body or
arbitrator, and all amounts required to be paid in connection with any such
compromise or settlement consented to by the Indemnifying Party, shall be
borne and paid by the Indemnifying Party.
5.09 Subrogation Rights. In the event that the Indemnifying Party
shall be obligated to indemnify the Indemnified Party pursuant to this Article
V, the Indemnifying Party shall, upon payment of such indemnity in full, be
subrogated to all rights of the Indemnified Party (and to all rights of the
Company if the Indemnified Party is Purchaser after the Closing) with respect
to the Loss to which such indemnification relates; provided, however, that the
Indemnifying Party shall be subrogated only to the extent of any amount paid
by it pursuant to this Article V in connection with such Loss.
5.10 Indemnification Payments. Subject to the terms hereof, an
Indemnifying Party shall pay to the Indemnified Party the full amount of any
and all Losses (other than Losses resulting from an Asserted Liability) under
this Article V within ten (10) days of receipt of the Claims Notice thereof
and the full amount of any Loss resulting from an Asserted Liability within
ten (10) days of the date such Litigation is terminated or the date a final
judgment or award is rendered and no appeal is taken, and thereafter the
amount of such Loss shall bear interest at a rate equal to the lesser of one
and one-half percent (1 1/2%) per month or the maximum amount permitted by
Law.
The amount which an Indemnified Party shall be entitled to receive from the
Indemnifying Party with respect to any Loss shall be net of (i) any insurance
recovery by the Indemnified Party on account of such Loss from an unaffiliated
Third Party and (ii) any net Tax benefit received by the Indemnified Party as
a result of such Loss and any related indemnification payment. Purchaser
shall be entitled to offset from any payments due to the Shareholders for any
reason whatsoever, including without limitation, the Escrow Funds, any amount
due and owing to Purchaser by way of indemnification pursuant to Section 5.02,
and Purchaser shall not be liable for any amounts so offset.
5.11 Allocation of Tax Liability.
(a) Notwithstanding any other provision of this Agreement, the
Shareholders shall be responsible for the payment of all Liabilities of the
Company for Taxes related or allocable to a period ending before the Closing
Date that have not been paid or adequately reserved against on the balance
sheet of the Company included in the Financial Statements. The Company and
Purchaser shall be responsible for all other Taxes. The Company shall prepare
and file all necessary documentation and Tax Returns to be filed by the
Company after the Closing Date and shall allow the Shareholders sufficient
time and opportunity to review and approve all such documentation and Tax
Returns, which approval shall not be unreasonably withheld.
(b) For purposes of Section 5.11(a), in the case of Taxes that
are payable with respect to a taxable period that begins before the Closing
Date and ends after the Closing Date, the portion of any such Tax that is
allocable to the portion of the period ending the day prior to the Closing
Date shall: (i) in the case of Taxes that are either (x) based upon or
related to income or receipts or (y) imposed in connection with any sale,
other transfer or assignment or any deemed sale, transfer or assignment of
property (real or personal, tangible or intangible), be deemed equal to the
amount that would be payable if the taxable year ended on the Closing Date,
and (ii) in the case of Taxes imposed on a periodic basis with respect to the
assets of the Company or otherwise measured by the level of any item, be
deemed to be the amount of such Taxes for the entire period (or, in the case
of such Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a fraction the numerator of which
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is the number of calendar days in the portion of such period ending the day
prior to the Closing Date and the denominator of which is the number of
calendar days in the entire period. For purposes of clause (i) above, any
exemption, deduction, credit or other item that is calculated on an annual
basis shall be allocated to the period beginning before the Closing Date and,
pursuant to clause (i) treated as ending the day prior to the Closing Date,
based on the pro rata portion of such item determined by multiplying the total
amount of such item times a fraction, the numerator of which is the number of
calendar days in the period up to the Closing Date and the denominator of
which is the total number of calendar days in the entire period.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date (or such earlier date as may be specified), of each
and every one of the following conditions, all or any of which may be waived,
in whole or in part, by Purchaser for purposes of consummating such
transactions, but without prejudice to any other right or remedy that
Purchaser may have hereunder as a result of any misrepresentation by, or
breach or any agreement, covenant or warranty of the Company or the
Shareholders contained in this Agreement or any Other Agreement:
6.01 Representations True and Covenants Performed at Closing. The
representations and warranties made by the Company and the Shareholders shall
be correct and complete on the Closing Date with the same force and effect as
if such representations and warranties had been made on and as of the Closing
Date. The Company and the Shareholders shall have each duly performed and
complied with all of the agreements, covenants, acts and undertakings to be
performed or complied with by it on or prior to the Closing Date. The Company
and each of the Shareholders shall have delivered to Purchaser a certificate
or certificates dated as of the Closing Date certifying the fulfillment of the
conditions of this Section 6.01.
6.02 Incumbency Certificate. Purchaser shall have received an
appropriate incumbency certificate or certificates, dated the Closing Date,
certifying the incumbency of all officers of the Company who have executed
this Agreement and the Other Agreements. The certificate or certificates
shall contain specimens of the signatures of each of the officers whose
incumbency is certified and shall be executed by officers of the Company other
than officers whose incumbency is certified.
6.03 Certified Copies of Resolutions. Purchaser shall have
received copies, certified by the duly qualified and acting Secretary or
Assistant Secretary of the Company, of resolutions adopted by the Board of
Directors of the Company approving this Agreement and the Other Agreements and
the consummation of the transactions contemplated hereby and thereby.
6.04 Opinions of Counsel. Purchaser shall have received a written
opinion of Mayor, Day, Caldwell & Keeton, L.L.P., counsel to the Company and
the Shareholders, dated the Closing Date and substantially in the form of
Exhibit 6.04.
6.05 No Material Adverse Change. There shall not have occurred
any Material Adverse Change, or any condition or event which is reasonably
likely to result in a Material Adverse Change, with respect to the Business,
the Company, any of its Subsidiaries, or their respective assets from the
Balance Sheet Date. The Company and each of the Shareholders shall have
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delivered to Purchaser a certificate dated as of the Closing Date executed by
the Company and each of the Shareholders certifying the foregoing statement.
6.06 No Injunction, Etc. No Litigation, Law, Order or legislation
shall have been instituted, threatened or proposed by a Third Party before any
court or Governmental Authority to enjoin, restrain, prohibit or obtain
damages in respect of this Agreement or the consummation of the transactions
contemplated hereby, if such Litigation, Law, Order or legislation, in the
reasonable judgment of Purchaser, would make it inadvisable to consummate the
transactions contemplated hereby.
6.07 Approval of Legal Matters. All actions, proceedings,
instruments and documents reasonably deemed necessary or appropriate by
Purchaser or its attorneys to effectuate this Agreement and to consummate the
transactions contemplated hereby shall have been approved by such attorneys in
the exercise of their reasonable discretion.
6.08 Hart-Scott Approval. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the Hart-Scott Act
shall have expired or been terminated.
6.09 Environmental Report. Purchaser shall have received the
Phase I Environmental Reports obtained pursuant to Section 4.16.
6.10 Estoppel Certificates of Real Property Lessors. The Company
shall have delivered to Purchaser an estoppel certificate or status letter
from each landlord of Leased Real Property who is an Affiliate of the Company
or any of the Shareholders or any Related Person of any of the Shareholders
and shall use commercially reasonable efforts to deliver an estoppel
certificate or status letter from each other landlord of Leased Real Property,
dated no more than ten (10) days prior to the Closing Date, which estoppel
certificate or status letter will certify: (i) the Contracts being valid and
in full force and effect; (ii) there being no other agreements between the
Company or any of its Subsidiaries and such landlord with respect to Leased
Real Property; (iii) the rents and charges payable by the Company or its
Subsidiaries under the Contracts and the date to which same have been paid;
(iv) whether there are, to the knowledge of said landlord, any Defaults
thereunder, and, if so, specifying the nature thereof; (v) the consummation of
the transactions contemplated by this Agreement will not constitute or result
in a Default under the Contracts; and (vi) the existence of any Lien, prior
interests or superior interests of any nature whatsoever that currently do, or
potentially could, terminate or otherwise adversely affect such Leased Real
Property or any of the Company's or any of its Subsidiaries' right, title or
interest therein. If the Company is unable to deliver an estoppel certificate
or status letter from each landlord who is neither an Affiliate of the Company
or any of the Shareholders nor a Related Person of any of the Shareholders,
then the Shareholders shall deliver a certificate containing the
certifications set forth in this Section 6.10; provided, however, that in the
event the Shareholders are unable to certify any of the matters set forth
above at clause (iv) with respect to a Default by the Company or its
Subsidiaries, clause (v) or clause (vi), then the Shareholders shall certify
so much as they are able to certify, and their failure to certify any other
matters shall be taken into account in considering whether the condition
specified at Section 6.20 has been satisfied.
6.11 Financing Obtained by Purchaser. Purchaser shall have
obtained financing for the transactions contemplated by this Agreement on
terms and conditions acceptable to Purchaser in its sole and absolute
discretion.
6.12 Non-Competition Agreements. Purchaser shall have received
from each of the Shareholders an executed Non-Competition Agreement
substantially in the form set forth in Exhibit 6.12 and providing for a non-
competition fee in the amount of Two Million One Hundred Ninety Thousand
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Eighty-Three Dollars ($2,190,083) for each of the Shareholders (collectively,
the "Non-Competition Agreements"). The Non-Competition Agreements shall
provide that the scope of the Non-Competition Agreement does not extend into
or include the locations set forth on Exhibit 6.12(b).
6.13 Resignations; Releases. Purchaser shall have received a
written instrument signed by each of the directors and officers of the Company
resigning from the Board of Directors and as corporate officers of the Company
effective the Closing Date. Purchaser also shall have received a written
release of the Company and each of its Subsidiaries from each of the
Shareholders, which release shall be in form and substance reasonably
satisfactory to Purchaser.
6.14 Absence of New Debt. From and after the date of this
Agreement, neither the Company nor any of its Subsidiaries shall have incurred
any additional indebtedness to any current or former shareholders of the
Company. In addition, the combined bank debt of the Company and its
Subsidiaries shall not exceed $750,000. On or before the Closing Date,
Purchaser shall have received a pay-off letter in form and content reasonably
satisfactory to Purchaser from each Person to whom the Company or any of its
Subsidiaries is indebted for borrowed money.
6.15 Financial Statements. Purchaser shall have received the
Financial Statements sufficient in substance, form and scope to enable
Purchaser to reasonably comply with all of its filing and reporting
requirements related to the transactions contemplated by this Agreement
pursuant to the Securities Exchange Act of 1934, as amended, including without
limitation, Rule 3.05 of Regulation S-X.
6.16 Accountants' Comfort Letter. Purchaser shall have received a
letter, dated not more than two (2) days prior to the Closing Date, from Ernst
& Young, L.L.P. in form and substance reasonably satisfactory to Purchaser, to
the effect that they have (a) read the available unaudited interim financial
statements of the Company and its Subsidiaries for all periods ended since the
Balance Sheet Date, (b) made inquiries of certain officials of the Company and
its Subsidiaries responsible for financial and accounting matters as to
transactions and events subsequent to the Balance Sheet Date, and (c) read the
minutes of meetings and other actions of the Board of Directors and
Shareholders since the Balance Sheet Date (which procedures do not constitute
an examination in accordance with generally accepted auditing standards), and
such procedures have not caused them to believe, nor has anything else caused
them to believe, that during the period from the Balance Sheet Date to a
specified date not more than five (5) days prior to the Closing Date (i) there
has been any Material Adverse Change with respect to the Company or any of its
Subsidiaries and (ii) neither the Company nor any of its Subsidiaries has made
any change in any method of accounting or accounting practice. The Company
agrees to permit Purchaser and its accountants and representatives, during
normal business hours, to have reasonable access to, and to examine and make
copies of, its books and records, including, without limitation, the work
papers of the Company's and its Subsidiaries' accountants, and to have
reasonable access to representatives of the Company's and its Subsidiaries'
accountants, in connection with any review of the bases of the aforesaid
letter that Purchaser desires to undertake.
6.17 Acquisition of Name. The Shareholders shall have obtained a
transfer to Purchaser of all, right, title and interest in and to the names
"Southland" and "Southland Container" and all related trade names, trademarks,
service names, service marks, logos, assumed names, brand names and all
registrations and applications therefor together with the goodwill of the
business symbolized thereby (collectively referred to as the "Southland
Name"), including, without limitation, all right, title and interest of
Southland Container, Inc. in and to the Southland Name.
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6.18 Amendment of Certain Leases. The real property leases for
Orlando, Florida and Maryland facilities shall have been amended on terms and
conditions reasonably satisfactory to the parties.
6.19 FIRPTA Certificate. The Company shall have delivered to
Purchaser a certificate in form and content reasonably satisfactory to
Purchaser that certifies to Purchaser that no Tax withholding is required by
the Foreign Investment in Real Property Tax Act, as codified by Section 1445
of the Code.
6.20 Consents and Approvals. The Company shall have delivered to
Purchaser all of the waivers, consents and approvals described in Section
4.05, except only those waivers, consents and approvals with respect to which
the failure to obtain would not have a Material effect on the Company, any of
its Subsidiaries, any of their respective assets, liabilities or operations,
or the Business.
6.21 Payoff Letters. The Company shall have delivered to
Purchaser written payoff letters from each of the Company's lenders, in form
and substance reasonably satisfactory to Purchaser.
6.22 Termination of Certain Lease. The Shareholders shall have
delivered to Purchaser documents satisfactory to Purchaser evidencing the
termination of that certain lease agreement between Lester G. Gegenheimer and
the Company concerning the Real Property located in Corsicana, Texas and
releasing the Company from any and all Liability related thereto or arising
thereunder.
6.23 Settlement of Certain Litigation. Purchaser shall have
received documents evidencing the settlement of the U-Haul Litigation, in form
reasonably satisfactory to Purchaser's counsel, including but not limited to,
a stamp-filed stipulation of dismissal with prejudice or other appropriate
pleading.
6.24 Purchase of Texas and Oklahoma Operations. Purchaser, the
Company or one of its Subsidiaries shall have purchased for nominal cash
consideration from Southland Container, Inc. and its Subsidiaries all of their
collective facilities and operations in the states of Texas and Oklahoma,
including without limitation the customer lists, supplier lists and other
information related thereto. Such purchase shall include relevant
representations and warranties in the form contained in this Agreement.
Purchaser, the Company or one of its Subsidiaries also shall have entered into
an employment agreement with Randall Rogers on terms and conditions reasonably
satisfactory to Purchaser.
6.25 Agreements with Respect to Maryland Bond-financed Leased
Property. In addition to the lease amendments referred to in Section 6.18
above with respect to the lease dated [________], 1985 (the "Maryland Lease")
between Southland Maryland Properties as lessor and Southland Container, Inc.
of Maryland ("Southland Container") as lessee, which lease relates to property
financed through issuance by Howard County, Maryland of its Economic
Development Revenue Bond (Southland Container, Inc. of Maryland Facility),
Series 1985 in the original principal amount of $2,135,000.00 (the "Bond
Financing"), Seller shall have obtained and delivered to Purchaser
modifications of all documents entered into with respect to the Bond Financing
to terminate all representations, warranties and covenants of, and
indemnifications by, Southland Container, all in form and substance
satisfactory to Purchaser in its reasonable good faith judgment, which shall
include, without limitation, (i) a release or releases of the Southland
Container and Southland Holding Company guarantees of the Bond Financing, (ii)
a modification executed by all parties to the Loan and Financing Agreement
dated September 28, 1985 (the "Loan Agreement") given in connection with the
Bond Financing, deleting references to the guarantees by Southland Container
and Southland Holding Company, deleting the covenants of Southland Container
as the "Facility User," and deleting specific restrictions prohibiting
inclusion of non-disturbance language in the Maryland Lease and other leases
entitling the tenant to remain at the leased premises after the sale thereof,
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and (iii) a consent to the Maryland Lease amendments described in Exhibit 6.18
hereof. In addition, Seller shall have delivered to Purchaser a
subordination, non-disturbance and attornment agreement from NationsBank (the
lender with respect to the Bond Financing) and Howard County, Maryland, in
form and substance satisfactory to Purchaser in its reasonable good faith
judgment, which shall include an agreement by such parties that no default
with respect to the Bond Financing will affect the lessee's rights under the
Maryland Lease, provided the lessee is not otherwise in default thereunder.
6.26 Atlanta Property. Lester Gegenheimer will have purchased, or
tendered performance of his offer to purchase, the Atlanta Property on the
terms set forth on Schedule 6.26. Further, the Company or one of its
Subsidiaries shall have leased from Mr. Gegenheimer, or tendered performance
of its offer to lease, the Atlanta Property on the terms set forth on Schedule
6.26.
6.27 Mississippi Right of First Refusal. Purchaser, the Company
or one of its Subsidiaries shall have obtained the written right of first
refusal for the 18 months following the Closing Date to purchase the majority
of the capital stock of or substantially all of the assets of Southland
Container, Inc. and its Subsidiaries (or any similar transaction, whether
effected by merger, share exchange or otherwise). Such right of first refusal
shall be on such other terms and conditions as shall be reasonably acceptable
to Purchaser, Gegenheimer and Sanders.
6.28 Proprietary Rights Restriction. Messrs. Sanders and
Gegenheimer shall have executed and delivered to Purchaser an agreement
regarding restrictions on the use of proprietary rights containing at least
such provisions as are set forth on Schedule 6.28.
6.29 Termination of Certain Agreements. That certain agreement
regarding management services among Southland Container, Inc., Southland Paper
Company, Southland Container, Inc. of Louisiana and the Company shall have
been terminated. That certain Agreement between the Company and Southland
Container, Inc. regarding the payment of a sales commission shall have been
canceled and a new agreement shall have been entered into on substantially the
terms and conditions set forth on Exhibit 6.29.
6.30 Bank Account Signature Cards. Purchaser shall have received
executed signature cards changing the authorized signatures on each bank
account of the Company and its Subsidiaries to designees of Purchaser.
6.31 Audited Financials. Purchaser shall have received, no later
than December 31, 1996, audited financial statements, including the balance
sheets of the Company and its Subsidiaries and the related statements of
income and cash flows for the periods then ended, together with the notes
thereto, for the past three (3) years, substantially in the form of the draft
financial statements included in Schedule 2.07.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part,
by the Company and the Shareholders for purposes of consummating such
transactions, but without prejudice to any other right or remedy which the
Company and the Shareholders may have hereunder as a result of any
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misrepresentation by, or breach or any agreement, covenant or warranty of
Purchaser contained in this Agreement or any Other Agreement:
7.01 Representations True and Covenants Performed at Closing. The
representations and warranties made by Purchaser shall be correct and complete
on the Closing Date with the same force and effect as if such representations
and warranties had been made on and as of the Closing Date. Purchaser shall
have duly performed and complied with all of the agreements, covenants, acts
and undertakings to be performed or complied with by it on or prior to the
Closing Date. Purchaser shall have delivered to the Company and the
Shareholders a certificate dated as of the Closing Date certifying as to the
fulfillment of the conditions of this Section 7.01.
7.02 Incumbency Certificate. The Company and the Shareholders
shall have received an incumbency certificate or certificates dated the
Closing Date certifying the incumbency of all officers of Purchaser who have
executed this Agreement or documents in connection with this Agreement. The
certificate or certificates shall contain specimens of the signatures of each
of the officers whose incumbency is certified and shall be executed by an
officer of Purchaser other than an officer whose incumbency is certified.
7.03 Certified Copies of Resolutions. The Company and the
Shareholders shall have received copies, duly certified by the duly qualified
and acting Secretary or Assistant Secretary of Purchaser of resolutions
adopted by the Board of Directors of Purchaser approving this Agreement and
the consummation of the transactions contemplated herein.
7.04 No Injunction, Etc. No Litigation, Law, Order or legislation
shall have been instituted, threatened or proposed by a Third Party before any
court or Governmental Authority to enjoin, restrain, prohibit or obtain
damages in respect of this Agreement or the consummation of the transactions
contemplated hereby, if such Litigation, Law, Order or legislation, in the
reasonable judgment of Purchaser, would make it inadvisable to consummate the
transactions contemplated hereby.
7.05 Hart-Scott Act Approval. All waiting periods applicable to
this Agreement and the transactions contemplated hereby under the Hart-Scott
Act shall have expired or been terminated.
7.06 License of Name. Purchaser shall have licensed, on a
royalty-free basis, in the territory set forth on Exhibit 6.12(b) in which the
Non-Competition covenants do not apply, to Southland Container, Inc. and its
subsidiaries the use of the name "Southland Container" for so long as Lester
Gegenheimer and John Sanders collectively own or control a majority of the
ownership of Southland Container, Inc. and its subsidiaries, and for eighteen
(18) months thereafter.
7.07 Opinion of Counsel. The Shareholders shall have received a
written opinion of Alston & Bird, counsel to Purchaser, dated the Closing Date
and reasonably satisfactory to the Shareholders; provided that such opinion
shall be no more comprehensive than the opinions being rendered by Alston &
Bird to Purchaser's lenders.
7.08 Proprietary Rights Restriction. Purchaser shall have
executed and delivered to Messrs. Sanders and Gegenheimer an agreement
regarding restrictions on the use of proprietary rights containing at least
such provisions as are set forth on Schedule 6.28.
7.09 Audited Financials. The Shareholders shall have received, no
later than December 31, 1996, audited financial statements, including the
balance sheets of the Company and its Subsidiaries and the related statements
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of income and cash flows for the periods then ended, together with the notes
thereto, for the past three (3) years, substantially in the form of the draft
financial statements included in Schedule 2.07.
ARTICLE VIII
TERMINATION
8.01 Causes for Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing Date: (i) by the mutual consent of the Company and Purchaser; (ii) by
Purchaser in the event the conditions set forth in Article VI shall not have
been satisfied or waived by February 28, 1997; (iii) by the Company in the
event that the conditions set forth in Article VII shall not have been
satisfied or waived by February 28, 1997; (iv) by Purchaser pursuant to
Section 4.10; (v) by Purchaser at any time if Purchaser determines reasonably
and in good faith that (A) any Material Adverse Change, or any condition or
event which threatens to cause a Material Adverse Change, with respect to the
Company, its assets or the Business shall have occurred or been discovered
since the Balance Sheet Date or (B) that one or more of the conditions set
forth in Article VI shall not be reasonably capable of being satisfied on or
before the Closing Date; (vi) by the Company at any time the Company or
Shareholders determine reasonably and in good faith that one or more of the
conditions as set forth in Article VII shall not be capable of being satisfied
on or before the Closing Date; or (vii) by the Company or Purchaser in the
event that the Closing has not occurred on or before February 28, 1997.
8.02 Notice of Termination. Notice of termination of this
Agreement as provided for in this Article VIII shall be given by the party so
terminating to the other parties hereto in accordance with the provisions of
Section 11.01.
8.03 Effect of Termination.
(a) In the event of a termination of this Agreement
pursuant to Section 8.01 hereof, except for the confidentiality provisions of
Section 4.04 and the expense allocation provisions of Section 4.12, which
shall remain in full force and effect, this Agreement shall become void and of
no further force or effect, and each party shall pay the costs and expenses
incurred by it in connection with this Agreement, and no party (or any of its
directors, officers, shareholders, agents, counsel, representatives,
Affiliates or assigns) shall be liable to any other party for any Loss
hereunder. Notwithstanding the foregoing sentence and the provisions of
Section 4.12, if the non-occurrence of Closing is the direct or indirect
result of the Material Default by any of the parties to this Agreement of any
of his or its obligations hereunder, including without limitation, any
Material inaccuracy in any representation or warranty made by such party and
the other party has not Materially Defaulted on any of his or its obligations
hereunder, such Defaulting party or parties shall be liable for the sum of
Four Hundred Fifty Thousand Dollars ($450,000) as liquidated damages for loss
of the benefits that would accrue to the other party if the transactions
contemplated by this Agreement were consummated and to reimburse such party
for its costs and expenses incurred in connection with preparing to consummate
such transaction. The liquidated damages provided for in this Section 8.03(a)
shall be the sole and exclusive remedy of each party for any breach of any
representation, warranty or covenant of the Defaulting party prior to the
Closing. In addition, the Company and each of the Shareholders acknowledge
that Purchaser, at its option (to be exercised in its sole and absolute
discretion), may elect to have the Agreement specifically performed by the
Company and the Shareholders in addition to receipt of the liquidated damages
provided by this paragraph. The Company and the Shareholders further
acknowledge that any breach of this Agreement by either the Company or any of
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the Shareholders will cause irreparable damage and injury to Purchaser and
that Purchaser will be entitled to injunctive relief in any court of competent
jurisdiction without the necessity of posting any bond.
(b) It is agreed that time is of the essence in the
performance and satisfaction of this Agreement and each of the conditions
specified in Articles VI and VII of this Agreement is Material for purposes of
this Agreement.
8.04 Risk of Loss. The Shareholders assume all risk of
condemnation, destruction or Loss to the Company due to fire or other casualty
from the date of this Agreement until the Closing. If the condemnation,
destruction or Loss is such that the Business is interrupted or curtailed or
the assets of the Company are Materially affected, then Purchaser shall have
the right to terminate this Agreement. If the condemnation, destruction or
Loss is such that the Business is neither interrupted nor curtailed nor the
assets of the Company Materially affected, or if the Business is interrupted
or curtailed or the assets of the Company are Materially affected and
Purchaser nevertheless foregoes the right to terminate this Agreement, the
Purchase Price shall be adjusted at the Closing to reflect such condemnation,
destruction or Loss, to the extent that insurance or condemnation proceeds
paid or to be paid to the Company are not sufficient to cover such destruction
or Loss. If Purchaser and the Shareholders are unable to agree upon the
amount of such adjustment, the dispute shall be resolved jointly by the
independent accounting firms then employed by Purchaser and the Company, and
if said accounting firms do not agree, an arbitrator shall be selected by the
American Arbitration Association and the matter resolved pursuant to the
provisions of Article IX.
ARTICLE IX
ARBITRATION
(a) Any dispute, controversy or claim arising out of or relating
to this Agreement, or a Default hereunder, or any of the transactions or
activities resulting from or connected with the Agreement, shall be settled by
arbitration in accordance with the Rules of Commercial Arbitration of the
American Arbitration Association then in effect (the "Rules"), and judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Notwithstanding Section 11.06 of this Agreement,
arbitration pursuant to this Article 9 shall be governed by the Federal
Arbitration Act and the cases interpreting relevant provisions thereof.
(b) Arbitration may be commenced at any time by either the
Shareholder Representative or Purchaser giving written notice to the other by
registered or certified mail, return receipt requested that a dispute has been
referred to arbitration pursuant to this Article IX. Within ten (10) business
days after receipt of such notice, the Shareholder Representative and
Purchaser shall designate in writing one arbitrator to resolve the dispute;
provided, however, that if the parties cannot agree on an arbitrator within
such ten (10) business day period, the arbitrator shall be selected by the
American Arbitration Association. The arbitrator so designated shall not be
an employee, consultant, officer, director, stockholder or an Affiliate of, or
attorney for any party hereto.
(c) Within fifteen (15) business days after the designation of
the arbitrator, the arbitrator, the Shareholder Representative and Purchaser
shall hold an in-person conference in Atlanta, Georgia or such other place as
the arbitrator may designate, at which time the Shareholder Representative and
Purchaser shall submit in writing to the arbitrator all disputed issues and a
proposed ruling on each such issue.
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(d) The arbitrator shall set a date for a hearing, which shall
be no later than sixty (60) days after the in-person conference held pursuant
to paragraph (c) above, to address and resolve each of the issues identified
by the Shareholder Representative and Purchaser. Each such party shall have
the right to be represented by counsel. The arbitrator shall have sole
discretion with regard to the admissibility of evidence and rules of
discovery, to the extent not inconsistent with the Commercial Arbitration
Rules of the American Arbitration Association.
(e) The arbitrator shall use his or her best efforts to rule on
each disputed issue within thirty (30) days after the completion of the
hearings described in paragraph (d) above.
(f) The prevailing party in any arbitration shall be entitled to
an award of reasonable attorneys' fees and expenses incurred in connection
with the arbitration and in connection with all investigations and defense
related thereto. The non-prevailing party shall pay such fees, together with
the fees of the arbitrator and the costs and expenses of the arbitration.
(g) The place of the arbitration shall be Atlanta, Georgia.
(h) The award of the arbitrator shall be in writing, signed by
the arbitrator and shall address and decide each of the disputed issues
submitted. The award of the arbitrator shall be final and binding upon all
parties hereto. The parties waive any right to appeal the award, to the
extent a right to appeal may be lawfully waived. Each party retains the right
to seek judicial assistance: (i) to compel arbitration; (ii)to obtain
interim measures of protection pending arbitration; and (iii) to enforce any
decision of the arbitrators, including the final award. Consistent with and
in furtherance of this Article 9 and the arbitration provisions contained
herein, each of the parties hereby irrevocably and unconditionally submits,
for itself and its property, to the jurisdiction of any Georgia court or the
United States District Court for the Northern District of Georgia, and any
appellate court from any thereof, in any Litigation arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
Litigation may be heard and determined in such Georgia court or, to the extent
permitted by Law, in such Federal court. Each of the parties hereto agrees
that a final judgment in any such Litigation shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each of the parties hereto agrees that it will not institute
or seek to institute any Litigation arising out of or relating to this
Agreement (other than Litigation seeking enforcement of a judgment) in any
forum other than a Georgia court or the United States District Court for the
Northern District of Georgia. Each of the parties hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection it may now or hereafter have to the laying of venue of
any Litigation arising out of or relating to this Agreement in any Georgia
court or the United States District Court for the Northern District of
Georgia. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by Law, the defense of an inconvenient forum to the
maintenance of such Litigation in any such court. Each party to this
Agreement irrevocably consents to service of process in the manner provided
for notices in Section 11.01. Nothing in this Agreement will affect the right
of any party to this Agreement to serve process in any other manner permitted
by Law.
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ARTICLE X
DEFINITIONS
The following terms (in their singular and plural forms as
appropriate) as used in this Agreement shall have the meanings set forth below
unless the context requires otherwise:
"Accounts Receivable" means all accounts receivable, notes
receivable, and other monies due to the Company for sales and deliveries of
goods, performance of services and other business transactions (whether or not
on the books of the Company) on the Closing Date.
"Act" means the Securities Act of 1933, as amended.
"Affiliate" of a Person means: (i) any Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii)any officer, director, partner,
employee, agent, or representative or direct or indirect beneficial or legal
owner of any 5% or greater equity or voting interest of such Person; or (iii)
any entity for which a Person described in (ii)above acts in any such
capacity.
"Agreement" means this Share Purchase Agreement, including the
Exhibits and Schedules delivered pursuant hereto or referred to herein, each
of which is incorporated herein by reference.
"Balance Sheet" means collectively, the consolidated audited balance
sheet of the Company as of April 30, 1996 and included in the Financial
Statements.
"Balance Sheet Date" means the date of the Balance Sheet.
"Business" means the Company's business of buying, selling,
warehousing, marketing, printing and transporting packaging materials and
supplies .
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Date" means January 24, 1997, or such other date as the
parties may agree in writing.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Computer Software" means all computer programs, materials, tapes,
source and object codes, and all prior and proposed versions, releases,
modifications, updates, upgrades and enhancements thereto, as well as all
documentation and listings related thereto.
"Contract" means any written or oral contract, agreement,
understanding, lease, usufruct, license, plan, instrument, commitment,
restriction, arrangement, obligation, undertaking, practice or authorization
of any kind or character or other document to which any Person is a party or
that is binding on any Person or its securities, assets or business.
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"Databases" means databases in all forms, versions and media,
together with prior and proposed updates, modifications and enhancements
thereto, as well as all documentation and listings therefor, other than
Licenses.
"Default" means (1) a breach of, default under, or misrepresentation
in or with respect to any Contract or License, (2) the occurrence of an event
that with the passage of time or the giving of notice or both would constitute
a breach of, default under, or misrepresentation in any Contract or License,
or (3) the occurrence of an event that with or without the passage of time or
the giving of notice or both would give rise to a right to terminate, change
the terms of or renegotiate any Contract or License or to accelerate,
increase, or impose any Liability under any Contract or License.
"Dividend Payment" has the meaning given that term in Section
4.01(g).
"Employee Benefit Plan" means collectively, each pension,
retirement, profit-sharing, deferred compensation, stock option, employee
stock ownership, severance pay, vacation, bonus or other incentive plan, any
other written or unwritten employee program, arrangement, agreement or
understanding, whether arrived at through collective bargaining or otherwise,
any medical, vision, dental or other health plan, any life insurance plan, or
any other employee benefit plan or fringe benefit plan, including, without
limitation, any "employee benefit plan," as that term is defined in Section
3(3) of ERISA currently or previously adopted, maintained by, sponsored in
whole or in part by, or contributed to by the Company or any Subsidiary or
ERISA Affiliate thereof or under which the Company, any Subsidiary or any
ERISA Affiliate thereof has any Liability for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate. "Employee Benefit Plans" also means any plans, programs,
agreements, arrangements or understandings previously maintained by, sponsored
in whole or in part by, or contributed to by the Company, or any Subsidiary or
ERISA Affiliate thereof that could result in a Material Liability to the
Company, including but not limited to, any plan covered by or subject to Title
IV of ERISA. Employee Benefit Plans include (but are not limited to)
"employee benefit plans" as defined in Section 3(3) of ERISA and any other
plan, fund, policy, program, practice, custom, understanding or arrangement
providing compensation or other benefits to any current or former officer or
employee or director or independent contractor of the Company, or any
Subsidiary, or any dependent or beneficiary thereof, maintained by the Company
or any Subsidiary or under which the Company or any Subsidiary has any
obligation or Liability, whether or not they are or are intended to be (i)
covered or qualified under the Code, ERISA or any other applicable Law, (ii)
written or oral, (iii) funded or unfunded, (iv) actual or contingent, or
(v) generally available to any or all employees (or former employees) of the
Company or any Subsidiary (or their beneficiaries or dependents), including,
without limitation, all incentive, bonus, deferred compensation, flexible
spending accounts, cafeteria plans, vacation, holiday, medical, disability,
share purchase or other similar plans, policies, programs, practices or
arrangements.
"Environmental Laws" means all Laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"),
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.
("RCRA"), and other Laws relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any Hazardous Substance.
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"Environmental Litigation" means any Litigation against the Company,
the Business or the assets of the Company (including, without limitation,
notice or other communication, written or oral, by any Person alleging
potential Liability for investigatory costs, cleanup costs, private or
governmental response or remedial costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based upon, or
resulting from (i) any Environmental Matter or (ii) any circumstances or state
of facts forming the basis of any Liability or alleged Liability under, or
violation or alleged violation of, any Environmental Law.
"Environmental Matter" means any matter or circumstances related in
any manner whatsoever to (i) the emission, discharge, disposal, release or
threatened release of any Hazardous Substance into the environment, (ii) the
transportation, treatment, storage, recycling or other handling of any
Hazardous Substance, (iii) the placement of structures or materials into
waters of the United States, or (iv) the presence of any Hazardous Substance,
including, but not limited to, asbestos, in any building, structure or
workplace or on any of the Real Property.
"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning given that term in Section 2.21.
"ERISA Plan" means any Employee Benefit Plan which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, or an
"employee welfare benefit plan" as that term is defined in Section 3(1) of
ERISA.
"Financial Statements" means (i) the consolidated balance sheets of
the Company and its Subsidiaries as of April 30, 1996, April 30, 1995, and
April 30, 1994 and the related statements of income and cash flows for the
periods then ended and (ii) the consolidated unaudited balance sheets of the
Company and its Subsidiaries as of May 31, 1996, June 30, 1996, July 31, 1996
and August 31, 1996 and the related statements of income for the months then
ended, together with the monthly financial statements provided to Purchaser
pursuant to Section 4.06.
"GAAP" means generally accepted accounting principles consistently
applied.
"Governmental Authority" means any federal, state, county, local,
foreign or other governmental or public agency, instrumentality, commission,
authority, board or body.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, 15 U.S.C.A. 18(a), as amended, and all Laws promulgated
thereunder.
"Hazardous Substance" means (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil.
"Improvements" means all buildings, structures, fixtures and other
improvements included in the Real Property.
"Intellectual Property" means the Company's and each of its
Subsidiaries' (i) U.S. and foreign patents and pending patent applications
together with any and all continuations, continuations in-part, divisions,
reissues, extensions and renewals thereof, (ii) trade secrets, know-how,
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inventions, formulae and processes, whether trade secrets or not, (iii) trade
names, trademarks, service marks, logos, assumed names, brand names and all
registrations and applications therefor together with the goodwill of the
business symbolized thereby, (iv) copyrights and any registrations and
applications therefor, (v) technology rights and licenses, and (vi) Computer
Software and all other intellectual property owned by, registered in the name
of, or used in the business of a Person or in which a Person or its business
has any interest.
"Inventory" means all inventories of raw materials, supplies,
products, advertising materials, and other inventories.
"IRS" means the Internal Revenue Service of the United States of
America.
"Knowledge," or "Known," with respect to the Company or any of the
Shareholders, means collectively those facts that after due inquiry were
actually known or reasonably should have been known by the Company, any of its
Subsidiaries, any of their respective executive officers (including, without
limitation, Messrs. Becker, Smith, Zimmerman, Lyons, Brown and Cook) or any of
the Shareholders.
"Law" means any code, law, legal principal, order, ordinance,
regulation, rule, or statute of any Governmental Authority.
"Leased Personal Property" means all Personal Property that is not
owned by the Company that the Company either uses or has the right to use.
"Leased Real Property" means all Real Property that is not owned in
fee simple by the Company that the Company either occupies or uses or has the
right to occupy or use.
"Liability" means any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, expense (including, without
limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills and checks presented to banks for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute, contingent, liquidated, unliquidated, matured, unmatured or
otherwise.
"License" means any license, franchise, notice, permit, easement,
right, certificate, authorization, approval or filing to which any Person is a
party or that is or may be binding on any Person or its securities, property
or business.
"Lien" means any mortgage, lien, security interest, pledge,
hypothecation, encumbrance, restriction, reservation, encroachment,
infringement, easement, conditional sale agreement, title retention or other
security arrangement, defect of title, adverse right or interest, charge or
claim of any nature whatsoever of, on, or with respect to any property or
property interest.
"Litigation" means any action, administrative or other proceeding,
arbitration, charge, cause of action, claim, complaint, criminal prosecution,
inquiry, hearing, investigation (governmental or otherwise), litigation,
notice (written or oral) by any Person alleging potential Liability or
requesting information relating to or affecting the Company, its assets
(including, without limitation, Contracts relating to the Company), the
Business or the transactions contemplated by this Agreement.
"Loss" means any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties, interest,
assessments, actions, causes of action, suits, losses, diminution in the value
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of assets, damages, punitive, exemplary or consequential damages (including,
but not limited to, lost income and profits and interruptions of business),
liabilities, costs, expenses (including without limitation, (i) interest,
penalties and reasonable attorneys' fees and expenses, (ii) attorneys' fees
and expenses necessary to enforce rights to indemnification hereunder, and
(iii) consultants' fees and other costs of defense or investigation), and
interest on any amount payable to a Third Party as a result of the foregoing,
whether accrued, absolute, contingent, known, unknown, or otherwise as of the
Closing Date or thereafter.
"Material" or "Materially" shall be determined in light of the facts
and circumstances of the matter in question; provided, however, that any
specific monetary amount cited in this Agreement shall be deemed to determine
materiality in that instance.
"Material Adverse Change" or "Material Adverse Effect" means (A) any
material adverse change in or effect on the ability of such Person to
consummate the transactions contemplated by this Agreement or any of the Other
Agreements to which it is or will be a party, or (B) any adverse change in or
effect on the business, assets, Liabilities, condition (financial or
otherwise) or results of operations of such Person that results in a Loss in
excess of $250,000.
"Order" means any decree, injunction, judgment, order, ruling, writ,
quasi-judicial decision or award or administrative decision or award of any
federal, state, local, foreign or other court, arbitrator, mediator, tribunal,
administrative agency or Governmental Authority to which any Person is a party
or that is or may be binding on any Person or its securities, assets or
business.
"Other Agreements" means the agreements, documents, assignments and
instruments to be executed and delivered by the Company or the Shareholders
pursuant to this Agreement.
"Owned Personal Property" means all Personal Property other than
Leased Personal Property.
"Owned Real Property" means all Real Property other than Leased Real
Property.
"Permitted Liens" means (i) Liens for current real property taxes
not yet due and payable, (ii) Liens that do not affect the value or use of any
parcel of Real Property and (iii) Liens disclosed on Schedule X.
"Person" means a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a business association,
corporation, general partnership, joint venture, limited partnership, limited
liability company, trust, or any person acting in a representative capacity.
"Personal Property" means collectively all of the personal property
or interests therein owned, leased, used or controlled by the Company
including, without limitation, machinery, tools, equipment (including office
equipment and supplies), furniture, furnishings, fixtures, vehicles, leasehold
improvements, all other tangible personal property other than Inventory (which
is specifically excluded from the Personal Property).
"Purchase Price" means the total consideration to be paid to the
Company by Purchaser for the purchase of the Shares pursuant to this Agreement
and which shall be paid in accordance with Section 1.02 of this Agreement.
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"Real Property" means collectively all the real property owned by
the Company, or interests of the Company as to real property leased, occupied,
used or controlled, by the Company as of the date of this Agreement, together
with (i) all rights, easements, tenements, hereditaments, appurtenances,
privileges, immunities, mineral rights and other benefits belonging or
appertaining thereto which run with said real property and (ii) all right,
title and interest, if any, of the Company in and to (A) any land lying in the
bed of any street, road, avenue, open or proposed, adjoining said real
property, (B) any award made or to be made in lieu of the land described in
the preceding clause (A), (C) any unpaid award for damage to said real
property, and (D) all strips and rights-of-way abutting or adjoining said real
property, if any. The Real Property includes, without limitation, all
buildings, structures, fixtures and other improvements located on the land
described in the preceding sentence.
"Related Person" means, with regard to any natural Person, its
spouse, parent, sibling, child, aunt, uncle, niece, nephew, in-law,
grandparent and grandchild (including by adoption) and any trustees or other
fiduciaries for the benefit of such relatives.
"Shares" means shares of the Company's $1.00 par value per share
common stock.
"Subsidiary" means any Person of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such Person, is at the time directly or indirectly
owned or controlled by another Person, or by any one or more Subsidiaries of
such other Person, or by such other Person and one or more of its Subsidiaries
or Affiliates.
"Tax" or "Taxes" means any federal, state, county, local, foreign
and other taxes, assessments, charges, fees, and impositions, including
obligations to withhold such amounts and including interest and penalties
thereon or with respect thereto, whether disputed or not, and including
Liabilities relating to unclaimed property.
"Tax Returns" means all returns, reports, filings, declarations and
statements relating to Taxes that are required to be filed, recorded, or
deposited with any Governmental Authority, including any attachment thereto or
amendment thereof.
"Third Party" or "Third Parties" means any Person that is not
Purchaser, the Company or the Shareholders or an Affiliate of Purchaser, the
Company or Shareholders.
"U-Haul Litigation" means the following lawsuit: No. H-95-4526; U-
Haul International Inc. v. Southland Container, Inc., Southland Container,
Inc. of Florida, Southland Container, Inc. of Georgia, Southland Container,
Inc. of Louisiana, Southland Container, Inc. of Maryland, Southland Container,
Inc. of North Carolina, and Southland Holding Company; In the United States
District Court for the Southern District of Texas, Houston Division.
"Undisclosed Liabilities" means any Liability that is not fully
reflected or reserved against in the Financial Statements or fully disclosed
in a Schedule.
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ARTICLE XI
MISCELLANEOUS
11.01 Notices.
(a) All notices, requests, demands and other
communications hereunder shall be (i) delivered by hand, (ii) mailed by
registered or certified mail, return receipt requested, first class postage
prepaid and properly addressed, (iii) sent by national overnight courier
service, or (iv) sent by facsimile, graphic scanning or other telegraphic
communications equipment to the parties or their assignees, addressed as
follows:
To the Company: Southland Holding Company
200 North 13th Street, Suite 112
Corsicana, Texas 75110
Attention: Mr. John L. Sanders, Jr.
Facsimile: (903) 874-4399
with copies to: Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002-2778
Attention: Roy E. Bertolatus, Esquire
Facsimile: (713) 225-7047
To the Shareholders:Mr. Lester G. Gegenheimer
808 Drane Place
Corsicana, Texas 75110
Mr. John L. Sanders, Jr.
Route 1, Box 155
Purdon, Texas 76679
Mr. William P. Blincoe, III
130 Carrick Bend Lane
P.O. Box 171
Boca Grande, Florida 33921
To Purchaser: Jotan, Inc.
118 West Adams Street
P.O. Box 836
Jacksonville, Florida 32201
Attention: Mr. Shea Ralph
Facsimile: (904) 353-0075
with copies to: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Stephen A. Opler, Esquire
Facsimile: (404) 881-7777
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(b) All notices, requests, instructions or documents given
to any party in accordance with this Section 11.01 shall be deemed to have
been given (i) on the date of receipt if delivered by hand, overnight courier
service or if sent by facsimile, graphic scanning or other telegraphic
communications equipment or (ii) on the date three (3) business days after
depositing with the United States Postal Service if mailed by United States
registered or certified mail, return receipt requested, first class postage
prepaid and properly addressed.
(c) Any party hereto may change its address specified for
notices herein by designating a new address by notice in accordance with this
Section 11.01.
11.02 Entire Agreement. This Agreement, the Schedules, the
Exhibits and the Other Agreements constitute the entire agreement between the
parties relating to the subject matter hereof and thereof and supersede all
prior and contemporaneous oral and written negotiations, discussions, writings
and agreements relating to the subject matter of this Agreement, including
without limitation, that certain letter of intent dated July 11, 1996 from
Purchaser to the Shareholders and the Company, as amended.
11.03 Modifications, Amendments and Waivers. The failure or delay
of any party at any time or times to require performance of any provision of
this Agreement shall in no manner affect its right to enforce that provision.
No single or partial waiver by any party of any condition of this Agreement,
or the breach of any term, agreement or covenant or the inaccuracy of any
representation or warranty of this Agreement, whether by conduct or otherwise,
in any one or more instances shall be construed or deemed to be a further or
continuing waiver of any such condition, breach or inaccuracy or a waiver of
any other condition, breach or inaccuracy.
11.04 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the parties
hereto, and his or its estates, successors, legal or personal representatives,
heirs, distributees, designees and assigns, but no assignment shall relieve
any party of his or its obligations hereunder. This Agreement or any portion
thereof cannot be assigned by any party without the prior written consent of
the other parties hereto; provided, however, that Purchaser may assign this
Agreement without the consent of the parties to any of its lenders as
collateral security and, with the prior written consent of the Company and the
Shareholders, to an Affiliate of Purchaser and to a subsequent purchaser of
any of the Company's assets. No such assignment shall relieve Purchaser of
its obligations hereunder. With respect to such assignments, all
representations, warranties, covenants and indemnification rights shall be
binding upon, and inure to the benefit of, the assignee or assignees as if
such representations, warranties, covenants and indemnification rights were
made directly between the original parties to this Agreement.
11.05 Table of Contents; Captions; References. The table of
contents and the captions and other headings contained in this Agreement as to
the contents of particular articles, sections, paragraphs or other
subdivisions contained herein are inserted for convenience of reference only
and are in no way to be construed as part of this Agreement or as limitations
on the scope of the particular articles, sections, paragraphs or other
subdivisions to which they refer and shall not affect the interpretation or
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meaning of this Agreement. All references in this Agreement to "Section" or
"Article" shall be deemed to be references to a Section or Article of this
Agreement.
11.06 Governing Law. This Agreement will be substantially
performed in the State of Texas, and shall be controlled, construed and
enforced in accordance with the substantive Laws of the State of Texas,
without respect to the Laws related to choice or conflicts of Laws.
11.07 Pronouns. All pronouns used herein shall be deemed to refer
to the masculine, feminine or neuter gender as the context requires.
11.08 Severability. Should any one or more of the provisions of
this Agreement be determined to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby. The parties
shall endeavor in good faith to replace any invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close
as practicable to that of the invalid, illegal or unenforceable provisions.
11.09 Sole and Exclusive Remedy; Waiver and Release; Confirmation
of Company Indemnity. The parties agree that the rights and remedies as among
them in respect of the transactions set forth herein shall be as provided in
this Agreement. Accordingly, the indemnification given by the parties under
Article V shall be the parties' sole and exclusive remedy, each against the
other, with respect to matters of any kind or nature relating to this
Agreement or the Company or its Business, assets or operations, and the
condition, ownership, operation, management, use or control of the Business
and such assets. The parties hereby waive and release any other rights,
remedies, causes of action or claims that they have or that may arise against
the other parties with respect to matters of any kind or nature relating to
the Company and its Business, assets and operations, or the condition,
ownership, operation, management, use or control thereof.
11.10 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original; but all of such
counterparts shall together constitute one and the same instrument.
11.11 Interpretations. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Purchaser, the
Company, or the Shareholders whether under any rule of construction or
otherwise. No party to this Agreement shall be considered the draftsman. On
the contrary, this Agreement has been reviewed, negotiated and accepted by all
parties and their attorneys and shall be construed and interpreted according
to the ordinary meaning of the words used so as fairly to accomplish the
purposes and intentions of all parties hereto.
11.12 Shareholder Representative.
(a) Each of the Shareholders hereby irrevocably makes,
constitutes, and appoints John L. Sanders, Jr. as the representative, agent
and true and lawful attorney in fact of and for each of the Shareholders in
connection with this Agreement (the "Shareholder Representative"). Each of
the Shareholders hereby authorizes and empowers the Shareholder Representative
to make or give any approval, waiver, request, consent, instruction or other
communication on behalf of each of the Shareholders as each such Shareholder
could do for himself, including with respect to the amendment of any provision
of this Agreement or to the delivery of any new Schedule or Exhibit or any
modification to an existing Schedule or Exhibit. Each of the Shareholders
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further authorizes and empowers the Shareholder Representative to (i) receive
all demands, notices or other communications directed to such Shareholder
under this Agreement and to take any action (or to determine to refrain from
taking any action) with respect thereto as he may deem appropriate as
effectively as such Shareholder could act for himself (including, without
limitation, the settlement or compromise of any dispute or controversy) and
(ii) execute and deliver all instruments and documents of every kind incident
to the foregoing with the same effect as if such Shareholder had executed and
delivered such instruments and documents personally. Accordingly, any
demands, notices or other communications directed to the Shareholders
hereunder shall be deemed effective if given to the Shareholder
Representative. Upon the death, resignation or incapacity of the Shareholder
Representative, or at any other time, a successor may be appointed by the
Shareholders, and such successor shall agree in writing to accept such
appointment in accordance with the terms hereof. Notice of the selection of a
successor Shareholder Representative appointed in any manner permitted in this
Section 11.12 shall be provided to Purchaser promptly.
(b) Without limiting the generality of the foregoing
paragraph (a), if Purchaser or the Company or any of the other Persons
specified in Section 5.02 asserts a claim for indemnification based upon the
provisions of Article V, the notice requirements of Sections 5.06 and 11.01
shall be satisfied by delivery of the Claims Notice to the Shareholder
Representative as representative of and on behalf of each of the Shareholders,
and the Shareholder Representative shall exercise all rights of the
Indemnifying Party under Article V and shall cause all obligations of the
Indemnifying Party under Article V to be performed. Each of the Shareholders
agrees to be bound by all actions and failures to act of the Shareholder
Representative in accordance with this Section 11.12. Notwithstanding the
foregoing, it shall be the obligation of each Shareholder, and not of the
Shareholder Representative, to indemnify Purchaser, the Company and the other
Persons specified in Section 5.02 for Losses based upon the provisions of
Article V.
11.13 No Intention to Benefit Third Parties. This Agreement is
not intended to, and shall not, (i) benefit any Person other than Purchaser,
the Company or the Shareholders or (ii) create any third-party beneficiary
right in any Person.
11.14 Texas Deceptive Trade Practices Act Waiver. Purchaser (a)
represents and warrants to the Shareholders that it (i) is acquiring the
Shares for commercial or business use; (ii) as of the date of its purchase of
such Shares, has assets in excess of $25,000,000 and (iii) has knowledge and
experience in financial and business matters such that enable it to evaluate
the merits and risks of the transaction contemplated by this Agreement and is
not in a significantly disparate bargaining position with respect to the
Shareholders; and (b) hereby unconditionally and irrevocably waives any and
all rights of remedies it may have under the Deceptive Trade Practices --
Consumer Protection Act of the State of Texas, Tex. Bus. & Com. Code 17.41 et
seq., other than any of the provisions of 17.555 of such Act, if such Act
would for any reason be deemed applicable to the transactions contemplated
hereby.
[SIGNATURES ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, Purchaser, the Company, and the Shareholders
have duly executed this Agreement under seal as of the date first above
written.
PURCHASER:
JOTAN, INC.
By:_________________________________
Title: _____________________________
Attest:
____________________________
Its:________________________
[CORPORATE SEAL]
THE COMPANY:
SOUTHLAND HOLDING COMPANY
By:__________________________________
Title: ______________________________
Attest:
___________________________
Its:_______________________
[CORPORATE SEAL]
THE SHAREHOLDERS:
________________________________(SEAL)
LESTER G. GEGENHEIMER
________________________________(SEAL)
JOHN L. SANDERS, JR.
________________________________(SEAL)
WILLIAM P. BLINCOE
53
<PAGE>
EXHIBIT 1.02
FORM OF ESCROW AND DEPOSITORY AGREEMENT
Jotan, Inc., a corporation organized under the laws of the State of
Florida ("Jotan"), the shareholders of Southland Holding Company, a Texas
corporation, who are signatories hereto (the "Shareholders," and together with
Jotan, the "Undersigned"), and NationsBank, N.A. (South) (the "Depository"),
as the Depository for the Undersigned and the Shareholder Representative (as
defined below) for the purposes and upon the terms and conditions herein set
forth, do hereby represent and warrant to, and agree with each other, as
follows:
1. Appointment of the Depository. The Depository is hereby appointed
Depository for the Undersigned with respect to the "Property" as that term is
herein defined and the Depository hereby accepts such appointment.
2. The Property. Concurrently with the execution and delivery
hereof, the Shareholders have deposited with the Depository, as custodian and
depository, the items described in Schedule A hereto (such items, together
with all interest dividends and other investment returns with respect thereto,
being herein collectively called the "Property"), and the Undersigned direct
that same be held and disposed of by the Depository as herein provided.
3. Shareholder Representative.
(a) By their execution hereof, each of the Shareholders hereby
irrevocably appoints (subject to Section 3(b)) John L. Sanders, Jr., as the
representative, agent and true and lawful attorney-in-fact of and for each of
the Shareholders in connection with this Agreement (hereinafter the
"Shareholder Representative"). Each of the Shareholders hereby authorizes and
empowers the Shareholder Representative to take any action which this
Agreement provides may or shall be taken by the Shareholder Representative and
to take any action which may be taken by any of the Shareholders under this
Agreement.
(b) Upon the resignation of the Shareholder Representative, the
Shareholders shall, or at any other time, the Shareholders may, by Majority
Action (as defined below) designate a successor Shareholder Representative,
and such successor shall agree in writing to accept such appointment in
accordance with the terms hereof. Notice of the selection of a successor
Shareholder Representative shall be provided promptly to the Shareholders, the
Depository and Jotan. For purposes of this Agreement, "Majority Action" shall
mean written action by the Shareholders whose applicable percentage as set
forth opposite such Shareholder's name on the signature pages hereto (the
"Applicable Percentage") exceed 50%.
<PAGE>
4. The Depository's Duties and Authority to Act.
(a) The Depository shall hold the Property in safekeeping and
shall release and deliver the Property (or portions thereof) as set forth in
this Section 4.
(b) From time to time (but at least 5 business days prior to the
next Escrow Payment Date), Jotan shall have the right to deliver a written
notice to the Depository and the Shareholder Representative which notice (x)
states that Jotan has an unresolved claim or claims under Section 5.02 of that
certain Share Purchase Agreement dated as of December 19, 1996 by and among
Jotan, Southland Holding Company and the Shareholders (the "Share Purchase
Agreement") and (y) states the Unresolved Claims Amount (as defined below) as
of such next Escrow Payment Date . The "Unresolved Claims Amount" with
respect to any Escrow Payment Date shall mean the estimated aggregate amount
of the unresolved claim or claims (which amount shall not include prior to the
third anniversary of the Closing Date any amounts included in the Unresolved
Claims Amount applicable to any prior Escrow Payment Date) which is set forth
in the notice meeting the requirements set forth in the preceding sentence of
this Section 4(b). Such notice shall also set forth a reasonably detailed
description of the unresolved claim or claims.
The term "Escrow Payment Date" shall mean each date on which the
Depository is required to deliver a portion of the Property to the
Shareholders pursuant to Section 4(c) hereof, to wit, the first anniversary of
the Closing Date, the second anniversary of the Closing Date, the third
anniversary of the Closing Date and each of the dates set forth in clause
(iv) in Section 4(c) hereof.
(c) The Depository shall release and deliver to the Shareholders
in accordance with their respective Applicable Percentages the following
amounts from the Property on the dates set forth:
(i) on the first anniversary of the Closing Date,
the amount, if any, necessary to reduce the balance of the
Property held by the Depository to an amount equal to (x)
$2,400,000, plus (y) the amount, if any, of the Unresolved
Claims Amount applicable to such Escrow Payment Date;
(ii) on the second anniversary of the Closing Date,
the amount, if any, necessary to reduce the balance of the
Property held by the Depository to an amount equal to (x)
$1,500,000 plus (y) the amount, if any, of the Unresolved
Claims Amount applicable to such Escrow Payment Date (and
which was not included in the Unresolved Claims Amount
applicable to any prior Escrow Payment Date) plus (z) the
amount, if any, of the Unresolved Claims Amount applicable
to the prior Escrow Payment Date that has not been paid to
Jotan or, at Jotan's request, to other persons for Jotan's
account;
(iii) on the third anniversary of the Closing Date,
the amount, if any, of the Property then remaining necessary
to reduce the balance of the Property held by the Depository
to an amount equal to (x) $0 plus (y) the amount, if any, of
the Unresolved Claims Amount applicable to such Escrow
Payment Date (and which was not included in the Unresolved
Claims Amount applicable to any prior Escrow Payment Date)
plus (z) the amount, if any, of the Unresolved Claims
Amounts applicable to either prior Escrow Payment Date that
has not been paid to Jotan or, at Jotan's request, to other
persons for Jotan's account; and
(iv) after the third anniversary of the Closing Date,
on the last day of each month thereafter, the excess, if
any, of the amount of the Property then remaining over the
Unresolved Claims Amounts applicable to each prior Escrow
Payment Date (less any portion of such Unresolved Claims
Amounts which has been disposed of pursuant to Section 4(d)
hereof).
<PAGE>
With respect to any Unresolved Claims, the Unresolved Claims
Amount shall continue to be held by the Depository until the Depository
receives instructions as to the disposition of the Unresolved Claims Amount
pursuant to clauses (i), (ii) or (iii) of Section 4(d) hereof.
(d) The Depository shall distribute the Property only under the
following circumstances: (i) in accordance with Section 4(c) hereof, (ii) upon
joint written instruction of Jotan and the Shareholder Representative or (iii)
pursuant to a decision of an arbitration tribunal pursuant to Section 11 of
this Agreement.
(e) When instructions from both Jotan and the Shareholder
Representative are required, such instructions may be given by separate
instruments of similar tenor. Each of the Shareholders shall act through the
Shareholder Representative. Jotan and the Shareholder Representative may
hereafter act through an agent or attorney-in-fact only if written evidence of
authority is furnished to the Depository and agreed to by the Depository and
to the other parties hereto, provided that, for purposes of this Section 4(e),
notice to the Shareholder Representative shall constitute notice to the
Shareholders.
(f) The Depository may act upon any written notice, request,
waiver, consent, certificate, receipt, authorization, power of attorney or
other document that it in good faith believes to be genuine and to have been
signed or presented by the proper party or parties.
(g) The Depository shall be deemed to have properly delivered
the Property, or any part thereof, if such delivery is made by check or by
wire transfer of immediately available funds of U.S. currency pursuant to the
written instructions of the Undersigned to which such Property is being
delivered or, in the case of the Shareholders, pursuant to the written
instructions of the Shareholder Representative.
(h) In acting under this Agreement, or refraining from acting
hereunder, the Depository shall not be liable to anyone for damages, losses or
expenses which may be incurred as a result of the Depository so acting or
refraining from so acting; provided, however, the Depository shall not be
relieved from liability for damages arising out of its gross negligence or
willful misconduct under this Agreement. The Depository shall in no event
incur any liability with respect to (i) any action taken or omitted to be
taken in good faith upon advice of legal counsel given with respect to any
questions relating to the duties and responsibilities of the Depository
hereunder or (ii) any action taken or omitted to be taken in reliance upon any
document delivered to the Depository and believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties.
(i) Jotan, on the one hand, and the Shareholders, on the other
hand, hereby agree to deliver instructions to the Depository pursuant to
Section 4(d)(ii) hereunder instructing the Depository to distribute the
Property (i) to the Shareholders when it is reasonably established that any
amount withheld as an Unresolved Claims Amount has been otherwise discharged,
paid or satisfied or (ii) to Jotan in the event that it is reasonably
established that Jotan is entitled to payment from the Shareholders pursuant
to the Share Purchase Agreement.
<PAGE>
5. Other Agreements. The Depository is not a party to, nor is it
bound by, nor need it give consideration to the terms or provisions of, any
other agreement or undertaking among the Undersigned or any of them, or
between the Undersigned or any of them and other persons, or any agreement or
undertaking which may be evidenced by or disclosed by the Property, it being
the intention of the parties hereto that the Depository assent to and be
obligated to give consideration only to the terms and provisions hereof.
Unless otherwise provided herein, the Depository shall have no duty to
determine or inquire into the happening or occurrence of any event or
contingency or the performance or failure of performance of any of the
Undersigned with respect to arrangements or contracts with each other or with
others, the Depository's sole duty hereunder being to hold the Property and to
dispose of and deliver the same in accordance with instructions given to it as
provided in Section 4.
6. Standard of Care.
(a) The Depository undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Depository.
(b) If the Depository is required by the terms hereof to
determine the occurrence of any event or contingency, the Depository shall, in
making such determination, be liable only for its willful misconduct or gross
negligence, as determined in light of all the circumstances, including the
time and facilities available to it in the ordinary conduct of its business.
In determining the occurrence of any such event or contingency the Depository
may request from any of the Undersigned or any other person such reasonable
additional evidence as the Depository in its sole discretion may deem
necessary to determine any fact relating to the occurrence of such event or
contingency, and may at any time inquire of and consult with others, including
without limitation, any of the Undersigned, and the Depository shall not be
liable for any damages resulting from its delay in acting hereunder pending
its receipt and examination of additional evidence requested by it.
(c) Whenever the Depository is required by the terms hereof to
take action upon the occurrence of any event of contingency, the time
prescribed for such action shall in all cases be a reasonable time after
written notice received by the Depository for the happening of such event or
contingency, provided however, that this provision shall not be deemed to
limit or reduce the time allowed the Depository for action as provided in
Section 6(b).
7. Limitation on Liability. The Depository shall not be responsible
or liable to the Undersigned or the Shareholder Representative or to any other
person in any manner whatsoever for the sufficiency, correctness, genuineness,
effectiveness or validity of any of the Property, or for the form of execution
thereof, or for the identity or authority of any person executing or
depositing the same. If any of the Undersigned are acting as agent for
others, all of the Undersigned represent and warrant that each such agent is
authorized to make and enter into this Agreement. This Agreement is a
personal one among the Undersigned, the Shareholders and the Depository. The
Depository is authorized by each of the Undersigned to rely upon their
respective representations relating to this Agreement and/or the Property,
including without limitation representations as to marital status, authority
to execute and deliver this Agreement, notifications, receipts or instructions
hereunder, and relationships among persons, firms, corporations or other
entities, including those authorized to receive delivery hereunder, and the
Depository shall not be liable to any person in any manner by reason of such
<PAGE>
reliance. The duties of the Depository hereunder shall be only to the
Undersigned and the Shareholder Representative, their respective successors,
heirs, assigns, executors and administrators and to no other person, firm,
corporation or other entity whatsoever.
8. Time of Performance. Whenever under the terms hereof the time for
performance of any provision shall fall on a date which is not a regular
business day of the Depository, the performance thereof on the next succeeding
regular business day of the Depository shall be deemed to be in full
compliance. Whenever time is referred to in this Agreement, it shall be the
time recognized by the Depository in the ordinary conduct of its normal
business transactions.
9. Death, Disability, etc. of the Undersigned or the Shareholder
Representative. The death, disability, dissolution, liquidation, bankruptcy,
insolvency, reorganization or absence of any of the Undersigned or the
Shareholder Representative shall not affect or prevent performance by the
Depository of its obligations or its right to rely upon instructions received
hereunder.
10. Examination of the Property. Jotan and the Shareholder
Representative are entitled, upon written request from either of them, to an
accounting of the value of the Property which accounting will set forth the
total value of the Property, including accrued interest, and the rate at which
such Property is currently bearing interest.
11. Remedies of the Depository.
(a) As additional consideration for and as an inducement for the
Depository to act hereunder, it is understood and agreed that in the event of
any disagreement between or among the parties to this Agreement or in the
event any other person or entity claims an interest in the Property or any
part thereof, and such disagreement or claim results in adverse claims and
demands being made by them or any of them in connection with or for any part
of the Property, the Depository shall be entitled, at the option of the
Depository, to refuse to comply with the instructions or demands of the
parties to this Agreement, or any of such parties, so long as such
disagreement or adverse claim shall continue. In such event, the Depository
shall not be required to make delivery or other disposition of the Property.
Anything herein to the contrary notwithstanding, the Depository shall not be
or become liable to the Shareholder Representative, the Undersigned or any of
them for the failure of the Depository to comply with the conflicting or
adverse demands of the Shareholder Representative, the Undersigned or any of
such parties or of any other persons or entities claiming an interest in the
Property or any part thereof. The Depository shall be entitled to refrain and
refuse to deliver or otherwise dispose of the Property or any part thereof or
to otherwise act hereunder, as stated above, unless and until (i) the rights
of the parties and all other persons and entities claiming an interest in the
Property have been duly adjudicated in an appropriate court, whether Federal
or state, sitting in Fulton County, Georgia, or by an arbitration tribunal
pursuant to Section 11(c) hereof or (ii) the parties to this Agreement and
such other persons and entities have reached an agreement resolving their
differences and have notified the Depository in writing of such agreement and
have provided the Depository with indemnity satisfactory to it against any
liability, claims or damages resulting from compliance by the Depository with
such agreement. In addition to the foregoing, the Depository shall have the
right to tender into the registry or custody of any court, whether Federal or
state, sitting in Fulton County, Georgia, any part of or all of the Property
<PAGE>
or initiate an arbitration proceeding pursuant to Section 11(c) hereof. Upon
such tender or initiation, the parties hereto agree that the Depository shall
be discharged from all further duties under this Agreement other than safe-
keeping the Property; provided, however, that the filing of any such legal
proceeding or the initiation of any such arbitration proceedings shall not
deprive the Depository of its compensation hereunder earned prior to such
filing and discharge of the Depository of its duties hereunder. In the event
the Depository tenders any part or all of the Property into the registry or
custody of, or otherwise causes an action relating to this Agreement or the
Property or the Undersigned to be brought before, a court having jurisdiction
over the parties hereto and the Property, the Undersigned agree (i) to
petition such court collectively to dismiss such proceeding and (ii) to
initiate an arbitration proceeding pursuant to Section 11(c) hereof.
(b) While any suit or legal or arbitration proceeding arising
out of or relating to this Agreement or the Property or the Undersigned is
pending, whether the same be initiated by the Depository or by others, the
Depository shall have the right at its option to stop all further performance
of this Agreement (except for the Depository's obligation to invest the
Property as provided for in Section 21) and instructions received hereunder
until all differences shall have been resolved by agreement or until the
rights of all parties shall have been fully and finally adjudicated by the
court or an arbitration tribunal. The rights of the Depository under this
Section 11(b) are in addition to all other rights which it may have by law or
otherwise.
(c) (i) Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of Commercial Arbitration of the American
Arbitration Association then in effect (the "Rules"), and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Notwithstanding Section 20 of this Agreement,
arbitration pursuant to this Section 11 is to be governed by the Federal
Arbitration Act and the cases interpreting relevant provisions thereof.
(ii) Within ten (10) business days after receipt of notice
as provided in paragraph (c)(vii) below, the Shareholder Representative and
Jotan shall designate in writing one arbitrator to resolve the dispute;
provided, however, that if the parties cannot agree on an arbitrator within
such ten (10) business day period, the arbitrator shall be selected by the
American Arbitration Association. The arbitrator so designated shall not be
an employee, consultant, officer, director, stockholder or an Affiliate of, or
attorney for any party hereto.
(iii) Within fifteen (15) business days after the
designation of the arbitrator, the arbitrator, the Shareholder Representative
and Jotan shall hold an in-person conference in Atlanta, Georgia or such other
place as the arbitrator may designate, at which time the Shareholder
Representative and Jotan shall submit in writing to the arbitrator all
disputed issues and a proposed ruling on each such issue.
(iv) The arbitrator shall set a date for a hearing, which
shall be no later than sixty (60) days after the in-person conference held
pursuant to paragraph (c)(iii) above, to discuss each of the issues identified
by the Shareholder Representative and Jotan. Each such party shall have the
right to be represented by counsel. The arbitrator shall have sole discretion
with regard to the admissibility of evidence and rules of discovery, to the
<PAGE>
extent not inconsistent with the Commercial Arbitration Rules of the American
Arbitration Association.
(v) The arbitrator shall use his or her best efforts to
rule on each disputed issue within thirty (30) days after the completion of
the hearings described in paragraph (c)(iv) above.
(vi) The prevailing party in any arbitration shall be
entitled to an award of reasonable attorneys' fees and expenses incurred in
connection with the arbitration and in connection with all investigations and
defense related thereto. The non-prevailing party shall pay such fees,
together with the fees of the arbitrator and the costs and expenses of the
arbitration.
(vii) Either Jotan or the Shareholder Representative or the
Depository is authorized to initiate arbitration by providing written notice
of arbitration by registered or certified mail, return receipt requested, in
accordance with the Rules, to the Administrator of the American Arbitration
Association and to the party or parties against whom a claim is being made.
(viii) The place of the arbitration shall be Atlanta,
Georgia.
(ix) The award of the arbitrator shall be in writing,
signed by the arbitrator and shall address and decide each of the disputed
issues submitted. The award of the arbitrator shall be final and binding upon
all parties hereto. The parties waive any right to appeal the award, to the
extent a right to appeal may be lawfully waived. Each party retains the right
to seek judicial assistance (i) to compel arbitration; (ii) to obtain interim
measures of protection pending arbitration; and (iii) to enforce any decision
of the arbitrator, including the final award. Consistent with and in
furtherance of this Section 11 and the arbitration provisions contained
herein, each of the parties hereby irrevocably and unconditionally submits,
for itself and its property, to the jurisdiction of any Georgia court or the
United Stated District Court for the Northern District of Georgia, and any
appellate court from any thereof, in any Litigation arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
litigation may be heard and determined in such Georgia court or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees
that a final judgment in any such litigation shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each of the parties hereto agrees that it will not institute
or seek to institute any litigation arising out of or relating to this
Agreement (other than litigation seeking enforcement of a judgment) in any
forum other than a Georgia court or the United States District Court for the
Northern District of Georgia. Each of the parties hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection it may now or hereafter have to the laying of venue of
any litigation arising out of or relating to this Agreement in any Georgia
court or the United States District Court for the Northern District of
Georgia. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such litigation in any such court. Each party to this
Agreement irrevocably consents to service of process in the manner provided
for notices in Section 23. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner permitted by
law.
<PAGE>
12. Reliance on Counsel. The Depository may from time to time consult
with legal counsel of its own choosing in the event of any disagreement, or
controversy, or question or doubt as to the construction of any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the
opinion or instructions of such counsel. Any such reasonable fees and
expenses of such legal counsel shall be considered part of the fees and
expenses of the Depository described below.
13. Fees and Expenses.
(a) Each of Jotan, on the one-hand, and the Shareholders, on the
other, hereby agrees to pay to the Depository (i) for its ordinary services
hereunder one-half of the fees determined in accordance with, and payable as
specified in, the Schedule of Fees set forth in Exhibit A, attached hereto and
(ii) one-half of its reasonable expenses incurred in connection with this
Agreement, including, but not limited to, reasonable legal fees and expenses,
in the event the Depository deems it necessary to retain counsel. Such
expenses shall be paid to the Depository within 30 days following receipt by
Jotan and the Shareholder Representative of a written statement setting forth
such expenses.
(b) Each of Jotan, on the one hand, and the Shareholders, on the
other, agrees that in the event any controversy arises under or in connection
with this Agreement or the Property, or the Depository is made a party to or
intervenes in any litigation or arbitration proceeding pertaining to this
Agreement or the Property, to pay to the Depository one-half of reasonable
compensation for its extraordinary services and to reimburse the Depository
for one-half of all reasonable costs and expenses associated with such
controversy or, litigation or arbitration proceeding, including, but not
limited to, reasonable legal fees and expenses.
(c) As security for the Shareholders' one-half share of all
reasonable fees and expenses of the Depository hereunder and the Shareholders'
one-half share of any and all losses, claims, damages, liabilities and
expenses incurred in connection with the acceptance of appointment hereunder
or with the performance of its obligations under this Agreement and to secure
the obligation of the Undersigned to indemnify the Depository as set forth in
Section 22 hereof, the Depository is granted a security interest in and lien
upon the Property, which security interest and lien shall be prior to all
other security interests, liens or claims against the Property or any part
thereof. Each of the Undersigned warrants and agrees with the Depository
that, unless otherwise expressly set forth in this Agreement, there is no
security interest in the Property or any part thereof; no financing statement
under the Uniform Commercial Code of any jurisdiction is on file in any
jurisdiction claiming a security interest in or describing, whether
specifically or generally, the Property or any part thereof; and the
Depository shall have no responsibility at any time to ascertain whether or
not any security interest exists in the Property or any part thereof or to
file any financing statement under the Uniform Commercial Code of any
jurisdiction with respect to the Property or any part thereof.
(d) The Depository is authorized by the Undersigned to withhold
from the Property, prior to distribution thereof and prior to termination of
this Agreement, the one-half of all fees and expenses to which the Depository
is entitled hereunder for which the Shareholders are responsible. In
addition, in the event any such fees and expenses owing by the Shareholders
are not paid to the Depository on or prior to the date such amounts are due,
the Depository, upon five days' written notice to the Shareholder
<PAGE>
Representative, is hereby authorized and directed to pay such amounts owed by
the Shareholders to it from cash funds included in the Property or, if no cash
funds are then included in the Property, to sell assets constituting part of
the Property for the purpose of paying such amounts owed to it.
(e) In the event fees and expenses of the Depository are to be
paid pursuant to Section 21(a) hereof, it is understood and agreed by the
Undersigned that such fees and expenses are in addition to those described
above and that such fees and expenses shall be subject to periodic review and
modification by the Depository as determined by the Depository in its
reasonable discretion.
14. Effective Date. The Effective Date of this Agreement shall be
_________________, 19__.
15. Termination and Resignation. Unless sooner terminated as
hereinafter provided, this Agreement shall terminate without action of any
party upon the payment of the Property pursuant to Section 4 after the third
anniversary of the Closing Date. In the event that Unresolved Claims Amounts
exist on the third anniversary of the Closing Date, this Agreement shall not
terminate until the final litigation or arbitration decision resolving, or
final settlement of, all such Unresolved Claims Amounts. The Depository may
terminate this Agreement upon thirty (30) days written notice signed by the
Depository and delivered to each of Jotan and the Shareholder Representative.
The Undersigned may terminate this Agreement upon thirty (30) days written
notice to the Depository signed by each of the Undersigned. Upon termination
of this Agreement, the Depository shall deliver the Property in accordance
with the written instructions delivered pursuant to Section 4(d) hereof. All
reasonable fees and expenses owed to the Depository hereunder shall be paid in
full prior to such delivery of the Property, and the Depository is hereby
authorized and directed by the Undersigned to withhold release or distribution
of the Property until such time as the Depository has received payment in full
of the Shareholders' one-half share of such fees and expenses. Upon written
notice to the Shareholder Representative and Jotan, the Depository is
authorized and directed to deduct the Shareholders' one-half share of such
fees and expenses from the Property prior to release or distribution thereof.
16. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts shall
constitute and be one and the same instrument.
17. Assignment of Interests. Each of the Undersigned shall be
permitted to assign or transfer his or its interest or any part thereof
hereunder upon written notice to the Depository and the other parties,
provided that such assignee or transferee shall agree in writing to be bound
by, and take subject to, the provisions of the Agreement. In the event of an
assignment or other transfer of the interest, or any part thereof, of a
Shareholder, the assignee shall deliver to the other parties hereto a written
instrument setting forth such assignee's Applicable Percentage and the
assignor's remaining Applicable Percentage, if any. For purposes of this
Section 17, notice to the Shareholder Representative shall constitute notice
to the Shareholders.
18. Amendments. This Agreement cannot be amended or modified except
by another agreement in writing signed by all the parties hereto or by their
respective successors in interest.
<PAGE>
19. Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provision of this agreement.
20. Governing Law. This Agreement shall be deemed to have been made
and shall be construed and interpreted in accordance with the laws of the
State of Georgia.
21. Investment of Property; Withholding.
(a) The Depository shall invest cash balances each day in such
financial instruments or other investments of the type and nature set forth on
Exhibit B attached hereto. Any fees paid to the Depository or its affiliates
for investments made by the Depository with respect to the Property for which
the Depository or one of its affiliates acts as investment advisor, custodian,
transfer agent, registrar, sponsor, distributor, manager or otherwise shall be
in addition to the fees and expenses owed to the Depository under this
Agreement.
(b) The Depository shall not be responsible or liable for
determination or payment of any taxes assessed against the Property or the
income therefrom nor for the preparation or filing of any tax returns other
than informational returns or withholding required by statute or treaty. Each
of the Undersigned agrees to provide the Depository any information necessary
to perform any such required informational returns or withholding and the
Depository shall be entitled to rely on such information. The Depository will
establish the account holding the Property with sub-accounts under the TIN of
each of the Shareholders; if Depository is responsible for tax reporting as
set forth in this Section 21, it will be rendered under the aforementioned
TIN. A W-9 certifying to the party's withholding status in the form set forth
on Exhibit C attached hereto will be completed at closing. Earnings and
losses on the investments will be allocated among the Shareholders in
accordance with the Applicable Percentages set forth on the signature pages.
(c) The Depository may make any and all investments through its
own bond or investment department. The Depository shall not be held liable or
responsible for the quality or diversity of the assets constituting the
Property or for any loss or depreciation in the value of such assets or any
loss resulting from any investment made by the Depository in accordance with
the terms of this Agreement. If the Depository is required to sell or
otherwise redeem or liquidate any Property prior to its maturity, the
Undersigned agree that the Depository shall not be personally liable for any
loss to the Property or other costs incurred as a result of any such early
redemption or liquidation.
22. Indemnification and Hold Harmless. The Undersigned hereby agree
to indemnify and hold the Depository and its directors, employees, officers,
agents, successors and assigns harmless from and against any and all losses,
claims, damages, liabilities and expenses, including without limitation,
reasonable costs of investigation and counsel fees and expenses which may be
imposed on the Depository or incurred by it in connection with its acceptance
of this appointment as the Depository hereunder or the performance of its
duties hereunder. Such indemnity includes, without limitation, all losses,
damages, liabilities and expenses (including reasonable counsel fees and
expenses) incurred in connection with any litigation (whether at the trial or
appellate levels) or any arbitration proceeding arising from this Escrow
Agreement or involving the subject matter hereof. The indemnification
provisions contained in this Section 22 are in addition to any other rights
any of the indemnified parties may have by law or otherwise and shall survive
<PAGE>
the termination of this Agreement or the resignation or removal of the
Depository.
23. Notice. Any notice to be made in connection with this Agreement
shall be made in the following manner:
If to the Shareholders: ________________________
________________________
Facsimile: ________________
with copies to: ________________________
________________________
________________________
Attention: ________________
Facsimile: ________________
If to the Shareholder
Representative: John L. Sanders, Jr.
________________________
________________________
Attention: ________________
Facsimile: ________________
with copies to: Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002-2778
Attention: Roy E. Bertolatus, Esquire
Facsimile: (713) 225-7047
If to Jotan: Jotan, Inc.
118 West Adams Street
P.O. Box 836
Jacksonville, Florida 32201
Attention: Mr. Shea Ralph
Facsimile: (904) 353-0075
with copies to: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Stephen A. Opler Esquire
Facsimile: (404) 881-7777
If to Depository: NationsBank, N.A. (South)
400 N. Ashley Drive, 6th Floor
Tampa, Florida 33602
Attention: Ms. Shari B. Sawyers
Facsimile: (813) 224-3658
[SIGNATURES ON FOLLOWING PAGES]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow and Depository
Agreement to be executed under seal this ____ day of _____________, 199_.
JOTAN, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
ATTEST:
__________________________________
Title:____________________________
[CORPORATE SEAL]
THE SHAREHOLDERS:
APPLICABLE PERCENTAGE ____% LESTER G. GEGENHEIMER
By:_______________________________(SEAL)
Lester G. Gegenheimer
APPLICABLE PERCENTAGE ____% JOHN L. SANDERS, JR.
By:_______________________________(SEAL)
John L. Sanders, Jr.
APPLICABLE PERCENTAGE ____% WILLIAM P. BLINCOE
By:_______________________________(SEAL)
William P. Blincoe
<PAGE>
The Depository hereby acknowledges receipt of the Property described in
Schedule A hereof and hereby accepts the same as Depository hereunder, subject
to the terms and conditions set forth above, this _____ day of _____________,
199_.
DEPOSITORY
NATIONSBANK, N.A. (South)
By: ________________________________
Title: _______________________________
ATTEST:
___________________________________
Title:_____________________________
[CORPORATE SEAL]
<PAGE>
ATTACHMENTS:
Schedule A - Description of Property
Exhibit A - Fee Schedule
Exhibit B - Investment Direction
Exhibit C - Withholding Form
SCHEDULE A
DESCRIPTION OF PROPERTY
$3,000,000
EXHIBIT A
SCHEDULE OF FEES
JOTAN, INC.
SOUTHLAND HOLDING CORPORATION AND
NATIONSBANK, N.A. (SOUTH) AS DEPOSITORY
ACCEPTANCE FEE $1000.00
Includes review of document and account set up
ANNUAL ADMINISTRATION FEE $1500.00
Funds as referenced on Schedule A shall be invested in the NationsFund
Treasury Portfolio of which the Depository will be paid a sweep fee.
All fees are due annually in advance. Does not include extraordinary services
not contemplated at the time of closing. All out of pockets will be billed at
cost.
<PAGE>
EXHIBIT B
PERMITTED INVESTMENTS
Nations Fund Treasury Portfolio
EXHIBIT C
WITHHOLDING FORM
- - 63 -
AD963160022 A&B Draft 12-12-96
ALSTON & BIRD DRAFT
DATED DECEMBER 12, 1996
AD963160022
[Signature Page to the Escrow and Depository Agreement]
- - 77 -
AD963160022 A&B Draft 12-12-96
AD963160.022 A&B Draft 09/23/96
AD963160022 A&B Draft 12-12-96
[Signature Page to the Escrow and Depository Agreement]
- - 81 -
AD963160022
AD963160022 A&B Draft 12-12-96
AD963160022 A&B Draft 12-12-96
<PAGE>
EXHIBIT 6.12
FORM OF
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (this "Agreement") is
made and entered into as of the ____ day of _______, 1996, by and between
JOTAN, INC., a Florida corporation ("Purchaser") and ___________________, a
resident of ___________ ("Shareholder").
W I T N E S S E T H:
WHEREAS, Shareholder owns a portion of the issued and outstanding capital
stock of SOUTHLAND HOLDING COMPANY, a Texas corporation ("Southland"); and
WHEREAS, Southland has been engaged in the business of buying, marketing,
selling, warehousing, printing and transporting packaging materials and
supplies (the "Business Activities"); and
WHEREAS, Shareholder, Southland and Purchaser, among others, have entered
into that certain Share Purchase Agreement of even date herewith (the "Share
Purchase Agreement") whereby, in consideration of Shareholder's agreeing to
and abiding by the terms of this Agreement, Purchaser is purchasing, and
Shareholder is selling, all of the issued and outstanding shares of the
capital stock of Southland owned by, or for the benefit of, Shareholder; and
WHEREAS, Purchaser also will pay to Shareholder Two Million One Hundred
Ninety Thousand Eighty-Three Dollars ($2,190,083) in consideration of
Shareholder's agreeing to and abiding by the terms of this Agreement; and
WHEREAS, Shareholder has acquired intimate knowledge of the Business
Activities, which if exploited by Shareholder in contravention of this
Agreement, would seriously, adversely and irreparably affect the ability of
Purchaser to derive benefit or value from the stock purchased under the Share
Purchase Agreement or from the assets and business of Southland; and
WHEREAS, the Share Purchase Agreement requires Shareholder to enter into
this Agreement with Purchaser as a condition precedent to the consummation of
the transactions contemplated in the Share Purchase Agreement and Purchaser
would be unwilling to consummate the transactions contemplated in the Share
Purchase Agreement without this Agreement;
<PAGE>
NOW THEREFORE, in consideration of the foregoing, the premises, the
mutual covenants and restrictions contained herein and in the Share Purchase
Agreement and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Shareholder agree
as follows:
1. Capitalized Terms: Except as otherwise specified in this
Agreement, all capitalized terms used herein shall have the meanings ascribed
to such terms in the Share Purchase Agreement.
2. Consideration. In consideration of Shareholder's agreeing to and
abiding by the terms of this Agreement, Purchaser agrees to purchase all of
the issued and outstanding shares of the capital stock of Southland owned by,
or for the benefit of, Shareholder and Purchaser agrees to pay to Shareholder
an additional _____________________________ Dollars ($____________) for
entering into this Agreement.
3. Covenant Not To Compete. Shareholder agrees that for a period of
five (5) years after the date of execution of this Agreement and the sale of
his shares concurrent therewith pursuant to the Share Purchase Agreement, so
long as Purchaser or Southland continues to conduct Business Activities during
that period, he will not, by himself or in conjunction with any person, firm
or corporation, engage in the Business Activities within any part of the
Territory (as defined below), or render any managerial, marketing or other
services relating to Business Activities within any part of the Territory;
provided, however, that Business Activities do not include the ownership or
operation of Southland Paper Company, Inc. or its business and operations so
long as Southland Paper Company, Inc. does not engage in the wholesale
distribution of corrugated products in the Territory . As used herein, the
term "Territory" shall mean the geographic area in which Southland or its
subsidiaries conducts Business Activities at the time of the execution of this
Agreement which consists of the entire continental United States of America;
provided, however, that the term Territory shall not include those designated
portions of Tennessee, Alabama, Florida, Mississippi, Louisiana and Arkansas
more particularly set forth on the map attached hereto as Exhibit A.
Shareholder agrees that Purchaser does business and distributes products
throughout the Territory and that this definition of Territory is reasonable.
4. Covenant Not to Solicit Customers. Shareholder further agrees
that for a period of five (5) years after the date of execution of this
Agreement, so long as Purchaser or Southland continues to conduct Business
Activities during that period, he will not, by himself or in conjunction with
any person, firm or corporation, solicit, for the purpose of engaging in the
Business Activities, any customer of Southland or Purchaser that he had
solicited, serviced, sold products to or otherwise worked with on behalf of,
or in connection with his employment with, Southland or Purchaser.
<PAGE>
5. Confidentiality.
(a) Trade Secrets Defined. As used in this Agreement, the term
"Trade Secrets" shall mean, in addition to any information covered by any
definition of "trade secrets" or any equivalent term under state, local or
federal law, information, without regard to form, including, but not limited
to, technical or non-technical data, a formula, a pattern, a compilation, a
program, a device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans, or a list of actual or potential
customers or suppliers which is not commonly known by or available to the
public and which information: (A) derives economic value, actual or
potential, from not being known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its
disclosure or use; and (B) is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy. Such information also shall
include, but not be limited to, source codes to programs used and/or sold by
Company, object codes to programs used and/or sold by Company, Company
software, design documentation, product design and documentation, technical
information regarding Company products and product development, product
formulas, current and future development and expansion or contraction plans of
Company, information concerning the legal affairs of Company and certain
information concerning the financial affairs of Company. "Trade Secrets"
shall not include information that has become generally available to the
public by the act of one who has the right to disclose such information
without violating any right or privilege of Company.
(b) Nondisclosure of Trade Secrets. Shareholder shall not, at any
time after the execution of this Agreement, directly or indirectly transmit or
disclose any Trade Secret of Southland or Purchaser to any person, concern or
entity, and shall not make use of any such Trade Secret, directly or
indirectly, for himself or for others, without the prior written consent of
Southland and Purchaser.
(c) Confidential Information Defined. As used in this Agreement,
the term "Confidential Information" shall mean, in addition to information
covered by any definition of "trade secrets" or any equivalent term under
state, local or federal law, all information regarding Southland or Purchaser,
Southland's or Purchaser's activities, Southland's or Purchaser's business or
Southland's or Purchaser's clients that is not generally known to persons not
employed by Southland or Purchaser and that is not generally disclosed by
Southland or Purchaser to persons not employed by Southland or Purchaser, but
that does not rise to the level of a Trade Secret. "Confidential Information"
shall include, but is not limited to, sales and marketing techniques and
plans, distribution techniques, purchase and supply information, prices paid
by customers, customer billing information, financial plans and data
concerning Southland or Purchaser, and management planning information.
"Confidential Information" shall not include information that has become
generally available to the public by the act of one who has the right to
disclose such information without violating any right or privilege of
Southland or Purchaser.
<PAGE>
(d) Nondisclosure of Confidential Information. Shareholder shall
not, for a period of five (5) years after the execution of this Agreement,
directly or indirectly transmit or disclose any Confidential Information to
any person, concern or entity, or make use of any such Confidential
Information, directly or indirectly, for himself or for others, without the
prior written consent of Purchaser.
6. Non-Recruitment of Employees. Shareholder further agrees that for
a period of five (5) years after the date of execution of this Agreement,
Shareholder shall not induce or attempt to induce any employee of Southland,
Purchaser or any affiliate of Purchaser to terminate his or her association
with Southland, Purchaser or any affiliate of Purchaser or to come to work for
any person, concern or entity other than Southland or Purchaser.
7. New Manufacturing Facilities. In order to ensure that Purchaser
obtains the benefit of the purchase of the shares of capital stock of
Southland and the benefit of Southland's intellectual property, trade secrets
and confidential information, Shareholder shall not, and shall cause Southland
Container, Inc. and its Subsidiaries to not, directly or indirectly, for a
period ending on the fifth (5th) anniversary of the date of execution of this
Agreement, acquire or construct any manufacturing facilities in the Territory.
8. Reasonableness and Opportunity to Consult With Counsel. The
covenants contained in Sections 3, 4, 5, 6 and 7 inclusive are considered by
the parties hereto to be fair, reasonable and necessary for the protection of
Purchaser and the conduct of its Business Activities. Shareholder has been
represented by counsel throughout the negotiation of this Agreement and has
had the opportunity to consult with counsel about the meaning and effect of
every provision of this Agreement, including the restrictive covenants in
Sections 3, 4, 5, 6 and 7.
Employee's Initials: ____
9. Equitable Relief. The parties mutually agree that if a violation
of any covenant contained in Section 3, 4, 5, 6 or 7 occurs, such violation
will cause irreparable injury to Purchaser and the remedy at law for any such
violation will be inadequate. Shareholder agrees, therefore, that Purchaser
shall be entitled to appropriate equitable relief, including, but not limited
to, a temporary restraining order and a preliminary injunction, without the
necessity of posting any bond. Such equitable relief shall be in addition to
any damages available (including return of all consideration received by
Shareholder for his agreement to the terms of this Agreement). The provisions
of Sections 3, 4, 5, 6 or 7 of this Agreement shall survive the execution and
delivery of this Agreement pursuant to the terms of each such Section.
Nothing in this provision or this Agreement shall limit any rights or remedies
otherwise available to Southland or Purchaser under federal, state or local
law.
10. Severability. In the event that any term or provision in this
Agreement is held to be invalid, void, illegal or unenforceable in any
respect, the Agreement shall not fail, but shall be deemed amended to delete
the void or unenforceable term or provision, and the remainder of this
<PAGE>
Agreement shall be enforced in accordance with its terms and shall not in any
way be affected or impaired thereby. In the event that any term or provisions
of this Agreement is held to be overbroad or otherwise unreasonable, the same
shall not fail, but shall be deemed amended only to the extent necessary to
render it reasonable, and the parties agree to be bound by the same as thus
amended.
11. Entire Agreement. This Agreement (including the recitals set
forth at the beginning), together with the Share Purchase Agreement and the
Consulting Agreement (executed between Purchaser and Shareholder as of the
date of this Agreement), sets forth the entire Agreement and understanding of
the parties with respect to the subject matter hereof in respect of the
transactions contemplated by this Agreement, and supersedes all prior
agreements, arrangements and understandings (other than those contained in the
Share Purchase Agreement, the Consulting Agreement or any other agreement
executed in connection with the closing of the acquisition evidenced by the
Share Purchase Agreement)) relating to the specific subject matter of this
Agreement.
12. Governing Law. This Agreement has been negotiated, executed and
delivered in, and shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida.
13. Exceptions to Sections 4 and 5. Notwithstanding the other terms
of this Agreement, Shareholder shall not be in violation of Section 4 or
Section 5 hereof in using information of Southland or soliciting customers of
Southland as long as and to the extent that Shareholder is not in violation of
Section 3 of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement under
seal on the day and year first above written.
SHAREHOLDER:
____________________________________(SEAL)
[Name]:_____________________________
PURCHASER:
JOTAN, INC.
Attest:___________________ By:__________________________________
Title:____________________ Title:_______________________________
[CORPORATE SEAL]
<PAGE>
EXHIBIT 6.29
SOUTHLAND CONTAINER, INC. AGREEMENT TERMS
A. The Company and Southland Container, Inc. shall work jointly on
servicing selected accounts.
B. The Company will coordinate with Southland Container, Inc. on all
contract issues which will impact Southland Container, Inc. Southland
Container, Inc. will have the right to negotiate jointly with the Company
concerning any issues effecting both companies.
C. Southland Container, Inc. will have the right with 90 days notice to
withdraw from any joint customer contract.
D. If Southland Contain, Inc. chooses to withdraw from the contract, the
Company will have the right to maintain service to those Southland Container,
Inc. customers who were covered under the Ryder contract, and who are within
the Licensed Territory (as defined in Schedule 6.28).
E. Southland Container, Inc. will transition the administrative functions
to the Company by February 1, 1997 (the anniversary of the contract) and will
receive a fee of $10,000 to cover expenses relating to the transition.
F. Contracts currently in place between Southland Container, Inc. and
Third Parties supporting the Ryder contract will remain in effect.
<PAGE>
JOTAN ANNOUNCES AGREEMENT TO ACQUIRE
SOUTHLAND HOLDING COMPANY
December 20, 1996 - JACKSONVILLE, FLORIDA - Shea Ralph, President of Jotan,
Inc. (OTC BULLENTIN BOARD: JTAN) announced today, the signing of a definitive
agreement to acquire 100% of the stock of Southland Holding Company. Closing
of the transaction is expected in the first quarter of 1997. Terms of the
transaction were not immediately disclosed.
Southland is a leading distributor of packaging products to the moving and
storage industry and also serves significant packaging market segments in both
the air freight and perishable packaging areas. Southland has eleven
distribution centers located in California, Washington, Colorado,
Massachusetts, New York, New Jersey, Maryland, North Carolina, Georgia, and
Florida. Southland provides packaging materials to virtually all of the major
moving and storage companies in the United States.
The acquisition of Southland Holding Company will dramatically expand Jotan's
operations. With fifteen distribution centers nationwide, Jotan will be one of
the largest distributors of packaging products in the United States.
Soutbland's revenue for fiscal year, ended April 30, 1996, was $62.4 million.
Jotan plans to expand Southland's market penetration to include industrial
accounts which make up the majority of Jotan's business. Shea Ralph,
commenting on the acquisition said "The announcement of the signing of a
definitive agreement for Jotan to acquire Southland Holding Co. represents the
most significant step so far in Jotan's plan to become a nationwide provider
of Just On Time As Needed packaging services." Shea went on to say that "One
of the biggest assets that attracts us to Southland is their great team of
experienced employees. Having visited all of the Southland distribution
centers I can tell you that they have a wonderful team of dedicated people
committed to the same principles that have made our Company successful."
John Sanders, Vice President of Southland Holding Company indicated that
Southland's management team was looking forward to the opportunities resulting
from the combination of the two companies. He said "After working with the
Jotan management team, I believe that their focus on the industrial markets,
systems, and access to the capital markets will complement Southland's
strengths. The primary focus of both companies is to provide outstanding
service to our customers. I strongly believe that this value added, service
oriented approach is essential in today's competitive market."
Jotan, Inc. provides value added outsourcing and distribution services of
packaging materials to commercial customers with operations currently in
Florida, Georgia and South Carolina. For more information call David Freedman,
V.P. & Chief Financial Office, (904) 355-2592.
