STOCK PURCHASE AGREEMENT
BY AND BETWEEN
NATIONAL BANK OF COMMERCE,
A NATIONAL ASSOCIATION
AND
XXXXXX X. XXXXX
EFFECTIVE AS OF
OCTOBER 1, 2004
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated effective as of the 1st day of
October, 2004 (the "AGREEMENT"), is made and entered into by and between XXXXXX
X. XXXXX, a resident of Tennessee, or his assigns ("BUYER"), and NATIONAL BANK
OF COMMERCE, a national banking association ("SELLER").
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, all of the issued and outstanding shares of capital stock of Kenesaw
Leasing, Inc., a Tennessee Corporation ("KLI") and all of the issued and
outstanding shares of capital stock of J&S Leasing, Inc., a Tennessee
corporation ("JSL"; KLI and JSL are sometimes collectively referred to herein as
the "COMPANIES" and each is sometimes referred to as a "COMPANY"), upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, agreements, representations and warranties set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.01 PURCHASE AND SALE. Upon and subject to the terms and
conditions of this Agreement, at the Closing, Seller shall sell, convey, assign,
transfer and deliver to Buyer, and Buyer shall purchase, acquire and accept from
Seller, all of the issued and outstanding capital stock of KLI (the "KLI
SHARES") and all of the issued and outstanding capital stock of JSL (the "JSL
SHARES"), free and clear of all liens and encumbrances.
SECTION 1.02 CERTIFICATES FOR THE SHARES. On the Closing Date, Seller
shall deliver to Purchaser a certificate or certificates which represent the KLI
Shares and a certificate or certificates which represent the JSL Shares
(collectively the "CERTIFICATES"), properly issued, executed and countersigned,
as appropriate.
ARTICLE II
PURCHASE PRICE
SECTION 2.01 PURCHASE PRICE. The total purchase price for the KLI
shares and the JSL shares (the "PURCHASE PRICE") shall be thirteen million
dollars ($13,000,000). The Purchase Price is allocated as follows: (a) the
purchase price for the KLI Shares is seven million two hundred fifty thousand
dollars ($7,250,000); and (b) the purchase price for the JSL Shares is five
million seven hundred fifty thousand dollars ($5,750,000).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with Buyer, as of
the date hereof, as follows. For purposes of this Agreement, whenever a
statement herein is qualified by the
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phrase "TO SELLER'S KNOWLEDGE" or "TO THE KNOWLEDGE OF SELLER" it is intended to
mean that the President and Chief Executive Officer of Seller, Xxxxxxx X. Xxxx,
Xx., does not have current, actual knowledge of the inaccuracy of such
statement, without having undertaken any detailed independent investigation to
determine the accuracy thereof.
SECTION 3.01 ORGANIZATION. Each of the Companies is a corporation duly
organized, validly existing under the laws of Tennessee and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as are now being conducted. Each of the Companies has delivered to
Buyer accurate and complete copies of its Charter and Bylaws, as currently in
effect, and has made available to Buyer all of its minute books and stock
records.
SECTION 3.02 SUBSIDIARIES. Each of the Companies does not own or
control, directly or indirectly, any of the outstanding equity securities, or
have any other ownership interests in, any corporation, partnership,
association, subsidiary or other entity.
SECTION 3.03 CAPITALIZATION.
(a) The authorized capital stock of KLI consists of 1,000 shares of KLI
common stock, of which 100 shares are issued and outstanding. No such shares
are held in treasury. All of the outstanding shares of KLI common stock are
owned legally, of record and beneficially by Seller, free and clear of any lien,
claim, encumbrance or charge whatsoever. All issued and outstanding shares of
KLI common stock are validly issued, fully paid, nonassessable and free of
preemptive rights. There is not any outstanding or authorized subscription,
option, warrant, call, right, commitment or any other agreement of any nature
whatsoever obligating KLI to issue, transfer, sell, purchase, redeem or acquire
any shares of capital stock or other securities of KLI or any other securities
or contracts convertible into or evidencing the right to subscribe for or
otherwise acquire any shares of capital stock or other securities of KLI.
(b) The authorized capital stock of JSL consists of 2,000 shares of JSL
common stock, of which 100 shares are issued and outstanding. No such shares
are held in treasury. All of the outstanding shares of JSL common stock are
owned legally, of record and beneficially by Seller, free and clear of any lien,
claim, encumbrance or charge whatsoever. All issued and outstanding shares of
JSL common stock are validly issued, fully paid, nonassessable and free of
preemptive rights. There is not any outstanding or authorized subscription,
option, warrant, call, right, commitment or any other agreement of any nature
whatsoever obligating JSL to issue, transfer, sell, purchase, redeem or acquire
any shares of capital stock or other securities of JSL or any other securities
or contracts convertible into or evidencing the right to subscribe for or
otherwise acquire any shares of capital stock or other securities of JSL.
SECTION 3.04 AUTHORITY. Seller has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Seller, and no other corporate
proceedings on the part of Seller, KLI or JSL are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Seller and constitutes a valid
and binding agreement of Seller, enforceable against Seller in accordance with
its terms, subject to applicable bankruptcy,
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insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
SECTION 3.05 CONSENTS AND APPROVALS; NO VIOLATION. No filing with, and
no permit, authorization, consent or approval of, any public body or authority
is necessary for the consummation of the transactions contemplated by this
Agreement by Seller. No consent or approval of or notice to any person other
than a government entity, public body or authority is required to be obtained or
given by Seller in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance by Seller with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation, Bylaws or similar governing
instruments of Seller, or (ii) violate any order, writ, injunction, judgment,
decree, law, statute, rule or regulation applicable to Seller.
SECTION 3.06 FINANCIAL STATEMENTS BOOKS AND RECORDS. Seller has
previously furnished to Buyer the balance sheets of each of the Companies as of
December 31, 2002 and 2003, and the related statements of income, retained
earnings and cash flows for each of the twelve (12) month periods then ended,
and related statements of income, retained earnings and cash flows for the
periods then ended, together with the notes thereto (such financial statements
having been prepared under the direction of Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx
are hereafter collectively referred to as the "FINANCIAL STATEMENTS"). Seller
has also provided to Buyer true and correct copies of the interim balance sheets
of each of the Companies as of August 31, 2004, and related statements of
income, retained earnings and cash flows for the period then ended, together
with the notes thereto (such financial statements having been prepared under the
direction of Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx are hereinafter referred to as
the "INTERIM FINANCIAL STATEMENTS"). A copy of the August 31, 2004 balance
sheet is attached hereto as Exhibit 3.06. Since August 31, 2004, Seller has not
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made, or caused to be made, any changes, adjustments or charges to the Interim
Financial Statements, or any draws against the Companies' line of credit or
charges or debits to the Companies' accounts, other than in the ordinary course
of business and consistent with Seller's past practice with respect to the
Companies. To Seller's knowledge, the Interim Financial Statements are true,
complete and correct, and the balance sheet (including the related notes)
included in the Interim Financial Statements fairly presents the financial
position of each of the Companies as of August 31, 2004, and the other related
statements (including the related notes) included in the Interim Financial
Statements fairly present the results of operations and the changes in financial
position of each of the Companies as of such date, in each case in accordance
with reasonably prudent business practices, consistently applied.
SECTION 3.07 UNDISCLOSED LIABILITIES. To the knowledge of Seller, as
of August 31, 2004, each of the Companies had no indebtedness or liability
(whether accrued, absolute, asserted, unasserted, contingent or otherwise, and
whether due or to become due) which is not shown on or reserved for in the
Financial Statements or the notes thereto and is required to be so shown or
reserved for therein in accordance with reasonably prudent business practices,
consistently applied. Since August 31, 2004, to the knowledge of Seller the
Companies have not incurred any indebtedness or liability (whether accrued,
absolute, asserted, unasserted, contingent or otherwise, and whether due or to
become due), other than liabilities or
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indebtedness incurred in the ordinary course of business consistent with past
practice, and no such liability or indebtedness incurred in the ordinary course
of business consistent with past practice has had or could reasonably be
expected to have a material adverse effect on the business, operations,
financial or other condition or prospects of each of the Companies, or has had
or could reasonably be expected to have a material adverse effect on Seller's
ability to consummate the transactions contemplated hereby.
SECTION 3.08 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Section 3.08, the term "BENEFIT PLAN" means
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any plan, program, arrangement, practice or contract that provides benefits or
compensation to or on behalf of employees or former employees of either of the
Companies or of any "ERISA AFFILIATE" (as hereinafter defined), whether formal
or informal, whether or not written, including, but not limited to, the
following types of Benefit Plans:
(i) any bonus, incentive compensation, stock option, deferred
compensation, commission, severance, golden parachute or other executive
compensation plan, rabbi trust, program, contract, arrangement or practice;
(ii) any "employee benefit plan" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including any multi-employer plan (as defined in Section 3(37) and Section
4001(a)(3) of ERISA), defined benefit pension plan, profit sharing plan,
money purchase pension plan, savings or thrift plan, stock bonus plan,
employee stock ownership plan, or any plan, fund, program, arrangement or
practice providing for medical (including post-retirement medical),
hospitalization, accident, sickness, disability, or life insurance
benefits; and
(iii) any stock purchase, vacation, scholarship, day care, prepaid
legal services, severance pay or other fringe benefit plan, program,
arrangement, contract or practice.
(b) For purposes of this Section 3.08, the term "ERISA AFFILIATE" means
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each trade or business (whether or not incorporated) that, together with the
Companies, is treated as a single employer under Section 414(b), (c), (m), (o)
or (t) of the Internal Revenue Code of 1986, as amended (the "CODE").
(c) Except as set forth on Exhibit 3.08 hereto, each of the Companies
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does not maintain, has not at any time during Seller's ownership of the
Companies established or maintained, is not obligated, and has not at any time
during Seller's ownership of the Companies been obligated, to maintain or to
make contributions to or under or otherwise participate in, any Benefit Plan.
(d) Neither of the Companies nor any ERISA Affiliate thereof maintains,
or has at any time during Seller's ownership of the Companies established or
maintained, or is obligated, or has at any time been obligated, to maintain or
to make contributions to or under, or have at any time during Seller's ownership
of the Companies incurred any material withdrawal liability under, any
multi-employer plan (as defined in Section 3(37) and Section 4001(a)(3) of
ERISA)
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or any plan which is subject to the provisions of Title IV of ERISA. Each of
the Companies does not maintain, has not at any time during Seller's ownership
of the Companies established or maintained, is not obligated, and has not at any
time during Seller's ownership of the Companies been obligated, to maintain or
to make contributions to or under any organization described in Sections
501(c)(9) or 501(c)(20) of the Code.
(e) Each Benefit Plan maintained by either of the Companies or any
ERISA Affiliate thereof, and each Benefit Plan maintained by an ERISA Affiliate
of either of the Companies (i) which is subject to Title IV of ERISA or (ii) the
deductibility of the expenses under which is subject to Section 162(k) of the
Code, has at all times been maintained, by its terms and in its operation, in
accordance with all applicable laws and all contributions to or under each
Benefit Plan, including all matching contributions required under each Benefit
Plan, and all expenses for each such Benefit Plan, due as of the date hereof
have been paid in full and are fully deductible for income tax purposes for the
taxable year for which such contributions were made or such expenses were paid;
all reporting, disclosure, notice and nondiscrimination and other applicable
requirements under ERISA and the Code have been properly and timely satisfied in
full; and there are no issues outstanding or audits scheduled with the Internal
Revenue Service ("IRS") or the Department of Labor with respect to a Benefit
Plan.
(f) No "reportable event," non-exempt "prohibited transaction,"
"accumulated funding deficiency," or breach of fiduciary duty has occurred
within the most recent five (5) plan years with respect to any Benefit Plan.
(g) Each Benefit Plan that is intended to meet the requirements of a
"qualified plan" under Code Section 401(a) has received a determination from the
Internal Revenue Service that such Benefit Plan is so qualified, and nothing has
occurred since the date of such determination that could adversely affect the
qualified status of any such Benefit Plan. All such Benefit Plans have been
timely amended in accordance with any applicable legislation, including the tax
legislation known as "GUST" and "EGTRRA".
(h) No action, suit, proceeding, hearing or investigation, including
with respect to the administration or investment of the assets of any Benefit
Plan (other than routine claims for benefits), is pending or threatened, nor is
Seller aware of any basis for any such action, suit, proceeding, hearing or
investigation.
(i) All monies withheld from employees' paychecks with respect to any
Benefit Plan have been transferred to the Benefit Plan in a timely manner as
required by applicable law.
(j) No payment required to be made to any employee associated with
either of the Companies as a result of the transactions contemplated hereby
under any contract or otherwise will, if made, constitute an "excess parachute
payment" within the meaning of Section 280G of the Code.
(k) Seller and any ERISA Affiliate thereof have complied with the
continuation coverage requirements of Section 1001 of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601 through
608.
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(l) (i) Each of the Companies will not be subject to any liability, tax
or penalty whatsoever to any person whomsoever with respect to any Benefit Plan
maintained by Seller, either of the Companies, or any ERISA Affiliate thereof
for any period before the Closing; (ii) the termination of or withdrawal from
any Benefit Plan will not subject either of the Companies to any liability, tax
or penalty whatsoever; and (iii) the consummation of the transactions
contemplated by this Agreement will not create, accelerate or increase any
obligations under any Benefit Plan, including any obligation to make any payment
which would not be deductible under Section 280G of the Code.
SECTION 3.09 LABOR RELATIONS. To the knowledge of Seller, there are no
unlawful employment practice discrimination charges involving either of the
Companies pending before the Equal Employment Opportunity Commission ("EEOC"),
any EEOC recognized state "referral agency" or any other governmental agency.
To the knowledge of Seller, there are no unfair labor practice charges or
complaints against either of the Companies pending before the National Labor
Relations Board ("NLRB").
SECTION 3.10 LEGAL MATTERS. Except as set forth on Exhibit 3.10
hereto, to the knowledge of Seller, no investigation or review by any
governmental entity with respect to either of the Companies is pending or
threatened, nor has any governmental entity indicated to either of the Companies
or Seller an intention to conduct any such investigation or review, including
any investigation or review as to environmental matters. To the knowledge of
Seller, there is no action, suit or proceeding pending or threatened against or
affecting either of the Companies before any court or arbitral tribunal at law
or in equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality.
SECTION 3.11 TAXES. Each of the Companies has duly filed all federal,
state and local tax returns required to be filed by it and has duly paid or made
adequate provision for the payment of all taxes which are due and payable in
respect of all periods covered by such returns or pursuant to any assessment
with respect to taxes in such jurisdictions, whether or not in connection with
such returns. The liability for taxes reflected in the balance sheet of the
Interim Financial Statements (excluding any reserve for deferred taxes or
portion thereof which is attributable to differences between the timing of
income or deductions for tax and financial accounting purposes) is sufficient
for the payment of all unpaid taxes, whether or not disputed, that are accrued
or applicable for the period ended August 31, 2004, and for all years and
periods ended prior thereto. All deficiencies asserted as a result of any
examinations by the IRS or any other taxing authority have been paid, fully
settled or adequately provided for in the balance sheet of the Interim Financial
Statements. There are no pending claims asserted for taxes of either of the
Companies or outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of either of the Companies for any
period. Each of the Companies has made all estimated income tax deposits and
all other required tax payments or deposits and has complied for all prior
periods in all material respects with the tax withholding provisions of all
applicable federal, state, local and other laws. Seller has made available to
Buyer true, complete and correct copies of its federal and state income tax
returns for the last three (3) taxable years and such other tax returns
requested by Buyer.
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SECTION 3.12 REAL PROPERTY LEASES.
Seller has provided to Buyer true, correct and complete copies of all
leases pursuant to which each of the Companies leases real property at its
Landmark office location. To Seller's knowledge: all such leases are valid,
binding and enforceable in accordance with their terms and are in full force and
effect; there are no existing defaults with respect thereto by any party
thereto; and no event has occurred which (whether with or without notice, lapse
of time or the happening or occurrence of any other event) would constitute a
default thereunder by either of the Companies or by any other party thereto.
Seller has the full right to sublease the space(s) described in Section 5.06 and
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has obtained the consent of the Lessor(s) to such subleases and options to
sublease, if required under the underlying Leases.
SECTION 3.13 INSURANCE. Each of the Companies has been and is insured
by financially sound and reputable insurers with respect to its properties and
the conduct of its business in such amounts and against such risks as are
reasonable in relation to its business, and will maintain such insurance in
force until the Closing Date.
SECTION 3.14 COMPLIANCE WITH LAWS. To Seller's knowledge, each of the
Companies has all material authorizations, approvals, licenses and orders of and
from all governmental and regulatory offices and bodies necessary to carry on
its business as it is currently being conducted, to own or hold under lease the
properties and assets it owns or holds under lease and to perform all of its
obligations under the agreements to which it is a party. To Seller's knowledge,
each of the Companies has been and is in compliance with all applicable laws,
regulations and administrative orders of any country, state or municipality or
of any subdivision of any thereof to which its business and its employment of
labor or its use or occupancy of properties or any part thereof are subject, the
failure to obtain or the violation of which could have a material adverse effect
upon the assets, liabilities, results of operations or financial condition of
each of the Companies.
SECTION 3.15 ENVIRONMENTAL MATTERS.
To Seller's knowledge:
(a) Each of the Companies has not received any notification, whether
direct or indirect, pursuant to any Environmental Laws that any real property
owned, leased or controlled by it is or may be related to or subject to any
investigation or evaluation by any public body or authority or other person as
to whether (i) any Remedial Action (as hereinafter defined) is or may be needed
to respond to Contamination (as hereinafter defined); or (ii) any lien should be
levied on any such real property, or any proceeding commenced, related to or
arising from Contamination.
(b) Each of the Companies is not subject to any outstanding order from,
or contract with, any public body or authority or other person regarding
Contamination, nor has it received any notice, claim, demand or inquiry from any
adjacent property owner or occupant with respect to Contamination.
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(c) There are no actions, suits, claims, liens, penalties, fines,
investigations or proceedings under Environmental Laws with respect to any real
property leased or controlled by either of the Companies, or obligations to
remediate conditions under any Environmental Laws.
For purposes of this Agreement, the terms set forth below shall have the
following meanings:
(i) "CONTAMINATION" means the Release or threatened Release of
Hazardous Substances on, in, about or under any real property owned, leased
or controlled by either of the Companies, or any adjacent land as a result
of a Release of Hazardous Substances on any such real property owned,
leased or controlled by either of the Companies, but not including those
Releases which occur after the Closing.
(ii) "ENVIRONMENTAL LAWS" means federal, state or local laws,
rules and regulations, as well as orders, decrees, judgments or injunctions
issued, promulgated, approved or entered thereunder, relating to pollution,
protection of the environment or public health and safety, including the
Release or threatened Release of Hazardous Substances into the environment
or otherwise relating to the presence, manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of Hazardous Substances.
(iii) "HAZARDOUS SUBSTANCES" shall have the meaning set forth in
42 U.S.C. Sec. 9601(14) and petroleum or petroleum products and asbestos.
(iv) "RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any
property, including the movement of Hazardous Substances through or in the
air, soil, surface water, ground water or property.
(v) "REMEDIAL ACTION" means all actions reasonably necessary,
whether voluntary or involuntary, to (A) clean up, remove, treat or in any
other way adjust Hazardous Substances in the indoor or outdoor environment;
(B) prevent the Release or further movement of Hazardous Substances so that
they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; or (C) perform remedial
studies, investigations, restoration and post-remedial studies,
investigations and monitoring on, in, about or under any real property
owned, leased or controlled by either of the Companies.
SECTION 3.16 BROKERS AND FINDERS. Neither Seller nor any of its
officers, directors or employees, has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Seller in connection with this Agreement or any of the transactions contemplated
hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants, covenants and agrees to and with Seller, as of
the date hereof, as follows:
SECTION 4.01 AUTHORITY. Buyer is an adult resident of the State of
Tennessee. Buyer has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Buyer and
constitutes a valid and binding agreement of Buyer, enforceable against Buyer in
accordance with its terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting the enforceability of creditors' rights generally,
general equitable principles and the discretion of courts in granting equitable
remedies.
SECTION 4.02 CONSENTS AND APPROVALS; NO VIOLATION. No filing with, and
no permit, authorization, consent or approval of, any public body or authority,
is necessary for the consummation by Buyer of the transactions contemplated by
this Agreement. No consent or approval of or notice to any person other than a
government entity, public body or authority is required to be obtained or given
by Buyer in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby nor compliance by Buyer with any of the provisions hereof will (i)
result in a violation or breach of, or (with or without due notice or lapse of
time or both) constitute a default, give rise to any right of termination,
cancellation or acceleration or result in the loss of a material benefit, under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, or instrument or any material license, agreement or other obligation
to which Buyer is a party or by which it or any of its properties or assets may
be bound or (ii) violate any order, writ, injunction, judgment, decree, law,
statute, rule or regulation applicable to Buyer or any of its properties or
assets.
SECTION 4.03 BROKERS AND FINDERS. Buyer has not employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for Buyer, in connection with this Agreement or any of the
transactions contemplated hereby.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
SECTION 5.01 CONDUCT OF BUSINESS BY KLI AND JSL. From the date hereof
to the Closing, Seller, and Xxxxxx X. Xxxxx to the extent applicable, will cause
each of the Companies, except as required in connection with the transactions
contemplated by this Agreement or as consented to in writing by Buyer, to:
(a) Carry on its businesses in the ordinary course in substantially the
same manner as heretofore conducted and not engage in any new line of business
or enter into any agreement,
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transaction or activity or make any commitment except those in the ordinary
course of business and not otherwise prohibited under this Section 5.01;
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(b) Neither change nor amend its Charter or Bylaws;
(c) Not issue, sell or grant options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of any of its capital stock or rights or obligations
convertible into or exchangeable for any shares of its capital stock and not
alter its capital structure;
(d) Not declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock or other equity securities, and not
redeem, purchase or otherwise acquire any shares of its capital stock or any
options, warrants or other rights to purchase or subscribe for the foregoing;
(e) Not acquire or enter into an agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
(f) Preserve intact its corporate existence, goodwill and business
organization, and use its reasonable best efforts to keep its officers and
employees available to Buyer and preserve its relationships with customers,
suppliers and others having business relations with it;
(g) Not (i) create, incur or assume any long-term debt (including
obligations in respect of capital leases which individually involve annual
payments in excess of $5,000) or, except in the ordinary course of business
under existing lines of credit, create, incur or assume any short-term debt for
borrowed money, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, (iii) make any loans or advances to any other person, (iv)
make any capital contributions to, or investments in, any person, or (v) make
any capital expenditure involving in excess of $1,500 in the case of any single
expenditure or $5,000 in the case of all capital expenditures;
(h) Not enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and directors nor
grant any increase in the compensation of officers, directors or employees,
whether now or hereafter payable, including any such increase pursuant to any
option, bonus, stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract or commitment;
(i) Perform in all material respects all of its obligations under all
material contracts (except those being contested in good faith) and not enter
into, assume or amend any contract or commitment other than contracts to provide
services entered into in the ordinary course of business;
(j) Maintain in full force and effect and in the same amounts policies
of insurance comparable in amount and scope of coverage to that now maintained
by it;
(k) Continue to collect its accounts receivable in the ordinary course
of business and consistent with past practices; and
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(l) Prepare and file all federal, state and local tax returns and other
tax reports, filings and amendments thereto required to be filed by it, and
allow Buyer, at its request, to review all such returns, reports, filings and
amendments prior to the filing thereof, which review shall not interfere with
the timely filing of such returns.
In connection with the continued operation of the business of each of the
Companies between the date of this Agreement and the Closing, each of the
Companies shall confer in good faith on a regular and frequent basis with one or
more representatives of Buyer designated in writing to report operational
matters of materiality and the general status of ongoing operations. Seller
acknowledges that Buyer does not and will not waive any rights it may have under
this Agreement as a result of such consultations.
SECTION 5.02 INSPECTION AND ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Closing, Seller will
cause each of the Companies to provide Buyer and its accountants, counsel and
other authorized representatives full access, during reasonable business hours
and under reasonable circumstances, to any and all of its premises, properties,
contracts, commitments, books, records and other information (including tax
returns filed and those in preparation), and will cause its officers to furnish
to Buyer and its authorized representatives any and all financial, technical and
operating data and other information pertaining to the business of the
companies, as Buyer shall from time to time reasonably request.
(b) All non-public information obtained by Buyer or any of its
representatives pursuant to this Agreement or in connection with the matters
contemplated hereby concerning the business, operations or affairs of the other
will be kept confidential and will not be used for any purpose other than the
consummation of the transactions contemplated hereby, or be disclosed to any
other person or entity, except for such disclosure to its employees, agents,
representatives, lenders and investment partners who have a need to know the
same and who have been advised of the confidential nature of such information
and who agree to abide by the terms hereof and except for such disclosure as may
be required by applicable law, court order or governmental agency request. In
the event this Agreement is terminated in accordance with its terms, any
non-public information furnished by any party to any other party hereto will be
promptly returned.
SECTION 5.03 NO SOLICITATION, ACQUISITION PROPOSALS. From the date
hereof until the Closing or until this Agreement is terminated or abandoned as
provided in Article VIII, Seller shall not directly or indirectly (i) solicit or
------------
initiate (including by way of furnishing any information) discussions with or
(ii) enter into negotiations or agreements with, or furnish any information to,
any corporation, partnership, person or other entity or group (other than Buyer,
an affiliate of Buyer or its authorized representatives) concerning any proposal
for a merger, sale of substantial assets, sale of shares of stock or securities
or other takeover or business combination transaction (the "ACQUISITION
PROPOSAL") involving either of the Companies, and each of the Companies will
instruct its officers, directors, advisors and other financial and legal
representatives and consultants not to take any action contrary to the foregoing
provisions of this sentence. Seller will, or will cause each of the Companies
to, notify Buyer promptly in writing if it becomes aware that any inquiries or
proposals are received by, any information is requested
12
from, or any negotiations or discussions are sought to be initiated with either
of the Companies with respect to an Acquisition Proposal. Seller shall
immediately cease any existing activities, discussions or negotiations with any
third parties which may have been conducted on or prior to the date hereof with
respect to an Acquisition Proposal and shall direct and use reasonable efforts
to cause its officers, advisors and representatives not to engage in any such
activities, discussions or negotiations.
SECTION 5.04 REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION.
Subject to the other provisions of this Agreement, the parties hereto shall each
use their reasonable, good faith efforts to perform their obligations herein and
to take, or cause to be taken or do, or cause to be done, all things necessary,
proper or advisable under applicable law to obtain all regulatory approvals, if
any are required, and satisfy all conditions to the obligations of the parties
under this Agreement and to cause the transactions contemplated herein to be
effected on or prior to October 1, 2004 in accordance with the terms hereof and
shall cooperate fully with each other and their respective officers, directors,
employees, agents, counsel, accountants and other designees in connection with
any steps required to be taken as a part of their respective obligations under
this Agreement, including without limitation:
(a) Buyer and Seller shall promptly make their respective filings and
submissions and shall take, or cause to be taken, all actions and do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to obtain any required approval of any other federal, state or local
governmental agency or regulatory body with jurisdiction over the transactions
contemplated by this Agreement.
(b) In the event any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which questions
the validity or legality of the transactions contemplated hereby or seeks
damages in connection therewith, the parties agree to cooperate and use all
reasonable efforts to defend against such claim, action, suit, investigation or
other proceeding and, if an injunction or other order is issued in any such
action, suit or other proceeding, to use all reasonable efforts to have such
injunction or other order lifted, and to cooperate reasonably regarding any
other impediment to the consummation of the transactions contemplated by this
Agreement.
(c) Each party shall give prompt written notice to the other of (i) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty of Buyer or Seller, as the
case may be, contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Closing or that will or
may result in the failure to satisfy any of the conditions specified in Article
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VI and (ii) any failure of Buyer or Seller, as the case may be, to comply with
--
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder.
(d) Without the prior written consent of Buyer, Seller will not
terminate any employee if such termination would result in the payment of any
amounts pursuant to "change in control" provisions of any employment agreement
or arrangement.
SECTION 5.05 PUBLIC ANNOUNCEMENTS. The timing and content of all
announcements regarding any aspect of this Agreement to the financial community,
government agencies,
13
employees or the general public by Buyer or Seller shall be mutually agreed upon
in advance (unless either Buyer or Seller is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is required
to be made by law and then only after making a reasonable attempt to comply with
the provisions of this Section 5.05).
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SECTION 5.06 SUBLEASE BY KLI. Seller currently leases certain office
and retail space from Xxxxxx Commercial Properties IX, LLC, known as Xxxxxx
X-000, X-000, X-000X and P270, 0000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx.
Currently KLI and Seller share space in Suite S-600 and Seller occupies Suites
P-100 and P-100A. At the Closing, Buyer and Seller will cause KLI to enter into
a Sublease Agreement with Seller with respect to the space occupied by KLI in
Suites S-600, and including options for additional space in Suites S-600 and
P-100, in the form attached hereto as Exhibit 5.06.
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SECTION 5.07 CHANGES TO INTERIM FINANCIAL STATEMENTS; LINES OF CREDIT.
Seller covenants and agrees that it shall not make, or cause to be made, any
changes, adjustments or charges to the Interim Financial Statements after the
date thereof, other than in the ordinary course of business and consistent with
Seller's past practice with respect to the Companies (or as otherwise expressly
agreed in writing by Buyer). Seller specifically agrees that it shall not make
or cause to be made, any draws against the Companies' lines of credit or any
charges or debits to or withdrawals from the Companies' bank account(s) after
September 24, 2004. The outstanding balance of KLI's line of credit as of the
close of business on September 24, 2004 is thirty-six million three hundred
ninety-five thousand one hundred ten dollars and 94/100 ($36,395,110.94). The
outstanding balance of JSL's line of credit as of the close of business on
September 24, 2004 is five million three hundred fifty-nine thousand four
hundred seventy-eight dollars and 02/100 ($5,359,478.02).
SECTION 5.08 TAX MATTERS.
(a) RETURNS.
CONSOLIDATED RETURNS. Buyer and Seller agree that they shall cause
the Companies to join by consent or otherwise, for all taxable periods of the
Companies ending on or before the effective date of the Closing for which the
Companies are eligible to do so, in any consolidated, combined or unitary Income
Tax (as defined in Section 5.08(j)) returns in which Seller is included. Seller
---------------
or Seller's parent shall cause to be prepared and filed all such consolidated,
combined, unitary or other Income Tax returns. Buyer agrees to cooperate with
Seller and its affiliates in the preparation of the portions of such Income Tax
returns pertaining to the Companies, and hereby agrees to take no position
inconsistent with the Companies being members of such group. Seller shall cause
to be timely paid all Income Taxes to which such Income Tax returns relate for
all periods covered by such returns. Buyer shall cause the Companies to
reimburse Seller for all pre-closing tax liabilities advanced on behalf of the
Companies by Seller and/or any of Seller's affiliates.
(b) REFUNDS. Any refunds or credits of Income Taxes (including any
interest thereon) received by or credited to the Companies attributable to
periods ending on or prior to the effective date of the Closing ("SELLER'S
REFUNDS") shall be for the benefit of Seller, and
14
Buyer shall use its best efforts to obtain any Seller's Refunds and shall cause
the Companies to pay over to Seller any Seller's Refunds immediately upon
receipt thereof.
(c) BUYER'S INDEMNIFICATION. If the Closing shall occur, and subject
to Buyer fulfilling its obligations under Section 5.08(e), Seller shall
----------------
indemnify and hold harmless Buyer against any and all liability (including,
without limitation, interest, additions to tax and penalties, but net of any tax
benefits to Buyer or any of its affiliates, including the Companies) for Income
Taxes of any member (other than either Company) of any affiliated group of which
Seller is a member assessed against either Company for any taxable period ending
prior to or including the effective date of the Closing by reason of such
Company being severally liable for the entire tax of such affiliated group
pursuant to Treasury Regulation Section 1.1502-6 or any analogous state or local
tax provision.
(d) SELLER'S INDEMNIFICATION. It is understood by the parties hereto
that Seller shall not indemnify Buyer or any of its affiliates and instead that
Buyer shall, if the Closing shall occur, pay, or cause to be paid, and Buyer and
the Companies shall jointly and severally indemnify Seller and its affiliates
against and hold them harmless from (i) Income Taxes due with respect to or
assessed against either Company for any taxable period of such Company ending on
or prior to the effective date of the Closing, and (ii) any liability for taxes,
additions to tax, interest, penalties or other tax detriment (which, shall
include, but not be limited to, the utilization of any net operating loss or
capital loss or the utilization of any tax credits or other tax attributes by
the Companies) arising from any action or failure to act by Buyer or any
affiliate of Buyer (including the Companies) from and after the Closing,
including, without limitation, any sale or other disposition of assets by the
Companies from and after the Closing or the operation of ownership of the
business of the Companies from and after the Closing ("BUYER'S TAXES") other
than the deemed disposition in connection with the Section 338(h)(10) Election
provided in Section 5.08(g).
----------------
(e) AUDITS. Buyer shall promptly notify Seller in writing upon receipt
by Buyer or any affiliate of Buyer (including the Companies after the Closing
Date) of notice of any pending or threatened federal, state, local or foreign
tax audits or assessments which may affect the Income Tax liabilities of either
Company and for which Seller would be liable under Section 5.08(c). Seller shall
---------------
have the sole right to represent the interests of such Company in any federal,
state, local or foreign Income Tax matter, including any audit or administrative
or judicial proceeding or the filing of any amended return, which involves a
refund to which Seller would be entitled under Section 5.08(b) or an Income Tax
---------------
liability or potential Income Tax liability for which Seller would be liable
under Section 5.08(c) (a "TAX MATTER"), and to employ counsel of its choice at
----------------
its expense. Buyer agrees that it will cooperate fully with Seller and its
counsel in the defense or compromise of any Tax Matter. In no case shall Buyer
(including the Companies after the Closing Date) settle or otherwise compromise
any Tax Matter without the prior written consent of Seller.
(f) COOPERATION. After the Closing Date, Buyer and Seller shall make
available to the other, as reasonably requested, all information, records or
documents relating to tax liabilities or potential tax liabilities of the
Companies for all periods prior to or including the Closing Date and shall
preserve all such information, records and documents until the expiration of any
applicable statute of limitations or extensions thereof. Buyer shall prepare and
provide; to Seller
15
such federal, state, local and foreign tax information packages as Seller shall
request for the use of Seller in preparing any tax return that relates to either
Company. Such tax information packages shall be completed by Buyer and provided
to Seller within 30 days after request therefor. Notwithstanding any other
provisions hereof, each party shall bear its own expenses in complying with the
foregoing provisions.
(g) SECTION 338 ELECTIONS AND FORMS.
(i) Buyer and Seller hereby covenant and agree with each other
that they will join in making an election under Section 338(h)(10) of the
Code, and the regulations promulgated thereunder, and any applicable
analogous provision of state or local law, with respect to the sale and
acquisition of the Stock hereunder (the "Section 338(h)(10) Elections").
(ii) In the case of any Section 338(h)(10) Elections that are made
in accordance with Section 5.08(g)(i) hereof,
-------------------
(A) Buyer shall be responsible for the preparation and timely
filing of all returns (other than Income Tax returns the
responsibility for the preparation and filing of which is governed by
Section 5.08(a)), documents, statements and other forms required to be
---------------
filed with any federal, state or local taxing authority in connection
with the Section 338(h)(10) Elections (the "SECTION 338 FORMS");
provided, however, that Seller shall be solely responsible for
calculating the gain or loss resulting from making the Section
338(h)(10) Elections;
(B) Seller shall cooperate with Buyer to enable Buyer to
prepare and file all Section 338 Forms and shall execute and deliver
to Buyer such documents or forms as are required by the Code or the
regulations promulgated thereunder (and any applicable analogous
provision of state or local law) to properly complete the Section 338
Forms and to complete the Section 338 Elections, provided that such
material is completed and delivered by Buyer to Seller for execution
at least sixty (60) days prior to the date Buyer wishes to file such
material;
(C) The Purchase Price, liabilities of the Companies, and
other relevant items, shall be allocated in accordance with the rules
of Section 338 of the Code and the regulations promulgated thereunder.
Within 90 days following the Closing Date, Buyer shall prepare a draft
of a determination of the total consideration deemed paid for the
assets of the Companies and a draft allocation of that consideration
among the assets of the Companies that are deemed to have been
acquired pursuant to Section 338(h)(10) of the Code or the
corresponding provision of state, local or foreign law (the "DRAFT
ALLOCATION"). Seller shall have 30 days after receipt of the Draft
Allocation to object in writing to the Draft Allocation. If Seller
does not object to the Draft Allocation within such 30 day period, the
Draft Allocation shall become final (the "FINAL
16
ALLOCATION"). If Seller objects to the Draft Allocation in writing
within such 30 day period, Buyer and Seller shall attempt in good
faith to resolve the disputed items in the Draft Allocation, and any
such resolution shall constitute the Final Allocation. If, within 30
days after the Seller has objected in writing to the Draft Allocation,
the parties have not resolved all disputed items with respect to the
Draft Allocation, the remaining disputed items shall be resolved by an
independent public accounting firm in the United States that is
mutually acceptable to Buyer and Seller, and the resolution of such
independent public accounting firm (together with any agreed items)
shall constitute the Final Allocation. Buyer and Seller (i) shall be
bound by the Final Allocation for purposes of determining any and all
consequences with respect to taxes of the transactions contemplated
herein, (ii) shall prepare and file all tax returns to be filed with
any taxing authority in a manner consistent with the Final Allocation,
and (iii) shall take no position inconsistent with the Final
Allocation in any tax return, in any discussion with or proceeding
before any taxing authority, or otherwise, without the mutual consent
of Buyer and Seller, which consent shall not be unreasonably withheld.
In all events the Final Allocation shall be consistent with the
allocation of the Purchase Price set forth in Section 2.01 hereof;
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(D)
(i) Buyer hereby indemnifies and holds Seller, the
Companies and any affiliated person or entity affected thereby
harmless from and against any and all claims, demands, liabilities,
obligations, taxes, actions, suits, proceedings, losses, damages,
costs, expenses, assessments, judgments, recoveries and deficiencies,
including interest, penalies and reasonable attorneys' fees, of every
kind and description, contingent or otherwise, arising out of or
resulting from any adverse tax consequences ("TAX DAMAGES") that may
result from any incremental tax cost incurred by Seller as a result of
Buyer and Seller making 338(h)(10) Elections, provided, however, that
except as set forth in paragraph (D)(ii) below, Buyer's obligation to
indemnify Seller under this Section 5.08(g) shall in no event exceed
--------------
the amount of Three Hundred Thousand Dollars ($300,000) (the "Tax
Damages Indemnification Cap").
(ii) The parties acknowledge and agree that, in agreeing
to the foregoing Tax Damages Indemnification Cap, they have relied
upon the accuracy of the following assumptions with respect to certain
events or circumstances which occurred or were present prior to
Seller's acquisition of the Companies and which may have affected
Seller's tax basis in said Companies:
(a) Neither Company was a C corporation before the
effective date of its S corporation election.
17
(b) No shareholder of either Company acquired any
shares of stock of either Company from another shareholder (however,
certain shares of stock owned by the shareholders of KLI at the time
of NBC's acquisition of that Company had been previously acquired from
other shareholders and/or former shareholders of that Company, but the
specific details of these acquisitions are not readily ascertainable).
(c) Neither Company acquired any assets in a
transaction in which gain or loss was not recognized in whole or in
part.
(d) The basis of no shares of stock of the
Companies reflected the application of section 1014, regarding a
date-of-death fair market value basis for stock included in the gross
estate of a decedent, and further, to the best of Buyer's knowledge,
there have been no stock transfers as a result of death.
(e) Neither Company made any distributions that
resulted in the recognition of gain under Section 301(c)(3), Section
1368(b)(2), or so much of Section 1368(c) as incorporates the
provisions of Section 1368(b)(2).
(f) Neither Company made any redemption
distributions subject to the provisions of either Section 302(a) or
303 (however, JSL did redeem certain shares of stock in approximately
December 1996, which redemption was treated for federal tax purposes
as an S-corporation distribution and was subject to Section 302(a);
the specific details of said redemption are not readily
ascertainable).
(g) Neither Company made any charitable
contributions of appreciated property while it was an S corporation.
(h) The Shareholders of neither Company had any
suspended losses under Section 1366(d) which remained suspended at the
time the Companies were acquired by Seller (however, the shareholders
of KLI had certain suspended losses under Section 1366(d), in amounts
which are not readily ascertainable, that remained suspended at the
time of KLI's acquisition by Seller).
(i) No shareholder of either Company received their
stock as the result of a restricted stock grant or upon exercise of a
stock option granted in connection with the performance of services.
Notwithstanding the provisions of paragraph (D)(i) above, and in view of the
parties' reliance on the above statements, it is agreed that in the event that
(i) Seller suffers any Tax Damages as a result of the parties' making 338(h)(10)
Elections, (ii) the amount of such Tax Damages exceeds the amount of the Tax
Damages Indemnification Cap, and (iii) any portion of the Tax Damages are
directly attributable to (aa) the inaccuracy of any statement set forth in items
(a) through (i) of paragraph (D)(ii) above, or (bb) the information not readily
ascertainable in items (b), (f) or (h) of paragraph (D)(ii) above ((aa) and (bb)
being collectively referred to as the "Excess Tax
18
Damages"), then Buyer shall, in addition to indemnifying Seller for amounts up
to and including the Tax Damages Indemnification Cap in accordance with this
paragraph (D), indemnify Seller to the full extent of said Excess Tax Damages.
(iii) Notwithstanding the foregoing, it is further
agreed by the parties that Seller shall reimburse Buyer for any
indemnification amounts paid or caused to be paid by Buyer pursuant to
this paragraph (D), regardless of whether such indemnification amounts
relate to Excess Tax Damages incurred as a result of any inaccuracies
or inability to determine specific amounts in the statements set forth
in paragraph (D)(ii) above or from other adverse tax consequences
suffered by Seller in connection with the 338(h)(10) Election, if and
to the extent that Seller receives any post-Closing refund related to
taxes paid by or on behalf of either or both of the Companies; and
(E) Provided that Buyer shall have fulfilled all of its obligations
under this Section 5.08(g) and as required by the Code or any regulations
----------------
promulgated thereunder and any analogous provisions of state or local law with
respect to the Section 338(h)(10) Election, Seller shall indemnify Buyer, the
Companies and any affiliated person or entity affected thereby harmless from and
against any and all Tax Damages that may result if Seller does not make a
Section 338(h)(10) Election as provided above.
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(h) MISCELLANEOUS.
(i) For purposes of this Agreement, "Income Tax" means any
federal, state, local or foreign tax (including interest, penalties or
additions to such tax) based upon, measured by, or calculated with respect
to, net income or capital.
(ii) Buyer shall bear the cost of any documentary stamp, sales,
excise, transfer, stock transfer, real property transfer taxes or real
property gains taxes (provided that such real property gains taxes are not
an Income Tax) and similar taxes payable in respect of the sale of the
Stock hereunder.
(iii) Except as otherwise required by law, including any contrary
determination (within the meaning of Section 1313 of the Code), Buyer and
Seller agree to treat all payments made under this Section 5.08 or Article
------------ -------
V as adjustments to the Purchase Price for tax purposes.
-
(iv) After the Closing Date, Buyer and Seller and their
affiliates, including the Companies, shall cooperate with each other in
Seller's efforts to determine its income tax basis in the Companies. In
furtherance of such cooperation, Buyer shall cause and/or authorize its
affiliates, accountants, attorneys and/or the Internal Revenue Service to
disclose to Seller and its affiliates all information in their possession
which is necessary for the determination of Seller's income tax basis in
the Companies.
SECTION 5.09 INVESTMENT REPRESENTATIONS.
(a) Buyer understands and acknowledges that (i) the KLI Shares and the
JSL Shares have not been registered under the Securities Act or under any state
securities laws, in reliance upon exemptions provided thereunder and (ii) the
representations and warranties contained
19
herein are being relied upon by Seller as a basis for the exemption of the offer
and sale of the KLI Shares and the JSL Shares pursuant to this Agreement from
the registration requirements of the Securities Act and any applicable state
securities laws.
(b) Buyer is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act.
(c) Buyer has consulted with his own advisors with respect to the
federal income tax consequences and other tax consequences of the transactions
described herein, and is not relying on Seller or Seller's counsel for any tax
advice in connection with the transactions consummated hereby.
SECTION 5.10 EMPLOYEES; BENEFIT PLANS. The parties agree that all
employees of the Companies listed on Exhibit 5.10 attached hereto will be
-------------
retained by the Companies following the Closing (to the extent such employees
accept such continued employment, the "Retained Employees"). Each of the
Retained Employees shall have executed and delivered to Seller a waiver (the
"Severance Waiver") of any amount of severance payment, including without
limitation, any amounts payable pursuant to "Change in Control" provisions of
any employment agreement or arrangement applicable to such Retained Employee.
The parties acknowledge and agree that the Companies' implementation of Seller's
and/or Seller's parent company's Benefit Plan(s) shall be terminated immediately
prior to the Closing; that Seller shall be responsible for any and all
liabilities under Seller's and/or Seller's parent company's Benefit Plans
attributable to the employees of the Companies, including, but not limited to,
the Retained Employees; and that Buyer, KLI, JSL or their successors or
assignees will thereafter be responsible for liabilities under any Benefit
Plan(s) sponsored after the Closing Date by Buyer, KLI, JSL or their successors
or assignees. It is further agreed that, upon the Closing, each Retained
Employee shall be given the opportunity to participate in any Benefit Plan(s)
sponsored by Buyer, KLI, JSL, or their successors or assignees, and to, at his
or her option, receive a distribution (less any applicable early withdrawal
penalties) of any funds accrued pursuant to any Benefit Plan of Seller and/or
Seller's parent, or rollover any such funds into individual retirement accounts
and/or Benefit Plan accounts sponsored by Buyer, KLI, JSL and/or any of their
successors or assignees.
ARTICLE VI
CONDITIONS TO OBLIGATIONS
SECTION 6.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the purchase and sale of the Shares shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
(a) INJUNCTION. At the Closing there shall be no effective injunction,
writ or preliminary restraining order or any order of any nature issued by a
court or governmental agency of competent jurisdiction to the effect that the
transactions contemplated by this Agreement may not be consummated as herein
provided, no proceeding or lawsuit shall have been commenced by any governmental
or regulatory agency for the purpose of obtaining any such injunction, writ or
preliminary restraining order and no written notice shall have been
20
received from any such agency indicating an intent to restrain, prevent,
materially delay or restructure the transactions contemplated by this Agreement.
(b) CONSENTS. All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
documents required to be filed after the Closing.
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to effect the purchase of the Shares and the other transactions completed
by this Agreement shall be subject to the fulfillment at or prior to the Closing
of each of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller set forth in Article III of this Agreement shall be true and correct
-----------
as of the date of this Agreement and as of the Closing as though made on and as
of the Closing.
(b) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller shall have performed
in all material respects all covenants and agreements required to be performed
by it under this Agreement.
(c) OPINION OF SELLER'S COUNSEL. Buyer shall have received an opinion
of counsel for Seller, dated the Closing Date, substantially in the form
attached hereto as Exhibit 6.02(c).
----------------
(d) AUTHORIZATION. All corporate action necessary by Seller to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken.
(e) CERTIFICATES. Seller shall furnish to Buyer a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
--------
6.02(a), (b) and (d).
------- --- ---
(f) MATERIAL CONTRACTS AND CLIENT CONTRACTS. Buyer shall have received
consents to assignment of all material contracts and customer contracts or
written waivers of the provisions of any material contracts and customer
contracts requiring the consents of third parties.
(g) BUYER FINANCING. Buyer shall have obtained financing, or a joint
venture partner, for the transactions contemplated by this Agreement on terms
and conditions satisfactory to Buyer, in Buyer's sole discretion.
(h) OTHER AGREEMENTS. Buyer shall have received the Consent of Xxxxxx
Commercial Properties IX, LLC to Seller's entry into the Sublease Agreement
referred to in Section 5.06, and a Non-Disturbance, Attornment and Estoppel
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Agreement on terms reasonably satisfactory to Buyer and executed by Xxxxxx
Commercial Properties IX, LLC and Seller.
SECTION 6.03 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller to effect the purchase and sale of the Shares and the other transactions
contemplated by this Agreement
21
shall be subject to the fulfillment at or prior to the Closing of each of the
following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer set forth in Article IV of this Agreement shall be true and correct as
----------
of the date of this Agreement and as of the Closing as though made on and as of
the Closing.
(b) PERFORMANCE OF OBLIGATIONS BY BUYER. Buyer shall have performed in
all material respects all covenants and agreements required to be performed by
him under this Agreement.
(c) OPINION OF BUYER'S COUNSEL. Seller shall have received an opinion
of counsel for Buyer, dated the Closing Date, substantially in the form attached
hereto as Exhibit 6.03(c).
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(d) CERTIFICATES. Buyer shall furnish Seller with a certificate as to
Buyer's compliance with the conditions set forth in Sections 6.03(a) and (b).
---------------- ---
(e) SEVERANCE WAIVERS. Seller shall have received executed Severance
Waivers from each of the employees listed on Exhibit 5.10.
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(f) ASSIGNMENT. Buyer shall have assigned this Agreement, upon terms
reasonable satisfactory to Seller, to an entity qualified to make Buyer's
Section 338(h)(10) election as required by Section 5.08(g)(i) hereof.
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ARTICLE VII
CLOSING
SECTION 7.01 CLOSING DATE. The consummation of the transactions
contemplated by this Agreement are herein referred to as the "CLOSING." The
"CLOSING DATE" shall be the date on which the Closing occurs, and shall be
October20, 2004 or in any event within three (3) business days of the
satisfaction or waiver of the other conditions set forth in Article VI.
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Notwithstanding said Closing Date, however, the parties acknowledge and agree
that the transactions contemplated by this Agreement shall be treated for all
purposes as having been consummated effective as of October 1, 2004. The
Closing shall take place at the offices of Buyer, 0000 Xxxxxxxxxx Xxxxx, Xxxxx
X-000, Xxxxxxxxx, Xxxxxxxxx at 10:00 a.m., local time, or at such other time and
place as may be agreed upon by the parties.
SECTION 7.02 CLOSING OBLIGATIONS. At the Closing:
(a) SELLER. Seller shall execute, as appropriate, and deliver (or
cause to be executed and delivered) to Buyer:
(i) Certificates representing all of the KLI Shares, duly endorsed
in blank, or accompanied by duly executed stock powers, in proper form for
transfer;
(ii) Certificates representing all of the JSL Shares, duly
endorsed in blank, or accompanied by duly executed stock powers, in proper
form for transfer;
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(iii) the opinion of counsel for Seller referred to in Section
-------
6.02(c);
-------
(iv) a copy, certified by an officer of Seller, of minutes
evidencing the corporate action referred to in Section 6.02(d);
----------------
(v) Certificates of Existence from the Secretary of State of
Tennessee for each of KLI and JSL dated no more than fifteen (15) days
before the Closing Date;
(vi) the certificate of officers of Seller referred to in Section
-------
6.02(e);
-------
(vii) any consents or waivers described in Section 6.02(f), to the
---------------
extent not previously received by Buyer;
(viii) the Sublease Agreement referred to in Section 5.06;
-------------
(ix) the Consent of Xxxxxx Commercial Properties IX, LLC to
Seller's entry into the Sublease Agreement referred to in Section 5.06;
------------
(x) a Non-Disturbance, Attornment and Estoppel Agreement on terms
reasonably satisfactory to Buyer and executed by Xxxxxx Commercial
Properties IX, LLC and Seller;
(xi) Resignations of those officers and directors of each of the
Companies as requested by Buyer; and
(xii) such other documents necessary to effectuate the
transactions contemplated by this Agreement.
(b) BUYER. Buyer shall execute, as appropriate, and deliver (or cause
to be executed and delivered) to Seller:
(i) the Purchase Price, by wire transfer of immediately available
funds to the account specified by Seller;
(ii) the opinion of counsel for Buyer referred to in Section
-------
6.03(c);
-------
(iii) the Sublease Agreement referred to in Section 5.08, executed
------------
by KLI;
(iv) the Severance Waivers referred to in Section 5.10, executed
------------
by each of the employees; and
(v) such other documents necessary to effectuate the transactions
contemplated by this Agreement.
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ARTICLE VIII
TERMINATION
SECTION 8.01 TERMINATION AND ABANDONMENT. This Agreement may be
terminated at any time prior to the Closing Date:
(a) by mutual agreement of Buyer and Seller;
(b) by Seller, if the conditions set forth in Sections 6.01 and 6.03
------------- ----
hereof shall not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Buyer on or before October 20, 2004, except to the
extent that such noncompliance or nonperformance has not resulted in, or would
not reasonably be expected to result in, a material adverse effect upon Buyer's
ability to consummate the transactions contemplated by this Agreement;
(c) by Buyer, if the conditions set forth in Sections 6.01 and 6.02
------------- ----
hereof shall not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Seller on or before October 20, 2004, except to the
extent that such noncompliance or nonperformance has not resulted in, or would
not reasonably be expected to result in, a material adverse effect upon one or
both of the Companies or their respective businesses, or upon Seller's ability
to consummate the transactions contemplated by this Agreement.
SECTION 8.02 SPECIFIC PERFORMANCE AND OTHER REMEDIES. The parties
hereto each acknowledge that the rights of each party to consummate the
transactions contemplated hereby are special, unique and of extraordinary
character, and that, in the event that any party violates or fails or refuses to
perform any covenant or agreement made by it herein, the non-breaching party may
be without an adequate remedy at law. The parties each agree, therefore, that
in the event that either party violates or fails or refuses to perform any
covenant or agreement made by such party herein, the non-breaching party or
parties may, subject to the terms of this Agreement and in addition to any
remedies at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief. Any award of damages
to Buyer or Seller shall be limited to actual damages and shall not include
consequential or incidental damages, if any.
SECTION 8.03 EFFECT OF TERMINATION. In the event of termination of
this Agreement pursuant to this Article VIII, this Agreement shall forthwith
------------
become void and there shall be no liability on the part of any party or its
respective officers, directors or stockholders, except for obligations under
Section 5.02(b) and this Section 8.03, all of which shall survive the
---------------- -------------
termination. Notwithstanding the foregoing, nothing contained herein shall
relieve any party from liability for any breach of any covenant or agreement in
this Agreement.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
SECTION 9.01 SURVIVAL. The parties' respective representations and
warranties contained in this Agreement will survive the Closing and shall remain
in full force and effect for a period of two (2) years from and after the
Closing Date; provided, however, that the representations and
24
warranties set forth in Sections 3.11 shall survive until expiration of any
--------------
applicable statute of limitations which will preclude assertion of claims
against Buyer or Seller. This Section 9.01 shall not limit or restrict Buyer's
------------
or Seller's remedy against the other or any other person for fraud or willful
misconduct which remedies shall remain in effect from and after the Closing
Date. Any claim made or notice of a claim given as to any breach or alleged
breach of a representation or warranty shall extend the applicable survival
period set forth above until such claim has been resolved and satisfied by
agreement of the parties or by the entry of a final, non-appealable arbitration
award or judgment of a court having jurisdiction over such claim. The
respective representations and warranties of Buyer and Seller contained herein
or in any exhibit, certificate, or other document delivered by any party prior
to Closing shall not be deemed waived or otherwise affected by any investigation
made by a party hereto, except as otherwise provided in Section 10.12.
-------------
SECTION 9.02 INDEMNIFICATION.
(a) INDEMNIFICATION BY SELLER. Subject to the terms of this Article
-------
IX, Seller covenants and agrees to indemnify, defend, save and hold harmless
--
Buyer, KLI and JSL, and their respective officers, directors, employees, agents
or representatives, or any of their respective successors, assigns or personal
representatives (collectively, the "BUYER INDEMNIFIED PARTIES") from and against
any demands, claims, actions, losses, damages, deficiencies, liabilities, and
costs and expense (including, without limitation, reasonable attorneys' and
accountants' fees and expenses), together with interest and penalties
(collectively, "INDEMNIFIABLE DAMAGES") suffered by the Buyer Indemnified
Parties which arise out of or result from: (i) any material inaccuracy or
misrepresentation in or material breach of any of the representations,
warranties or covenants made by Seller in this Agreement; (ii) any material
inaccuracy or misrepresentation in a document, certificate or affidavit
delivered by Seller in accordance with the provisions of this Agreement; and
(iii) any intentional fraud, willful misconduct or bad faith by the directors or
officers of Seller in connection with this Agreement.
(b) INDEMNIFICATION BY BUYER. Subject to the terms of this Article IX,
----------
Buyer covenants and agrees to indemnify and hold harmless Seller from and
against any Indemnifiable Damages suffered by Seller which arise out of or
result from: (i) any material inaccuracy or misrepresentation in or material
breach of any of the representations, warranties or covenants made by Buyer in
this Agreement; (ii) any material inaccuracy or misrepresentation in a document,
certificate or affidavit delivered by Buyer in accordance with the provisions of
this Agreement; and (iii) any intentional fraud, willful misconduct or bad faith
by Buyer in connection with this Agreement.
SECTION 9.03 LIMITATION ON INDEMNIFICATION. Notwithstanding the
provisions of Section 9.03 hereof, Seller will not be obligated to indemnify,
-------------
defend or hold harmless the Buyer Indemnified Parties from or against any
Indemnifiable Damages, until the aggregate amount of Indemnifiable Damages
exceeds fifty thousand dollars ($50,000) (the "THRESHOLD"), after which the
amount of all Indemnifiable Damages (including those constituting the initial
$50,000) shall be subject to indemnity by Seller, provided, however, that the
Threshold shall not apply with respect to breaches of the representations and
warranties contained in Sections 3.1 through 3.4 or any amounts arising under or
------------ ---
pursuant to Sections 9.02(a)(iii). Seller's total obligation to the
----------------------
25
Buyer Indemnified Parties under this Article IX shall not exceed, in the
-----------
aggregate, the Purchase Price.
SECTION 9.04 PROCEDURE FOR THIRD-PARTY CLAIMS.
(a) Promptly after obtaining knowledge of any claim or demand which has
given rise to, or could reasonably give rise to, a claim of indemnification
hereunder, the party seeking indemnification shall give written notice of such
claim ("NOTICE OF CLAIM") to the other party within the survival period set
forth in Section 9.01. The Notice of Claim shall set forth a brief description
------------
of the facts giving rise to such claim and the amount (or a reasonable estimate)
of the liability, loss, damage or expense suffered, or which may be suffered, by
the party seeking indemnification;
(b) Upon receiving the Notice of Claim, the indemnifying party shall
resist, settle or otherwise dispose of such claim in such manner as it shall
deem appropriate, including the employment of counsel, and shall be responsible
for the payment of all settlements, judgment, costs and expenses, including the
reasonable fees and expenses of any counsel retained. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the indemnified party's expense unless:
(i) the employment has been specifically authorized by the
indemnifying party in writing;
(ii) the indemnifying party has improperly failed to assume the
defense and employ counsel; or
(iii) the named parties to any action (including any impleaded
parties) include Buyer and/or KLI and/or JSL and/or Seller, and the
indemnified party has been advised by such counsel that representation of
such parties by the same counsel would be inappropriate under applicable
standards or professional conduct due to actual or potential differing
interests between them (in which case, if the indemnified party notifies
the indemnifying party in writing that the indemnified party elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall have neither the right nor the obligation to
assume the defense of such action on behalf of the indemnified party).
(c) The party seeking indemnification shall comply with the foregoing
procedure for each claim arising hereunder, whether or not the amount of such
claims exceeds any minimum amount. The indemnified party shall cooperate with
the indemnifying party in defending any such claim and provide any books,
records, information or testimony requested, which is in the hands of or under
the control of the indemnified party.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01 NOTICES. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, shall
specify the Section hereunder pursuant to which it is given or being made, and
shall be delivered personally or by telecopy transmission or sent by registered
or certified mail or by any express mail service (with postage and other fees
prepaid) as follows:
To Buyer:
Xxxxxx X. Xxxxx
0000 Xxxxxxxxxx Xxxxx, Xxxxx X-000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopier No.: (000) 000-0000
with a copy to:
Woolf, McClane, Xxxxxx, Xxxxx & Xxxxxxxxx, PLLC
Xxxxxxxxx Xxxxx, Xxxxx 000
000 X. Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. XxXxxxx, Esq.
Telecopier No.: (000) 000-0000
To Seller:
National Bank of Commerce
Xxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Xx.
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxx, PLLC
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxxx, Xx., Esq.
Telecopier No.: (000) 000-0000
SECTION 10.02 EXHIBITS. The Exhibits hereto are hereby incorporated
into this Agreement and are hereby made a part hereof as if set out in full in
this Agreement.
SECTION 10.03 ASSIGNMENT; SUCCESSORS IN INTEREST. Buyer may transfer
its rights under this Agreement to any entity, financial institution, lender or
joint venture partner, which assignment may be made before or after the Closing.
No assignment or transfer by Seller of its
27
rights and obligations hereunder prior to the Closing shall be made except with
the prior written consent of Buyer. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns, and any reference to a party hereto shall also be a reference to a
permitted successor or assign.
SECTION 10.04 NUMBER; GENDER. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
SECTION 10.05 CAPTIONS. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise
specified to the contrary, all references to Articles and Sections are
references to Articles and Sections of this Agreement and all references to
Exhibits are references to Exhibits to this Agreement.
SECTION 10.06 CONTROLLING LAW; INTEGRATION; AMENDMENT.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Tennessee without reference to
Tennessee's choice of law rules.
(b) This Agreement supersedes all negotiations, agreements and
understandings among the parties with respect to the subject matter hereof and
constitutes the entire agreement among the parties hereto.
(c) Without limiting the foregoing, this Agreement may not be amended,
modified or supplemented except by written agreement of the parties hereto.
SECTION 10.07 SEVERABILITY. Any provision hereof which is prohibited
or unenforceable in any jurisdiction will, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction will not invalidate or render unenforceable
such provision in any other jurisdiction. To the extent permitted by law, the
parties hereto waive any provision of law which renders any such provision
prohibited or unenforceable in any respect.
SECTION 10.08 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
SECTION 10.09 ENFORCEMENT OF CERTAIN RIGHTS. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, and their
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, or result in such person, firm or corporation being
deemed a third party beneficiary of this Agreement.
28
SECTION 10.10 WAIVER. At any time prior to the Closing, the parties
hereto may, to the extent legally permitted: (i) extend the time for the
performance of any of the obligations or other acts of any other party; (ii)
waive any inaccuracies in the representations or warranties of any other party
contained in this Agreement or in any document or certificate delivered pursuant
hereto; (iii) waive compliance or performance by any other party with any of the
covenants, agreements or obligations of such party contained herein; and (iv)
waive the satisfaction of any condition that is precedent to the performance by
the party so waiving of any of its obligations hereunder. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. A waiver
by one party of the performance of any covenant, agreement, obligation,
condition, representation or warranty shall not be construed as a waiver of any
other covenant, agreement, obligation, condition, representation or warranty. A
waiver by any party of the performance of any act shall not constitute a waiver
of the performance of any other act or an identical act required to be performed
at a later time.
SECTION 10.11 FEES AND EXPENSES. Each of Buyer and Seller shall pay
its own fees, costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, including, but not limited to, the fees,
costs and expenses of its financial advisors, accountants and counsel.
SECTION 10.12 BUYER'S KNOWLEDGE. Notwithstanding anything to the
contrary contained herein, any information provided by Xxxxxx X. Xxxxx or Xxxxxx
X. Xxxxx, or any representation, warranty or covenant made by Seller which
Xxxxxx X. Xxxxx or Xxxxxx X. Xxxxx knew or reasonably should have known was
false, inaccurate or misleading, or any action taken by Xxxxxx X. Xxxxx or
Xxxxxx X. Xxxxx in contravention hereof, shall not constitute a basis for any
claim of breach or default and shall not be the basis for any award of damages
or other relief against Seller.
SECTION 10.13 RESOLUTION OF DISPUTES. All disputes or disagreements
arising between the parties pertaining to or relating in any manner to this
Agreement, including any breach of this Agreement, are to be decided by binding
arbitration before a single arbitrator. Arbitration proceedings may be
initiated by either party by written notice to the other party. The parties
shall use their best efforts to promptly agree upon an arbitrator. If the
parties are unable to agree upon an arbitrator within fifteen (15) days after
the notice of initiation of arbitration proceedings, either party shall have the
right to apply to the American Arbitration Association ("AAA") for
administration of the arbitration and appointment of an arbitrator under its
Commercial Arbitration Rules (the "AAA RULES"). Regardless of whether the
arbitration is administered by the AAA, the arbitration proceedings shall be
conducted in accordance with the AAA Commercial Arbitration Rules. The
arbitration proceeding shall take place in Knoxville, Tennessee, unless another
location is mutually agreed to by the parties. Each party shall be responsible
for its own costs and expenses in the arbitration proceedings. The award of the
arbitrator shall be final. Judgment on the award may be entered in any court
having jurisdiction. The parties intend that this arbitration provision and any
arbitration award hereunder be enforceable under the Federal Arbitration Act and
applicable state law. This arbitration provision shall survive the termination
of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers on the date first above
written.
BUYER:
/s/ Xxxxxx X. Xxxxx
--------------------------------------------
XXXXXX X. XXXXX
SELLER:
NATIONAL BANK OF COMMERCE,
a national association
By: /s/ Xxxxxxx X. Xxxx, Xx.
-----------------------------------------
Name: Xxxxxxx X. Xxxx, Xx.
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
30
