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EXHIBIT 10.14
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and among
MR SERVICES ACQUISITION CORPORATION,
as Buyer,
AMR SERVICES HOLDING CORPORATION,
as Seller,
and
AMR CORPORATION,
Seller's Parent
Dated: December 23, 1998
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TABLE OF CONTENTS
Page
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1. Definitions.......................................................................................... 1
2. Sale and Transfer of Shares; Closing................................................................. 13
a. Shares......................................................................................... 13
b. Purchase Price................................................................................. 13
c. Closing........................................................................................ 13
d. Closing Obligations............................................................................ 13
e. Adjustment Procedure........................................................................... 14
f. Deferred Payment Amount Procedure.............................................................. 15
g. Escrow......................................................................................... 17
3. Representations and Warranties of Seller............................................................. 17
a. Organization and Good Standing................................................................. 17
b. Authority; No Conflict......................................................................... 17
c. Capitalization................................................................................. 19
d. Financial Statements........................................................................... 19
e. Books of Account............................................................................... 20
f. Title to Properties, Encumbrances.............................................................. 20
g. No Undisclosed Liabilities..................................................................... 22
h. Taxes.......................................................................................... 22
i. Compliance with Legal Requirements; Governmental Authorizations................................ 23
j. Legal Proceedings; Orders...................................................................... 25
k. Absence of Certain Changes and Events.......................................................... 26
l. Contracts; No Defaults......................................................................... 27
m. Environmental Matters.......................................................................... 28
n. Employees...................................................................................... 29
o. Labor Relations; Compliance.................................................................... 30
p. Intellectual Property Assets................................................................... 30
q. Employee Benefit Matters....................................................................... 32
r. Brokers or Finders............................................................................. 34
s. Insurance...................................................................................... 34
t. Transactions with the Seller and Seller's Parent............................................... 34
u. Tangible Property.............................................................................. 34
v. Accounts and Notes Receivable.................................................................. 35
w. Computer Systems; Year 2000; Euro.............................................................. 35
x. Foreign Corrupt Practices Act.................................................................. 35
y. Extended Contracts............................................................................. 36
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4. Representations and Warranties of Buyer.............................................................. 36
a. Organization and Good Standing................................................................. 36
b. Authority; No Conflict......................................................................... 36
c. Investment..................................................................................... 37
d. Certain Proceedings............................................................................ 37
e. Brokers or Finders............................................................................. 37
f. Funds Available................................................................................ 37
g. No Additional Representations.................................................................. 38
h. Support Services............................................................................... 38
i. Venture Capital Operating Company.............................................................. 38
5. Representations and Warranties of Seller's Parent.................................................... 38
a. Organization and Good Standing................................................................. 39
b. Authority; No Conflict......................................................................... 39
6. Covenants of Seller Prior to the Closing Date........................................................ 40
a Access and Investigation....................................................................... 40
b. Operation of the Businesses of the Acquired Companies.......................................... 40
c. Required Approvals............................................................................. 43
d. Notice of Developments......................................................................... 43
e. 401(k) Plan Trust-to-Trust Transfer............................................................ 43
f. Best Reasonable Efforts........................................................................ 44
g. Acquisition Proposals.......................................................................... 44
h. Non-Competition................................................................................ 45
i. Nonsolicitation................................................................................ 46
j. Taxes.......................................................................................... 46
k. Audit Consent.................................................................................. 47
l. Insurance Claims............................................................................... 47
m. No Termination of Contract..................................................................... 47
n. Compliance..................................................................................... 47
o. Acquisition of SAP System...................................................................... 47
7. Covenants of Buyer Prior to the Closing Date......................................................... 48
a. Approvals...................................................................................... 48
b. Releases of Seller and Affiliates.............................................................. 48
c. Notifications.................................................................................. 49
d. Best Reasonable Efforts........................................................................ 49
8. Covenants of Buyer Subsequent to the Closing Date.................................................... 49
a. Post-Closing Access to Records................................................................. 49
b. No Use of Name and Cancellation of Registrations............................................... 49
x. Xxxxxxxxx Amounts.............................................................................. 50
d. One-Year Benefit Standstill.................................................................... 50
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e. Reimbursement for Certain Intercompany Transactions and Employee Loans......................... 50
f. Pre-Closing Date Obligations................................................................... 51
g. Performance Bonus Plan......................................................................... 51
h. Workers Compensation Claims.................................................................... 51
9. Conditions Precedent to Buyer's Obligation to Close.................................................. 51
a. Accuracy of Representations.................................................................... 51
b. Seller's Performance........................................................................... 51
c. Consents....................................................................................... 52
d. Additional Documents........................................................................... 52
e. No Proceedings................................................................................. 52
f. Certificates................................................................................... 52
g. Resignations................................................................................... 52
h. Incumbency Certificates........................................................................ 52
i. Opinion........................................................................................ 52
j. Debt........................................................................................... 52
k. Financing...................................................................................... 53
l. EBITDA......................................................................................... 53
m. Audit.......................................................................................... 53
n. No Material Adverse Change..................................................................... 53
o. AA Agreement................................................................................... 53
10. Conditions Precedent to Seller's Obligation to Close................................................. 53
a. Accuracy of Representations.................................................................... 53
b. Buyer's Performance............................................................................ 53
c. Consents....................................................................................... 54
d. Additional Documents........................................................................... 54
e. No Proceedings................................................................................. 54
f. Opinion........................................................................................ 54
11. Termination.......................................................................................... 54
a. Termination Events............................................................................. 54
b. Effect of Termination.......................................................................... 55
c. Limited Remedies of Buyer Upon Termination..................................................... 55
12. Indemnification; Remedies............................................................................ 56
a. Survival....................................................................................... 56
b. Indemnification and Payment of Damages by Seller and Seller's Parent........................... 56
c. Indemnification and Payment of Damages by Buyer................................................ 57
d. Time Limitations............................................................................... 57
e. Environmental Indemnification.................................................................. 58
f. Other Limitations.............................................................................. 62
g. Procedure for Indemnification--Third Party Claims.............................................. 63
h. Procedure for Indemnification--Other Claims.................................................... 64
i. Exclusivity of Indemnification Provisions...................................................... 64
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13. Tax Matters.......................................................................................... 65
a. Section 338(h)(10) Election.................................................................... 65
b. Liability for Taxes............................................................................ 66
c. Tax Returns.................................................................................... 67
d. Tax Allocation Arrangements.................................................................... 68
e. Tax Proceedings................................................................................ 68
f. Cooperation and Exchange of Information........................................................ 69
g. Treatment of Payments.......................................................................... 70
14. General Provisions................................................................................... 70
a. Expenses....................................................................................... 70
b. Public Announcements........................................................................... 70
c. Notices........................................................................................ 70
d. Confidentiality................................................................................ 71
e. Further Assurances............................................................................. 72
f. Waiver......................................................................................... 72
g. Entire Agreement and Modification.............................................................. 72
h. Disclosure Schedules........................................................................... 72
i. Assignments, Successors, and No Third-Party Rights............................................. 72
j. Severability................................................................................... 73
k. Section Headings, Construction................................................................. 73
l. Governing Law; Venue........................................................................... 73
m. Counterparts................................................................................... 73
n. Transition Cooperation......................................................................... 73
o. Antitrust Notification......................................................................... 74
p. Confidentiality Agreements..................................................................... 74
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AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (the
"AGREEMENT") is made and entered into as of December 23, 1998, by and among MR
Services Acquisition Corporation, a Delaware corporation ("BUYER"), AMR Services
Holding Corporation, a Delaware corporation ("SELLER"), and AMR Corporation, a
Delaware corporation and the parent of Seller ("SELLER'S PARENT").
RECITALS
WHEREAS, Seller desires to sell, and Buyer desires to
purchase, all of the issued and outstanding shares (the "SHARES") of capital
stock of AMR Services Corporation, a Delaware corporation ("COMPANY"), for the
consideration and on the terms set forth in this Agreement.
WHEREAS, Xxxxxx Xxxxxx Partners III, L.P., a Delaware limited
partnership and the parent of Buyer ("BUYER'S PARENT"), has executed and
delivered to Seller a limited guaranty of Buyer's performance of Buyer's
obligations under this Agreement from the date of this Agreement until the
Closing Date (the "PERFORMANCE GUARANTY").
AGREEMENT
The parties, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Section 1:
"ACCOUNTANT'S COMPUTATION" - as defined in Section
2.f.ii.
"ACCOUNTING REFEREE" - as defined in Section
13.c.iii.
"ACQUIRED COMPANIES" - the Company and its
Subsidiaries, and any other entities, collectively (whether in the form of
partnerships, joint ventures or limited liability companies), in which the
Company or any of its Subsidiaries has a voting interest excluding Cyclone
Surface Cleaning, Inc. and AMR Xxxxx, Inc. and its Subsidiaries), as detailed in
Section 3.a. of Seller's Disclosure Schedule.
"ACQUIRED GROUND HANDLING SUBSIDIARY" - as defined in
Section 6.h.iv.
"ACQUISITION DATE" - as defined in Section 6.h.iv.
"ACQUISITION PROPOSAL" - as defined in Section
6.g.ii.
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"ACQUISITION TRANSACTION" - means any purchase of
assets or stock, merger, consolidation, code sharing, marketing alliance or
other similar transaction.
"ACTUAL AMR REVENUES" - means the aggregate AMR
Revenues during the Revenue Period.
"ACTUAL PRE-CLOSING CAPITAL EXPENDITURES" - as
defined in Section 6.b.iii.(2).
"ADJUSTMENT AMOUNT" - an amount (which may be a
positive or negative number) equal to (a) the Working Capital of the Acquired
Companies as of the Closing Date, but excluding accruals and reserves relating
to taxes for any period ending on or prior to the Closing Date, to the extent
Seller and not one of the Acquired Companies pays such taxes after the Closing
Date, minus (b) $10,000,000. For the purpose of this Adjustment, the following
revisions to the Working Capital as of the Closing Date as contained in the
Working Capital Statement will be made, if appropriate:
a. if awards have been paid under the 1998 IC Plan,
then the cost of those awards will be subtracted from the Working Capital as of
the Closing Date,
b. if the portion of the allowance for doubtful
accounts on the Interim Balance Sheet related to the disputed Company xxxxxxxx
to the Port Authority of New York and New Jersey ($388,000) has been removed
from the allowance, then the amount of the allowance ($388,000) will be
subtracted from the Working Capital as of the Closing Date, to the extent the
associated receivable has not also been removed from the books,
c. if the note payable associated with the Cyclone
Surface Cleaning, Inc. stock option and exclusive license agreement remains
unpaid as of the Closing Date but is not reflected in the Working Capital, then
the amount of the note will be subtracted from the Working Capital as of the
Closing Date, and
d. if the worker's compensation liability or a
portion thereof is reclassified to non-current liabilities, then the amount
reflected in non-current liabilities will be subtracted from Working Capital as
of the Closing Date.
"AFFILIATE" - has the meaning set forth in Rule 405
of the regulations promulgated under the Securities Act.
"AGGREGATE CAPITAL BUDGET" - as defined in Section
6.b.iii.(2).
"AGS" - as defined in Section 6.h.iii.
"AMR-CONTROLLED AIRLINE" - as defined in Section
6.h.i.
"AMR GROUP" - as defined in Section 3.h.i.
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"AMR REVENUES" - means revenues of the Company
generated from services provided to and goods sold to the Seller's Parent and
its Consolidated Subsidiaries during the relevant period(s) as determined in
accordance with GAAP.
"AMT CREDIT CARRYOVER" - as defined in Section
13.b.v.
"APPLICABLE CONTRACT" - any Contract (a) under which
any Acquired Company may be entitled to receive revenues of more than $100,000
in any calendar year, (b) under which any Acquired Company may become subject to
any obligation to pay a liability of more than $100,000 in any calendar year,
(c) by which assets owned by any Acquired Company having a net book value of at
least $100,000 are bound, (d) under which any Acquired Company is restricted
from (i) competing with third parties, (ii) entering into agreements with any
other party, or (iii) acting in a manner which is in the Ordinary Course of
Business, or (e) under which, to the Knowledge of Seller, the Seller or any of
its Affiliates is a party and that relates to the confidentiality of matters or
information pertaining to the proposed sale of Shares.
"APPRAISER" - as defined in Section 13.a.
"ASM" - means one aircraft passenger seat flown one
mile. For purposes of calculating the Baseline Revenues, all ASMs of American
Airlines, Inc., American Eagle Airlines, Inc. and any other airline that is a
Consolidated Subsidiary of Seller's Parent shall be aggregated.
"AVIATION LIABILITY INSURANCE POLICY" - means the
insurance policy identified as item No.7 in Section 3.s. of Seller's Disclosure
Schedule.
"BALANCE SHEET" - as defined in Section 3.d.
"BASE AMOUNT" - equals $10 million.
"BASELINE PERIOD" - means the period from January 1,
1999 through December 31, 2008.
"BASELINE REVENUES" - means the hypothetical
cumulative AMR revenues over the Baseline Period calculated in accordance with
Exhibit "D". In the case of services that are terminated by (i) the Seller's
Parent or any Consolidated Subsidiary for default by the Company or (ii) by the
Company other than for default by Seller's Parent or any Subsidiary, there shall
be subtracted from 1998 AMR Revenues any revenues earned by and paid to the
Company for the terminated services in 1998.
"BEST REASONABLE EFFORTS" - the reasonable efforts
that a prudent Person desirous of achieving a result would use in similar
circumstances to ensure that such result is achieved as reasonably expeditiously
as possible; provided, however, that an obligation to use Best Reasonable
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would materially and adversely impact the
benefits to such Person of this Agreement and the Contemplated Transactions or
to expend a material amount of funds.
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"BREACH" - a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any inaccuracy in or a breach of, or any failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"BUSINESS" - all businesses of the Acquired Companies
as currently conducted by the Acquired Companies, including, without limitation,
the provision of cargo handling, passenger, ramp and technical services to
aircraft.
"BUSINESS DAY" - a day other than a Saturday or
Sunday on which trading occurs on the New York Stock Exchange.
"BUYER" - as defined in the first paragraph of this
Agreement.
"BUYER INDEMNIFIED PERSONS" - as defined in Section
12.b.
"BUYER'S ACCOUNTANTS" - as defined in Section 2.e.i.
"BUYER'S 401(k) PLAN" - as defined in Section 6.e.
"BUYER'S PARENT" - as defined in the Recitals of this
Agreement.
"CAPITAL EXPENDITURE NOTICE" - as defined in Section
6.b.iii.(2).
"CAPITAL EXPENDITURE SHORTFALL AMOUNT" - as defined
in Section 6.b.iii.
"CAPITAL EXPENDITURE SURPLUS AMOUNT" - as defined in
Section 6.b.iii.(1).
"CAPITAL IMPROVEMENT" - as defined in Section
6.b.iii.
"CERCLA" - as defined in the definition of
Environmental Law.
"CLAIM" - any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter or other written communication asserting or
alleging liability.
"CLOSING" - as defined in Section 2.c.
"CLOSING DATE" - the date and time as of which the
Closing actually takes place.
"CODE" - the Internal Revenue Code of 1986, as
amended, or any successor law.
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"COMPANY" - as defined in the Recitals of this
Agreement.
"COMPUTER SYSTEM" - as defined in Section 3.w.i.
"CONFIDENTIALITY AGREEMENT" - as defined in Section
14.d.
"CONSENT" - any approval, consent, ratification,
waiver, or other authorization (including any Governmental Authorization).
"CONSENT DEADLINE" - as defined in Section 2.g.
"CONSOLIDATED SUBSIDIARY" - means any Subsidiary of
Seller's Parent whose results are consolidated in the financial statements of
Seller's Parent.
"CONTEMPLATED TRANSACTIONS" - all of the transactions
contemplated by this Agreement, including, without limitation:
a. the sale of the Shares by Seller to Buyer;
b. the execution, delivery, and performance of this
Agreement, the Technical Services Agreement, License Agreement and the
Performance Guaranty; and
c. the performance by the parties of their respective
covenants and obligations under this Agreement.
"CONTRACT" - any agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether express or implied)
that is reasonably expected to be legally binding.
"CONTROLLER'S MANUAL" - the AMR Services Accounting
Policies and Procedures Manual containing the policies and procedures which have
been in effect since at least January 1, 1995, and utilized by the Acquired
Companies in connection with the preparation of financial information, including
unaudited financial statements and Seller's Parent's audited financial
statements.
"COPYRIGHTS" - as defined in Section 3.p.i.(3).
"DALFORT MERGER AGREEMENT" - as defined in Section
3.k.x. of Seller's Disclosure Schedule.
"DAMAGES" - as defined in Section 12.b.
"DEBT COMMITMENT LETTER" - as defined in Section 4.f.
"DEFERRED PAYMENT AMOUNT" - as defined in Section
2.f.ii.
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"DEFERRED PAYMENT INTEREST" - means simple interest
on the Base Amount or any portion thereof at a rate equal to 0.25% above the
rate of interest, as of the Closing Date, payable on the most subordinated
third-party indebtedness of the Buyer utilized in financing the Contemplated
Transactions.
"DISCLOSING PARTY" - as defined in Section 14.d.
"DOJ" - as defined in Section 14.o.
"EMPLOYEE PLANS" - as defined in Section 3.q.i.
"EMPLOYEES" - means all persons employed by any of
the Acquired Companies as of the specific time referenced, but with respect to
the time period prior to Closing, shall not include Transferred Employees.
"ENCUMBRANCE" - any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, preemptive right, right of first refusal, or restriction of any kind
(other than restrictions on transfers imposed by Securities Laws); including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"ENVIRONMENT" - soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), ground waters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"ENVIRONMENTAL CLAIM" - any Claim from any
Governmental Body or any third party involving violations of Environmental Laws
or Releases of Hazardous Materials from (i) any assets, properties or businesses
of the Acquired Companies or any predecessor in interest of any asset or
property of the Acquired Companies; (ii) from adjoining properties or
businesses; or (iii) from or onto any facility which received Hazardous
Materials generated by the Acquired Companies or any prior owner of a Facility.
"ENVIRONMENTAL LAWS" - all Legal Requirements under
the Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. Section 9601 et seq., as amended ("CERCLA"), the Resources Conservation
and Recover Act, 42 U.S.C. 6901 et seq., as amended, the Clean Air Act,
42 U.S.C. 7401 et seq., as amended, the Clean Water Act, 33 U.S.C. 1251 et seq.,
as amended, the Occupational Safety and Health Act, 29 U.S.C. 655 et seq., and
any other international, federal, state, local or municipal laws, statutes,
regulations, rules or ordinances imposing liability or establishing standards of
conduct for the protection of health, safety and the Environment.
"ENVIRONMENTAL LIABILITIES" - all monetary
obligations, losses, liabilities (including strict liability), damages, punitive
damages, treble damages, costs and expenses (including all reasonable
out-of-pocket fees, disbursements and expenses of counsel, out-of-pocket expert
and consulting fees and out-of-pocket costs for environmental site assessments,
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remedial investigation and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any Environmental Claim filed by any
Governmental Body or any third party which relate to any violations of
Environmental Laws, Remedial Actions or Releases of Hazardous Materials from or
onto (i) any Facility, even to the extent owned by a predecessor in interest
thereof, or (ii) any facility which received Hazardous Materials generated by
the Company or any of its Subsidiaries or any prior owner of a Facility.
"ENVIRONMENTAL REPORTS" - as defined in Section
3.m.iv.
"EQUITY COMMITMENT LETTER" - as defined in Section
4.f.
"ERISA" - the Employee Retirement Income Security Act
of 1974, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"ESCROW ACCOUNT" - as defined in Section 2.g.
"ESCROW AMOUNT" - as defined in Section 2.g.
"ESCROW SPREAD RATE" - means the difference between
(i) the rate of interest, as of the Closing Date, payable on the most
subordinated indebtedness of the Buyer from a non-Affiliate of Buyer utilized in
financing the Contemplated Transactions, and (ii) the rate of interest or
earnings paid on the Escrow Account.
"EXTENDED CONTRACTS" - has the meaning set forth in
the Umbrella Amendment.
"FAA" - as defined in Section 3.i.iii.
"FCPA" - as defined in Section 3.x.
"FACILITIES" - any real property, leaseholds, or
similar interests currently or formerly owned, leased or operated by any
Acquired Company and any buildings, plants, structures, or equipment located
thereon.
"FINAL ACCOUNTANT'S COMPUTATION" - as defined in
Section 2.f.iv.
"FIVE-YEAR PERIOD" - as defined in Section 6.h.
"FOREIGN EMPLOYEE PLAN" - as defined in Section
3.q.viii.
"FTC" - as defined in Section 14.o.
"GAAP" - means United States generally accepted
accounting principles as in effect from time to time applied on a consistent
basis.
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"GOVERNMENTAL AUTHORIZATION" - any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" - any nation, state, county,
city, town, village, district, or other government or jurisdiction of any nature
or any governmental, regulatory or quasi-governmental body, including airport
authorities, acting thereunder in each case with jurisdiction over any of the
Acquired Companies.
"GROUND HANDLING SERVICES" - as defined in Section
6.h.
"HAZARDOUS MATERIAL" - means "hazardous substance,"
"pollutant or contaminant," and "petroleum" and "natural gas liquids," as those
terms are defined or used in Section 101 of CERCLA, and any other substances
regulated under Environmental Laws because of their effect or potential effect
on public health and the environment, including, without limitation, PCBs, lead
paint, asbestos, and radioactive materials.
"HSR ACT" - the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, or any successor law, and regulations and
rules issued pursuant to that Act or any successor law.
"IC PLAN" - as defined in Section 8.g.
"INDEMNIFIED PARTY" - as defined in Section 13.f.
"INDEMNIFYING PARTY" - as defined in Section 13.f.
"INTELLECTUAL PROPERTY" - as defined in Section
3.p.i.
"INTELLECTUAL PROPERTY ASSETS" - as defined in
Section 3.p.i.
"INTERCOMPANY TRANSACTIONS" - those transactions
among Seller, Seller's Parent, the Acquired Companies and their respective
Affiliates described in Section 6.b.i. and 6.b.ii. of Seller's Disclosure
Schedule which will be consummated prior to or as of the Closing Date.
"INTERIM BALANCE SHEET" - as defined in Section 3.d.
"IRS" - the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
"KNOWLEDGE" - an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is actually
aware of such fact or other matter after inquiry. For the purpose of this
definition, "inquiry" shall mean a complete review and discussion of this
Agreement, the Disclosure Schedules and the agreements attached hereto. Seller
shall only be deemed to have "Knowledge" of a particular fact or other matter if
any of Xxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxx Xxxxxxxxx, Xxxxxxx Xxxxx, Xxx Xxxxxx,
Xxxx Xxxxxx, Xxxxx
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Xxxxxx, Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxxxxxx, Xxx Xxxxxxx, or Xxxx Xxxx has
Knowledge of such fact or matter. Buyer shall only be deemed to have "Knowledge"
of a particular fact or other matter if Xxxxxx Xxxxxxxx, Xxx Xxxxxxxx, or
Xxxxxxxxx Xxxxxxx, as consultant, has Knowledge of such fact or matter. Any
other Person (other than an individual) will only be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as Chief
Executive Officer, President or Chief Financial Officer of such Person, as of
the date hereof or as of the Closing Date, as the case may be, has Knowledge of
such factor or other matter.
"LEASES" - as defined in Section 3.f.ii.
"LEGAL REQUIREMENT" - any federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, rule,
statute, or treaty of any Governmental Body.
"LICENSE AGREEMENT" - as defined in Section
2.d.i.(3).
"LOVE FIELD LEASE" - as defined in Section 3.k.x. of
Seller's Disclosure Schedule.
"MARKS" - as defined in Section 3.p.i.(1).
"MATERIAL ADVERSE CHANGE" - as defined in Section
9.n.
"MATERIAL ADVERSE EFFECT" - any single or series of
related violations, inaccuracies, breaches, defaults, failures to comply,
changes in circumstance, losses, effects, facts, agreements, arrangements,
commitments, understandings or obligations which, as a result of the occurrence
or existence thereof, have a material adverse effect or material adverse impact
on the financial condition, assets, or results of operations, as applicable of
(i) the Acquired Companies taken as a whole, (ii) Seller's Parent and Seller
taken as a whole or (iii) any other Person(s) in question. However, a Material
Adverse Effect, when used with respect to any Person(s), does not include a
material adverse effect on the business, operations, properties, financial
condition, assets or results of operations of such Person(s) to the extent it is
caused by (i) one or more downturns in the economy or the securities markets in
general, or (ii) one or more downturns in the industries in which the Person(s)
operate.
"MCLA" - as defined in Section 6.h.iii.
"MONTHLY CAPITAL BUDGET" - as defined in Section
6.b.iii.(1).
"NON-MANDATORY CONSENT" - any Consent listed as such
in Part C of Section 10.c. of Seller's Disclosure Schedule.
"ORDER" - any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
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"ORDINARY COURSE OF BUSINESS" - an action taken by a
Person will be deemed to have been taken in the "Ordinary Course of Business"
if:
a. such action is taken in the ordinary course of the
normal operations of such Person;
b. such action is similar in nature and magnitude to
actions customarily taken in the ordinary course of the normal operations of
such Person;
c. such action that is taken with the prior written
approval of Buyer; or
d. such action is listed in Seller's Disclosure
Schedule as considered to be in the Ordinary Course of Business.
"ORGANIZATIONAL DOCUMENTS" - (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person,
including, with respect to a limited liability company, its member or operating
agreement; and (e) any amendment to any of the foregoing.
"OWNER" - as defined in the definition of Subsidiary.
"PATENTS" - as defined in Section 3.p.i.(2).
"PENSION PLAN" - as defined in Section 3.q.i.
"PERFORMANCE GUARANTY" - as defined in the Recitals
of this Agreement.
"PERSON" - any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN ASSETS REGULATIONS" - as defined in Section
4.i.
"POST-CLOSING CONSENT" - as defined in Section 2.g.
"POST-CLOSING PERIOD" - as defined in Section
13.b.ii.
"PRE-CLOSING PERIOD" - as defined in Section 13.b.i.
"PROCEEDING" - any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
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16
"PROPRIETARY RIGHTS AGREEMENT" - as defined in
Section 3.n.
"PURCHASE PRICE" - as defined in Section 2.b.
"QUARTERLY REPORT" - as defined in Section
12.e.ii.(6).
"RAW" - as defined in Section 12.e.(ii)(6).
"RECEIVING PARTY" - as defined in Section 14.d.
"RECORDS" - as defined in Section 8.a.
"RELEASE" - any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, dumping, or
disposing of Hazardous Materials (including the abandonment or discharging of
barrels, containers or other closed receptacles containing Hazardous Materials)
into the Environment.
"REMEDIAL ACTION" - all actions taken to correct,
remediate and resolve Covered Environmental Liabilities, including action, taken
to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or
in any other way address any Environmental Liability or any Hazardous Materials
in the Environment; (ii) prevent or minimize a Release of Hazardous Materials so
they do not migrate or endanger or threaten to endanger public health or welfare
or the Environment; (iii) perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities; or (iv) any other actions
authorized by 42 U.S.C. 9601.
"REPRESENTATIVE" - with respect to a particular
Person, any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, financial
advisors, financing sources and potential financing sources.
"RETURNS" - as defined in Section 3.h.ii.
"REVENUE PERIOD" - means the period commencing on the
first day of the first calendar month following the Closing Date and ending on
the tenth (10th) anniversary thereof.
"SECTION 338(h)(10) ELECTION" - as defined in Section
13.a.
"SECURITIES ACT" - the Securities Act of 1933, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"SELLER" - as defined in the first paragraph of this
Agreement.
"SELLER ENVIRONMENTAL LIABILITIES" - as defined in
Section 12.e.i.
"SELLER INDEMNIFIED PERSONS" - as defined in Section
12.c.
"SELLER'S ACCOUNTANTS" - as defined in Section 2.e.i.
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"SELLER'S DISCLOSURE SCHEDULE" - the disclosure
schedule delivered by Seller to Buyer concurrently with the execution and
delivery of this Agreement.
"SELLER'S PARENT" - as defined in the first paragraph
of this Agreement.
"SELLER'S PARENT'S 401(k) PLAN" - as defined in
Section 6.e.
"SHARES" - as defined in the Recitals of this
Agreement.
"STIPULATED CONSENT VALUE" - as defined in Section
2.g.
"SUBSIDIARY" - with respect to any Person ("OWNER"),
any corporation or other Person of which securities or other interests having
the power to elect a majority of that corporation's or other Person's board of
directors or similar governing body are held by the Owner and/or one or more of
its Subsidiaries; when used with respect to the Company, "Subsidiary" will
include only those Subsidiaries with respect to which the Company is an Owner
after giving effect to the consummation of the Intercompany Transactions; and
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary with respect to which the Company is an Owner. For purposes of this
definition, Cyclone Surface Cleaning, Inc. is not considered to be a Subsidiary.
"TAX ASSET" - as defined in Section 6.j.ii.
"TAXES" - as defined in Section 3.h.ii.
"TECHNICAL SERVICES AGREEMENT" - as defined in
Section 2.d.i.(2).
"THREATENED" - a Claim or Release will be deemed to
be "Threatened" if any demand or statement of such Claim or Release has been
made in writing or any notice has been given in writing.
"THRESHOLD REVENUES" - means 85% of the Baseline
Revenues.
"TRADE SECRETS" - as defined in Section 3.p.i.(4).
"TRANSFERRED EMPLOYEES" - as defined in Section
6.b.ii.
"TREASURY REGULATIONS" - means a regulation issued by
the Treasury Department pursuant to the Code.
"UMBRELLA AMENDMENT" - as defined in Section 9.o.
"UNADJUSTED PURCHASE PRICE" - as defined in Section
2.b.
"WELFARE PLAN" - as defined in Section 3.q.i.
"WORKERS COMPENSATION ACCRUAL" - means $2,009,000.
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"WORKING CAPITAL" - the amount remaining when the
current liabilities of the Acquired Companies are subtracted from the current
assets of the Acquired Companies, as determined in accordance with GAAP,
however, in no case will there be any reclassification (from the date of the
Interim Balance Sheet) of assets or liabilities between the current and
non-current categories.
"WORKING CAPITAL STATEMENT" - as defined in Section
2.e.i.
2. SALE AND TRANSFER OF SHARES; CLOSING.
a. Shares. Subject to the terms and conditions of
this Agreement, at the Closing, Seller will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Seller.
b. Purchase Price. The consideration for the Shares
comprises (i) the amount of SEVENTY-FIVE MILLION DOLLARS ($75,000,000.00) (the
"UNADJUSTED PURCHASE PRICE") minus any principal portion of the Escrow Amount,
if any, returned to Buyer pursuant to Section 2.g. hereof, (ii) the Adjustment
Amount (which can be a negative or positive amount), (iii) the Capital
Expenditure Shortfall Amount or the Capital Expenditure Surplus Amount, as the
case may be, and (iv) the Deferred Payment Amount.
c. Closing. The purchase and sale (the "CLOSING")
provided for in this Agreement will take place at the offices of Seller's
counsel, as soon as practicable, but in no event later than the fifth Business
Day following the satisfaction or waiver of all conditions to the obligations of
the parties to consummate the Contemplated Transactions (other than conditions
with respect to actions the respective parties will take at the Closing itself),
or at such other place or time as agreed by the parties. Subject to the
provisions of Section 11, failure to consummate the purchase and sale provided
for in this Agreement on the date and time and at the place determined pursuant
to this Section 2.c. will not result in the termination of this Agreement and
will not relieve any party of any obligation under this Agreement.
d. Closing Obligations. At the Closing:
i. Seller will deliver to Buyer:
(1) certificates representing
the Shares, duly endorsed
in blank (or accompanied by
duly executed stock
powers);
(2) a Technical Services
Agreement substantially in
the form of Exhibit
2.d.i.(2) executed by
Seller's Parent or any
other Affiliates of
Seller's Parent that are
designated by Seller's
Parent (the "TECHNICAL
SERVICES AGREEMENT");
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(3) a License Agreement
substantially in the form
of Exhibit 2.d.i.(3)
executed by the parties
thereto (the "LICENSE
AGREEMENT"); and
(4) the legal opinion of
Seller's counsel
substantially in the form
of Exhibit 2.d.i.(4).
ii. Buyer will deliver to Seller:
(1) the Unadjusted Purchase
Price less any Escrow
Amount in the form of a
wire transfer of
immediately available funds
delivered in accordance
with the instructions of
Seller;
(2) the Technical Services
Agreement executed by Buyer
and the Acquired Companies
specified therein;
(3) the License Agreement
executed by the parties
thereto;
(4) evidence of the deposit of
the Escrow Amount into the
Escrow Account; and
(5) the legal opinion of
Buyer's counsel
substantially in the form
of Exhibit 2.d.ii.(6).
e. Adjustment Procedure.
i. Seller will cause Ernst & Young, L.L.P.
("SELLER'S ACCOUNTANTS") to audit the consolidated working capital
statement of the Acquired Companies as of the Closing Date based on
information provided by the Company, and provide a computation in
accordance with GAAP of Working Capital as of the Closing Date (the
"WORKING CAPITAL STATEMENT"). Seller will deliver the Working Capital
Statement to Buyer within forty-five (45) days after the Closing Date,
and Seller shall cause Seller's Accountants to give Buyer and Buyer's
Accountants (defined below) access to Seller's Accountants and their
workpapers in order to evaluate the Working Capital Statement. The
Company shall, cooperate with Seller's Accountants in the preparation
of the Working Capital Statement. If within thirty (30) days following
delivery of the Working Capital Statement, Buyer has not given Seller
notice of its objection to the Working Capital Statement (which notice
must contain a detailed statement of the basis of Buyer's objection),
then the Working Capital reflected in the Working Capital Statement
will be used in computing the Adjustment Amount. If Buyer gives such
notice of objection, then the issues in dispute will be submitted
promptly to Seller's Accountants and PricewaterhouseCoopers, L.L.P.,
(the "BUYER'S ACCOUNTANTS"), for joint resolution. If issues in dispute
are submitted to Seller's Accountants and Buyer's Accountants for
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resolution, then (i) each party will furnish to the accountants such
workpapers and other documents and information relating to the disputed
issues as the accountants may request and are available to that party
or its Subsidiaries (or its independent public accountants), and will
be afforded the opportunity to present to the accountants any material
relating to the disputed issues and to discuss the disputed issues with
the accountants; (ii) the determination by the accountants, as set
forth in a notice delivered to all parties by the accountants within
thirty (30) days of submission, will be binding and conclusive on all
parties to this Agreement; and (iii) Buyer and Seller will each bear
the cost of their own accountants for such determination. If the
accountants are unable to resolve any such disputes, such accountants
shall appoint a third firm of certified public accountants to resolve
such disputes, and the determination of such third accounting firm
shall be conclusive and binding on the parties. During the period from
the Closing Date through the date of resolution of any dispute
regarding the Working Capital Statement as contemplated by this Section
2.e.i., Buyer will also provide Seller and its Representatives
reasonable access during normal business hours to the books, records,
facilities and employees of the Acquired Companies for the purposes of
preparing such Working Capital Statement and resolving any related
dispute. Buyer and Seller will each bear 50% of the fees of the third
firm of certified public accountants, if such accountants are retained
pursuant hereto.
ii. If the Adjustment Amount is greater than
zero, Buyer will pay the Adjustment Amount to Seller, and if the
Adjustment Amount is less than zero, Seller will pay the Adjustment
Amount to Buyer. All payments will be made together with interest per
annum at the prime rate as published in the Wall Street Journal on the
Closing Date for the period beginning on the Closing Date and ending on
the date of payment. Payments must be made by wire transfer of
immediately available funds within two (2) Business Days after the
final determination of the Adjustment Amount as provided herein.
f. Deferred Payment Amount Procedure
i. Buyer shall pay any Deferred Payment
Amount as calculated from the Final Accountant's Computation to Seller
in immediately available funds and to such accounts as Seller will
specify. Payment of all amounts under this section shall be subordinate
and junior in right of payment to all obligations of the Company for
borrowed money at the time of any such proposed payment other than
obligations owed to Affiliates of the Company.
ii. Within sixty (60) days following the end
of the Revenue Period, Seller will report to Buyer the ASMs for each
year in the revenue period based on Seller's Parent's public disclosure
thereof. As soon as reasonably practicable following the end of the
Revenue Period (but in no event later than the 90th day following the
end of the Revenue Period), Buyer shall cause its Certified Public
Accountants to prepare and deliver to Seller a computation
("Accountant's Computation") of the "DEFERRED PAYMENT AMOUNT" which
shall equal:
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(1) If the Actual AMR Revenues
equal or exceed the
Baseline Revenues, the Base
Amount plus Deferred
Payment Interest (to the
extent not previously paid)
for the period commencing
on the first day of the
Revenue Period and ending
on the date such Base
Amount is paid to Seller;
(2) If the Actual AMR Revenues
equal or exceed the
Threshold Revenues but are
less than the Baseline
Revenues, an amount equal
to (i) $666,666.66 plus
(ii) Deferred Payment
Interest (to the extent not
previously paid), for the
period commencing on the
first day of the Revenue
Period and ending on the
date such amount is paid to
Seller, for each percentage
point by which the Actual
AMR Revenues exceed the
Threshold Revenues (plus a
pro rata amount for each
partial percentage point);
or
(3) If the Actual AMR Revenues
are less than the Threshold
Revenues, $0.
Buyer shall have the option to pay Deferred Payment
Interest in cash annually or have the Deferred Payment Interest accrue
annually.
iii. Upon receipt of the Accountant's
Computation, Seller and its accountants shall have the right, during
the succeeding thirty (30) day period, to examine, at Seller's expense,
the Accountant's Computation and all records used to prepare such
Accountant's Computation. Seller shall notify the Buyer in writing, on
or before the last day of the thirty (30) day period, of any good faith
objections to the Accountant's Computation, setting forth a detailed
description of Seller's objections and the dollar amount of each such
objection. If Seller does not deliver such notice within such thirty
(30) day period, the Accountant's Computation shall be deemed to have
been accepted by Seller and deemed to be the Final Accountant's
Computation.
iv. If Seller in good faith objects to the
Accountant's Computation, Seller and Buyer shall attempt to resolve any
such objections within ten (10) days of Buyer's receipt of the Seller's
objections. If the parties agree upon the resolution of their dispute,
such resolution shall be conclusive and binding upon the parties. If
the parties are unable to resolve the matter within such ten (10) day
period, then the parties shall submit such dispute for final resolution
in accordance with the procedures set forth in Section 2.e.i. The
Accountant's Computation after the acceptance thereof by Seller or the
resolution of all disputes in connection therewith pursuant to Section
2.e.i. hereof is referred to herein as the "FINAL ACCOUNTANT'S
COMPUTATION."
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g. Escrow. If either party reasonably anticipates
that a Non-Mandatory Consent will not be obtained prior to Closing, then the
parties will negotiate in good faith to enter into an escrow agreement to
establish an escrow account (the "ESCROW ACCOUNT") with an escrow agent, all as
mutually agreed between the parties. At Closing, Buyer shall deposit into the
Escrow Account an amount equaling the value of each Non-Mandatory Consent, as
stipulated in Part C of Section 10.c. of Seller's Disclosure Schedule (the
"STIPULATED CONSENT VALUE"), that is not obtained by Seller prior to or on the
Closing Date (the "ESCROW AMOUNT"). At any time after the Closing Date and prior
to the end of the ninth full calendar month following the Closing Date (the
"CONSENT DEADLINE"), if Seller obtains any Non-Mandatory Consent that Seller had
not obtained prior to Closing (a "POST-CLOSING CONSENT"), then the Seller shall
promptly provide to Buyer a copy (or other satisfactory evidence) of the
obtained Post-Closing Consent. Within five (5) Business Days of Buyer's receipt
of the copy (or other evidence) of the Post-Closing Consent, Buyer shall
instruct the escrow agent to release from the Escrow Account that portion of the
Escrow Amount that corresponds to the Stipulated Consent Value of the
Post-Closing Consent, plus any interest accrued on such portion. The Escrow
Account shall remain in place until the earlier of (i) the date on which all
Post-Closing Consents have been obtained by Seller and (ii) the Consent
Deadline. If on the Consent Deadline, Seller has not obtained all of the
Post-Closing Consents, then Buyer may close the Escrow Account and retain any
remaining portion of the Escrow Amount including interest on such remaining
portion. If any Post-Closing Consents that are not obtained on or prior to the
Closing Date are subsequently granted subject to a condition that would have a
material adverse effect on the operations of the Acquired Company to which such
Post-Closing Consent pertains, Buyer and Seller shall negotiate in good faith to
determine an amount that reasonably compensates the Acquired Company for such
material adverse effect. Such compensatory amount shall be deducted from the
portion of the Escrow Amount to be disbursed to Seller and such deducted amount
shall be released to Buyer.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer the following as set forth in this Section 3. No
representations or warranties are made by Seller, any Acquired Company, any
Affiliate (other than Seller's Parent as set forth in Section 5 hereof) or any
Representative thereof in connection with the Contemplated Transactions, except
as expressly set forth in this Section 3.
a. Organization and Good Standing. Except as set
forth in Seller's Disclosure Schedule, Seller and each Acquired Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with the requisite corporate power
and authority to conduct its business as it is now being conducted and to own or
use the properties and assets that it purports to own or use, with such
exceptions as would not individually or collectively have a Material Adverse
Effect. Except as set forth in Seller's Disclosure Schedule, each Acquired
Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, save for such
exceptions as would not individually or collectively have a Material Adverse
Effect.
b. Authority; No Conflict.
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i. This Agreement constitutes the legal,
valid, and binding obligation of Seller enforceable against Seller in
accordance with its terms, subject to bankruptcy, reorganization,
insolvency and other similar laws affecting the enforcement of
creditors' rights in general and to general principles of equity
(regardless of whether considered in a proceeding in equity or an
action at law). Seller has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations under
this Agreement. The execution, delivery and performance of this
Agreement and the consummation of the Contemplated Transactions have
been duly and validly authorized by all necessary corporate action on
the part of Seller.
ii. Except as set forth in Seller's
Disclosure Schedule and save for such exceptions as would not
individually or collectively have a Material Adverse Effect, neither
the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will:
(1) contravene or result in a
violation of any provision
of the Organizational
Documents of the Acquired
Companies;
(2) contravene, conflict with,
or result in a violation
of, or give any
Governmental Body the right
to challenge any of the
Contemplated Transactions
or to exercise any remedy
or obtain any relief under,
any Legal Requirement or
any Order to which any
Acquired Company or Seller,
or any of the assets owned
by any Acquired Company, is
subject;
(3) contravene or result in a
violation of any of the
terms or requirements of,
or give any Governmental
Body the right to revoke,
withdraw, suspend, cancel,
terminate, or modify, any
Governmental Authorization
that is held by any
Acquired Company;
(4) result in the imposition or
creation of any Encumbrance
upon or with respect to any
of the assets owned by any
Acquired Company;
(5) contravene, conflict with,
or result in a violation or
breach of any provision of,
or give any Person the
right to declare a default
or exercise any remedy
under, or to accelerate the
maturity or performance of,
or to cancel, terminate, or
modify, any Applicable
Contract; and
(6) require the Consent of any
Governmental Body.
-18-
24
iii. Except as set forth in Seller's
Disclosure Schedule, neither Seller nor any Acquired Company is or will
be required to give any notice to or obtain any Consent or Governmental
Authorizations from any Person in connection with the consummation or
performance of any of the Contemplated Transactions.
c. Capitalization.
i. The authorized capital stock of the
Company consists of:
Shares of Shares of
Authorized Issued and
Company Common Stock Outstanding Stock Par Value
------- ------------ ----------------- ---------
AMR Services
Corporation 1,000 1,000 $1.00
The authorized capital stock of each of the Acquired Companies other than the
Company is as set forth in Seller's Disclosure Schedule. Except as set forth in
Seller's Disclosure Schedule, all of the outstanding equity securities of each
Acquired Company have been duly authorized and validly issued and are fully paid
and nonassessable. Except as set forth in Seller's Disclosure Schedule, all of
the outstanding equity securities and other securities of each Acquired Company
are owned of record and beneficially by Seller or one or more of the Acquired
Companies, free and clear of all Encumbrances. Except as set forth on Seller's
Disclosure Schedule, there are no warrants, options, convertible or exchangeable
securities, preemptive rights or Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of any Acquired Company.
Except as set forth on Seller's Disclosure Schedule, no Acquired Company owns,
or has any Contract to acquire, any equity securities or other securities of any
Person (other than Acquired Companies) or any direct or indirect equity or
ownership interest in any other business. Schedule 3.c. of Seller's Disclosure
Schedule sets forth a list distinguishing each dormant and active Acquired
Company.
ii. Under consummation of the Contemplated
Transactions, the Seller will transfer to the Buyer, and Buyer will
have, good and valid title to, the Shares, free and clear of all
Encumbrances (other than those that may be created by Buyer).
d. Financial Statements. Seller has delivered to
Buyer: (i) unaudited consolidated balance sheets of the Acquired Companies as of
December 31 in each of 1995 and 1996, and the related unaudited consolidated
statements of income and changes in stockholder's equity, for each of the fiscal
years then ended, (ii) an unaudited consolidated balance sheet of the Acquired
Companies as of December 31, 1997 (the "BALANCE SHEET"), and the related
consolidated statements of income and changes in stockholder's equity, for the
fiscal year then ended, and (iii) an unaudited consolidated balance sheet of the
Acquired Companies as of September 30, 1998 (the "INTERIM BALANCE SHEET") and
the related unaudited consolidated statement of income for the nine months then
ended. Such financial statements were prepared in
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25
accordance with the procedures and principles set forth in the Controller's
Manual on a basis consistent with the past preparation of prior financial
statements. Such financial statements fairly present in all material respects
the financial condition, results of operations and changes in stockholder's
equity, as the case may be, of the Acquired Companies as of their respective
dates and for the periods referred to in such financial statements, all in
accordance with such Controller's Manual on a basis consistent with the past
preparation of prior financial statements, subject, in the case of the interim
financial statements specified above, to (i) normal recurring year-end
adjustments (the effect of which will not have a Material Adverse Effect) and
(ii) the absence of notes.
e. Books of Account. The books of account of the
Acquired Companies, all of which have been made available to Buyer, are complete
and correct in all respects, save for such exceptions as would not individually
or collectively have a Material Adverse Effect, and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls, save for such exceptions as would not
individually or collectively have a Material Adverse Effect. Except for any
item, the absence of which, individually or collectively, would not have a
Material Adverse Effect: the minute books of the Acquired Companies contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Boards of Directors, and committees of the Board
of Directors of the Acquired Companies, and no meeting of any such stockholders,
Board of Directors or committees has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing Date, all of
those books and records will be in the possession of the Acquired Companies.
f. Title to Properties, Encumbrances.
i. The Acquired Companies own (with good and
indefeasible title in the case of real property, subject only to the
matters permitted by the following sentence) all the properties and
assets (whether real, personal, or mixed and whether tangible or
intangible) reflected in the Balance Sheet and the Interim Balance
Sheet (except in each case for assets held under capitalized leases and
personal property and assets sold or otherwise disposed of since the
date of the Balance Sheet and the Interim Balance Sheet, as the case
may be, in the Ordinary Course of Business, as otherwise disclosed in
Seller's Disclosure Schedule and properties and assets which may be
transferred by the Acquired Companies on or prior to the Closing Date
as part of the Intercompany Transactions), save for such exceptions as
would not individually or collectively have a Material Adverse Effect.
Except as set forth in Seller's Disclosure Schedule, all properties and
assets reflected in the Balance Sheet and the Interim Balance Sheet are
held by an Acquired Company free and clear of all Encumbrances and are
not, in the case of real property, subject to any rights of way,
building use restrictions, exceptions, variances, reservations, or
limitations of any nature, except, with respect to all such properties
and assets (i) mortgages or security interests shown on the Balance
Sheet or the Interim Balance Sheet as securing specified liabilities or
obligations, (ii) liens for current taxes not yet due (to the extent
such liens have been accounted for in the Balance Sheet and the Interim
Balance Sheet), (iii) with respect to real property, (1) imperfections
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26
of title, if any, none of which materially detracts from the value of
the property subject thereto, and (2) zoning laws and other land use
restrictions that do not materially impair the use of the property
subject thereto and (iv) any such matters which would not individually
or collectively have a Material Adverse Effect.
ii. Seller's Disclosure Schedule contains a
list of each real property lease that is material to the respective
stations at which the Acquired Companies conduct operations, including
any amendment, modification or supplement thereto (the "LEASES").
Seller has previously made available to Buyer true, correct and
complete copies of the Leases. Except as set forth in Seller's
Disclosure Schedule, the Acquired Companies have good and valid title
to the leasehold estates conveyed under the Leases, free and clear of
liens, except (i) liens shown on the Balance Sheet or the Interim
Balance Sheet, (ii) liens for current taxes not yet due and payable,
(iii) zoning, building and other similar governmental restrictions and
liens imposed by operation of law (including without limitation
mechanics', carriers', workmen's, repairmen's, landlord's or other
similar liens arising from or incurred in the ordinary course of
business and for which the underlying payments are not yet delinquent),
and (iv) easements, covenants, encroachments, rights-of-way or other
similar restrictions and imperfections of title, none of which items
referred to in the foregoing clauses (iii) and (iv) materially impairs
the use of the property subject thereto in the Business of the Acquired
Companies as presently conducted. The Leases are valid and, to the
Knowledge of Seller, in full force and effect and are binding and
enforceable in accordance with their terms, subject to bankruptcy,
reorganization, insolvency and other similar laws affecting the
enforcement of creditors' rights in general and to general principles
of equity (regardless of whether considered in a proceeding in equity
or an action at law). Except as set forth in Seller's Disclosure
Schedule, the Acquired Companies are not in default with respect to any
payment obligation under the Leases and, to the Knowledge of Seller,
there are no other existing material defaults on the part of the
Acquired Companies or any other party (including any landlord) with
respect to the Leases. To the Knowledge of Seller, no event has
occurred which (with or without notice, lapse of time or both) would
constitute a material default on the part of the Acquired Companies or
such other parties under the Leases. Except as set forth in Seller's
Disclosure Schedule, the consummation of the contemplated transactions
will not constitute a material default, or give rise to a right of
termination, cancellation or acceleration of any right under, the
Leases.
iii. Except as set forth in Seller's
Disclosure Schedule:
(1) the Acquired Companies have
received no notice, demand
or request from any
insurance company, any
board of fire underwriters
(or organization exercising
functions similar thereto)
or any Governmental Body or
any other Person requesting
the performance of any work
or alteration in respect to
the real property leased by
the Acquired Companies
under the Leases, save for
such
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27
exceptions that would not
individually or
collectively have a
Material Adverse Effect;
and
(2) to the Knowledge of the
Seller, the real property
leased by the Acquired
Companies under the Leases
is in a state of working
condition and repair
(ordinary wear and tear and
refurbishing excepted).
g. No Undisclosed Liabilities. Except as set forth in
Seller's Disclosure Schedule or contemplated pursuant to the terms of this
Agreement, on the Closing Date none of the Acquired Companies will have any
liabilities of a type required to be set forth on the Balance Sheet or on the
Interim Balance Sheet except for (i) liabilities reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet, (ii) liabilities incurred in
the Ordinary Course of Business since the respective dates of such balance
sheet, and (iii) liabilities that would not individually or collectively have a
Material Adverse Effect.
h. Taxes.
i. Except as set forth in Seller's
Disclosure Schedule, the Company and any of its Subsidiaries
incorporated under the laws of the United States of America have been
included in the consolidated federal income tax returns of the
affiliated group of which Seller's Parent is the common parent (the
"AMR GROUP") at least since the taxable year beginning January 1, 1990
and continuing through the taxable year ending December 31, 1997, and
will be included in the consolidated federal income tax returns of the
AMR Group for all taxable periods through the Closing Date.
ii. Except as set forth in Seller's
Disclosure Schedule and save for such exceptions as would not
individually or collectively have a Material Adverse Effect, (1) the
Acquired Companies have timely filed or will timely file (or, where
permitted or required, Seller's Parent has timely filed or will timely
file) all returns, information returns and statements required to be
filed by any of the Acquired Companies in respect of any Taxes for any
period ending on or before the Closing Date (collectively, "RETURNS");
(2) as of the time of the filing, the Returns correctly reflected (and,
as to Returns not filed as of the date hereof, will correctly reflect)
the Taxes payable by the Acquired Companies; (3) the Acquired Companies
have withheld and paid over to the proper Governmental Body all Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any Employee or other persons; (4) all Taxes shown as due
or payable on the Returns have been or will be paid at the time of
filing thereof; (5) neither Seller's Parent nor, to the Knowledge of
Seller, any of the Acquired Companies, has received or has Knowledge of
any notice of deficiency or assessment or proposed deficiency or
assessment which could affect the Tax liability of any of the Acquired
Companies or its properties from any Governmental Body; (6) there are
no outstanding agreements or waivers by, or with respect to, any of the
Acquired Companies that extend the statutory period of limitations
applicable to any Return or Tax; (7) there are no pending Tax claims,
audits, proceedings or controversies involving or affecting the
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28
Tax liability of any of the Acquired Companies; (8) set forth on the
Seller's Disclosure Schedule is a list of all federal income tax audits
that have ended within three years of the date of this Agreement that
resulted or could have resulted in adjustments to Taxes imposed upon
the Acquired Companies; (9) no tax liens have been filed and no claims
are being asserted with respect to any Taxes of the Company or any
Subsidiary; (10) neither the Company nor any Subsidiary is a party to
any agreement or understanding providing for the allocation or sharing
of Taxes other than with respect to each other; (11) neither the
Company nor any Subsidiary is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by the Company or any
Subsidiary and neither the Company nor any Subsidiary has knowledge
that the Internal Revenue Service has proposed any such adjustment or
change in accounting method, except as set forth in Seller's Disclosure
Schedule; (12) the acquisition of the stock of the Company will not be
a factor causing any payments to be made by the Company or any
Subsidiary to be nondeductible (in whole or in part) pursuant to
Section 280G of the Code; (13) neither the Company nor any Subsidiary
has filed with respect to any item a disclosure statement pursuant to
Section 6662 of the Code or any comparable disclosure with respect to
foreign, state and/or local tax statutes; and (14) no property of the
Company or any Subsidiary is "tax exempt use property" within the
meaning of Section 168(h) of the Code, and neither the Company nor any
Subsidiary is a party to any lease made pursuant to Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended, except as set forth
on Seller's Disclosure Schedule. For purposes of the Agreement "TAX"
means any of the Taxes, and "Taxes" means any tax, including, without
limitation, any income, gross receipts, sales, use, ad valorem,
transfer, franchise, withholding, payroll, employment, excise,
occupation, premium, property, stamp or other tax, duty or charge,
together with any interest, any penalties, additions to such tax or
additional amounts imposed by any Governmental Body (domestic or
foreign).
i. Compliance with Legal Requirements;
Governmental Authorizations.
(i) Except (a) for any
noncompliance specifically covered by any other representation or
warranty contained in this Section 3 (for example, Taxes, labor
relations, Employee Plans and environmental matters) (it being the
intention of the parties that any such noncompliance will be governed,
if at all, by such other representations and warranties), (b) as set
forth in Seller's Disclosure Schedule and (c) for such exceptions as
would not individually or collectively have a Material Adverse Effect:
(1) each Acquired Company is,
and at all times since
January 1, 1995 has been,
in compliance with each
Legal Requirement that is
or was applicable to it or
to the conduct or operation
of its business or the
ownership of any of its
assets;
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29
(2) no event has occurred or
circumstance exists that
(with or without notice or
lapse of time) (A) would
constitute or result in a
violation by any Acquired
Company of, or a failure on
the part of any Acquired
Company to comply with, any
Legal Requirement or (B)
would give rise to any
obligation on the part of
any Acquired Company to
undertake, or to bear all
or any material portion of
the cost of, any remedial
action under any Legal
Requirement;
(3) to the Knowledge of Seller,
neither Seller nor any of
the Acquired Companies has
received any written notice
or other communication from
any Governmental Body
regarding (A) any actual or
alleged violation of, or
failure to comply with, any
Legal Requirement by any
Acquired Company, or (B)
any actual or alleged
obligation on the part of
any Acquired Company to
undertake, or to bear all
or any portion of the cost
of, any remedial action
under any Legal
Requirement.
ii. Except (a) for those Governmental
Authorizations specifically covered by any other representation or
warranty contained in this Section 3 (for example, Taxes and
environmental matters) (it being the intention of the parties that such
Governmental Authorizations will be governed, if at all, by any such
other representations and warranties), (b) as set forth in Seller's
Disclosure Schedule and (c) for such exceptions as would not
individually or collectively have a Material Adverse Effect:
(1) Seller's Disclosure
Schedule contains a
complete and accurate list
of each Governmental
Authorization that is held
by any Acquired Company;
(2) Each Acquired Company holds
all Governmental
Authorizations required to
conduct the Business;
(3) each Acquired Company is in
compliance with all of the
terms and requirements of
each Governmental
Authorization identified in
Seller's Disclosure
Schedule;
(4) no event has occurred or
circumstance exists that
(A) constitutes a violation
of or a failure to comply
with any term or
requirement of any
Governmental Authorization
listed on Seller's
Disclosure
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Schedule, or (B) could
reasonably be expected to
result in the revocation,
withdrawal, suspension,
cancellation, or
termination of any
Governmental Authorization
listed in Seller's
Disclosure Schedule; and
(5) to the Knowledge of Seller,
neither Seller nor any of
the Acquired Companies has
received any written notice
or other communication from
any Governmental Body
regarding (A) any actual or
alleged violation of, or
failure to comply with, any
Governmental Authorization,
or (B) any actual or
alleged revocation,
withdrawal, suspension,
cancellation, termination
of, or modification to any
Governmental Authorization.
iii. Except as set forth in Seller's
Disclosure Schedule, Seller and each Acquired Company does not have any
pending formal or informal enforcement Proceedings that were initiated
by the Federal Aviation Administration ("FAA") against any Acquired
Company or any officers or employees (acting in their official capacity
for any Acquired Company). The term "pending formal or informal
enforcement Proceeding" includes (1) any Letter of Investigation,
Notice of Proposed Civil Penalty, Notice of Proposed Certificate
Action, Regional or National Aviation Safety Inspection Program Report,
Certificate Suspension/Amendment/Revocation hearing before the National
Transportation Safety Board, action by the U.S. Attorney's office for
Civil Penalty or other similar action, (2) which alleges that any
Acquired Company and/or its officers, agents or employees acting in
their official capacity for any Acquired Company has violated 49
USC Section 5101, 14 XXX Xxxx 0, 00 XXX Part 171, or other statutes and
regulations enforced by the FAA, and (3) which have not been closed.
"Closing" includes all actions recorded in writing by the FAA and does
not include matters resulting solely in an oral reprimand.
j. Legal Proceedings; Orders.
i. Except as set forth in Seller's
Disclosure Schedule and save for such exceptions as would not
individually or collectively have a Material Adverse Effect, there is
no pending Proceeding:
(1) that has been commenced
against any Acquired
Company; or
(2) that challenges or
prevents, delays, makes
illegal, or otherwise
interferes with, any of the
Contemplated Transactions.
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31
ii. Except as set forth in Seller's
Disclosure Schedule and save for such exceptions as would not
individually or collectively have a Material Adverse Effect:
(1) there is no Order to which
any of the Acquired
Companies, or any of the
assets owned, or to
Seller's Knowledge leased,
by any Acquired Company, is
subject;
(2) Seller is not subject to
any Order that affects any
of the assets owned, or to
Seller's Knowledge leased,
by any Acquired Company;
and
(3) each Acquired Company is in
compliance with each Order
to which it, or any of the
assets owned, or to
Seller's Knowledge leased,
by it, is subject.
k. Absence of Certain Changes and Events. Except as
set forth in Seller's Disclosure Schedule and save for such exceptions as would
not individually or collectively have a Material Adverse Effect or have been
approved by Buyer since the date of the Interim Balance Sheet, the Acquired
Companies have conducted their businesses only in the Ordinary Course of
Business and there has not been any:
i. change in any Acquired Company's
authorized or issued capital stock; grant of any stock option or right
to purchase shares of capital stock of any Acquired Company; issuance
of any security convertible into such capital stock; or purchase,
redemption, retirement, or other acquisition by any Acquired Company of
any shares of any such capital stock or amendment to the organizational
documents of any Acquired Company;
ii. payment or increase or proposed payment
or increase by any Acquired Company of any bonuses, salaries, or other
compensation to any officer of any Acquired Company or entry into any
employment, severance, or similar Contract with any such person other
than in the Ordinary Course of Business;
iii. except for ordinary wear and tear,
damage to or destruction or non-cash loss of any asset or property of
any Acquired Company, not covered by insurance;
iv. contract for, finance of, lease with
respect to, or payment for any single capital expenditure by any
Acquired Company in excess of $100,000 during the period from the date
of the Interim Balance Sheet through the date of this Agreement;
v. merger with or into or consolidation with
any other Person;
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32
vi. declaration, set aside or payment of any
non-cash dividend or non-cash distributions of any kind to the
stockholders of any Acquired Company;
vii. adoption of a plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of any Acquired Company (except
with respect to any dormant company as identified in Sections 3.a. and
3.c. of Seller's Disclosure Schedule);
viii. revaluation of any portion of the
non-current assets of the Acquired Companies in excess of $50,000;
ix. waiver or cancellation of any material
debt or right, claim or privilege other than in the Ordinary Course of
Business;
x. sale, lease, or other disposition of any
material asset of any Acquired Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material asset of
any Acquired Company; or
xi. except in the Ordinary Course of
Business incur any liability, guaranty, or off-balance sheet liability
in excess of $100,000; or
xii. agreement, whether oral or written, by
any Acquired Company to do any of the foregoing.
l. Contracts; No Defaults.
i. Save for such exceptions as would not
individually or collectively have a Material Adverse Effect, Seller's
Disclosure Schedule contains a complete and accurate list of, and
Seller has delivered to Buyer true and (to the extent written) complete
copies of:
(1) each Applicable Contract to
which any of the Acquired
Companies is a party;
(2) each collective bargaining
agreement in effect with
any labor union to which
any Acquired Company is
subject;
(3) each joint venture,
partnership, and other
Applicable Contract
(however named) involving a
sharing of profits or
losses by any Acquired
Company with any other
Person;
(4) each Applicable Contract
containing covenants that
purport to limit the
freedom of any Acquired
Company to engage in any
line of business or to
compete with any Person;
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33
(5) each written warranty,
guaranty, and/or other
similar undertaking with
respect to contractual
performance extended by any
Acquired Company other than
in the Ordinary Course of
Business; and
(6) each amendment, supplement
and modification in respect
of any of the foregoing.
ii. Except as set forth in Seller's
Disclosure Schedule and save for such exceptions as would not
individually or collectively have a Material Adverse Effect, each
Applicable Contract is in full force and effect and is valid and
enforceable against an Acquired Company in accordance with its terms,
subject to bankruptcy, reorganization, insolvency and other similar
laws affecting the enforcement of creditors' rights in general and to
general principles of equity (regardless of whether considered in a
proceeding in equity or an action at law) and will remain in full force
and effect immediately following the Closing Date after giving effect
to the Contemplated Transactions and any notices to be given or
Consents required to be obtained pursuant to the provisions of the
Applicable Contract.
iii. Except as set forth in Seller's
Disclosure Schedule, and save for such exceptions as would not
individually or collectively have a Material Adverse Effect:
(1) each Acquired Company is
in compliance with all
applicable terms and
requirements of each
Applicable Contract;
(2) to the Knowledge of Seller,
each other Person that has
any obligation or liability
under any Applicable
Contract is in compliance
with all applicable terms
and requirements of such
Applicable Contract; and
(3) no event has occurred or
circumstance exists that
contravenes or results in a
violation or breach of, or
gives any Person other than
any Acquired Company the
right to accelerate, cancel
or terminate any Applicable
Contract.
m. Environmental Matters. Except as set forth in
Seller's Disclosure Schedule or the Environmental Reports and save for such
exceptions as would not individually or collectively have a Material Adverse
Effect:
i. To the Knowledge of Seller, each Acquired
Company is, and at all times since January 1, 1995 has been in
compliance with, and has not been and is not in violation of, any
Environmental Law. Neither Seller nor any Acquired Company has received
any pending written Order or written regulatory notice from (1) any
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34
Governmental Body, or (2) the current or prior owner or operator of any
Facility, alleging any failure of any Acquired Company to comply with
any Environmental Law, or alleging any obligation of any Acquired
Company to undertake or bear the cost of any Environmental Liabilities
with respect to any of the Facilities or any other property to which
any Hazardous Material was transferred or disposed of by any Acquired
Company.
ii. There are no pending Environmental
Claims or Proceedings or, to the Knowledge of Seller, Threatened
Environmental Claims arising under any Environmental Law affecting any
of the Facilities.
iii. To the Knowledge of Seller, there has
been no Release of any Hazardous Materials at or from the Facilities.
iv. Seller has prior to the date hereof
given Buyer copies of the Phase I Assessments and other environmental
reports listed on Section 3.m. of Seller's Disclosure Schedule
reflecting the environmental condition of the Facilities (the
"ENVIRONMENTAL REPORTS"). Buyer hereby acknowledges receipt of such
Environmental Reports and acknowledges that such Environmental Reports
are provided (i) solely for the convenience of Buyer in conducting
Buyer's independent due diligence investigation, and (ii) with no
representation or warranty by Seller, Seller's Parent or any Acquired
Company as to the accuracy or completeness of the Environmental
Reports.
v. Each of the Acquired Companies has
obtained and is in compliance with Governmental Authorizations required
under Environmental Laws to conduct the business of the Acquired
Companies as presently conducted;
vi. To Seller's Knowledge, no Environmental
Claims have been asserted against the Acquired Companies or any
predecessor in interest nor are there any Threatened Environmental
Claims against any of the Acquired Companies;
vii. Seller has not received notice that any
Environmental Claims have been asserted relating to any facilities that
may have received Hazardous Materials generated by any of the Acquired
Companies;
viii. Except as set forth on Seller's
Disclosure Schedule, no underground storage tanks exist at any of the
Facilities.
The representations and warranties of Seller contained in this
Section 3.m. constitute all of the representations and warranties of Seller
concerning matters encompassed within the purview of Environmental Laws or
concerning Environmental Liabilities and Hazardous Materials and will not be
construed or deemed to be included in other, more general representations and
warranties, including without limitation those contained in Sections 3.i. and
3.j.
n. Employees. To the Knowledge of Seller, no Employee
of any Acquired Company or any Transferred Employee is a party to any agreement,
including any
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35
confidentiality, non-competition, or proprietary rights agreement, between such
Employee or Transferred Employee and any other Person besides the Acquired
Companies ("PROPRIETARY RIGHTS AGREEMENT") that would be material to (i) the
performance of his or her duties as an Employee of the Acquired Companies or
(ii) the ability of any Acquired Company to conduct its business in the Ordinary
Course of Business. On the date of this Agreement, the Acquired Companies shall
have adequate numbers of employees necessary to operate their businesses as
currently operated.
o. Labor Relations; Compliance. Except as set forth
in Seller's Disclosure Schedule, since January 1, 1995, no Acquired Company has
been or is a party to any collective bargaining agreement. Except as set forth
in Seller's Disclosure Schedule and save for such exceptions as would not
individually or collectively have a Material Adverse Effect, since January 1,
1995, there has not been and there is not presently existing (i) any strike or
work stoppage, or any organizational activity with respect to non-unionized
Employees or Transferred Employees, and to the Knowledge of Seller, no such
action is contemplated, or (ii) any petition for a union election, demand for
recognition or request for voluntary recognition by a collective bargaining
agent. Except as set forth in Seller's Disclosure Schedule, and save for such
exceptions as would not individually or collectively have a Material Adverse
Effect, there is not presently existing any Proceeding against any Acquired
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters (including any charge or complaint filed
by an Employee or Transferred Employee or union with any court, the National
Labor Relations Board, the National Mediation Board, the Equal Employment
Opportunity Commission, the Department of Labor or any comparable Governmental
Body). There is no lockout of any Employees by any Acquired Company, and to the
Knowledge of Seller, no such action is contemplated by any Acquired Company.
Except as set forth in Seller's Disclosure Schedule and save for such exceptions
as would not individually or collectively have a Material Adverse Effect, each
Acquired Company has complied with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing.
The representations and warranties of Seller contained in this Section 3.o.
constitute all of the representations and warranties of Seller concerning
matters relating to labor relations and will not be construed or deemed to be
included in other, more general representations and warranties, including
without limitation those contained in Sections 3.i. and 3.j.
p. Intellectual Property Assets.
i. Intellectual Property Assets. The term
"INTELLECTUAL PROPERTY" means:
(1) foreign and domestic
trademarks, service marks,
trade names, fictitious
names, Internet domain
names, d/b/a's, collective
marks, certification marks,
logos, symbols, trade
dress, other indicia of
source,
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36
whether registered or
unregistered, and
applications and
registrations therefor
(collectively, "MARKS");
(2) foreign and domestic
patents, industrial
designs, inventions and
applications and
registrations therefor
(collectively, "PATENTS");
(3) foreign and domestic
copyrights in published
works and unpublished
works, and applications for
registration and
registrations therefor
(collectively,
"COPYRIGHTS");
(4) know-how, trade secrets,
confidential information,
customer and vendor lists
and files, software,
proprietary and technical
information, data, process
technology, plans, drawings
and blueprints
(collectively, "TRADE
SECRETS"); and
(5) rights of publicity and
other proprietary rights.
All Intellectual Property owned, used, or licensed,
as licensee or licensor, by each Acquired Company is herein called "INTELLECTUAL
PROPERTY ASSETS." Seller's Disclosure Schedule contains a complete list of all
registered Marks, material unregistered Marks, Patent applications, issued
Patents and registrations and Copyright registrations owned by the Acquired
Companies and their designation (e.g. Xxxx Copyright, etc.), save for such
exceptions as would not individually or collectively have a Material Adverse
Effect.
ii. Intellectual Property Necessary for the
Business. Save for such exceptions as would not individually or
collectively have a Material Adverse Effect and except as set forth in
Seller's Disclosure Schedule, the Intellectual Property Assets
constitute all Intellectual Property necessary for the operation of the
Acquired Companies' Business as they are currently conducted. Except as
set forth on Seller's Disclosure Schedule, one or more of the Acquired
Companies is the owner of all right, title, and interest in and to, or
the licensee of, each of the Intellectual Property Assets, free and
clear of all Encumbrances, save for those that would not individually
or collectively have a Material Adverse Effect, and has the right to
use without further payment to any Person (except as contemplated by
those applicable license agreements identified in Seller's Disclosure
Schedule) all of such Intellectual Property Assets.
iii. Infringement. To Seller's Knowledge, no
Acquired Company is violating the Intellectual Properly rights
belonging to any Person and, to Seller's Knowledge, there is no
violation by any Person of any Intellectual Property Assets, save for
such exceptions as would not individually or collectively have a
Material Adverse Effect.
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37
iv. Except as otherwise set forth in
Seller's Disclosure Schedule and save for those that would not
individually or collectively have a Material Adverse Effect:
(1) Each of the registered
Patents, issued Patents,
registered Trademarks and
registered Copyrights owned
by the Acquired Companies,
or if not owned then to
Seller's Knowledge, is
valid, subsisting and in
full force and effect.
(2) No Intellectual Property
Asset owned by the Acquired
Companies, or if not owned
then to Seller's Knowledge,
is the subject of any
outstanding Order or
agreement (including
without limitation
trademark coexistence
agreements, trademark
consent agreements, and
covenants not to xxx), that
restricts or limits in any
way any Acquired Company's
use of, rights to or
enforcement of such
Intellectual Property
Asset.
(3) To Seller's Knowledge no
claim or position is
currently being asserted or
threatened that any of the
Acquired Companies has
violated any Intellectual
Property of any Person, or
breached any agreement
which grants Intellectual
Property to any of the
Acquired Companies.
(4) To Seller's Knowledge no
claim or position is
currently being asserted or
threatened that any of the
Intellectual Property
Assets is invalid,
unenforceable,
unpatentable,
unregisterable or
cancelable.
q. Employee Benefit Matters.
i. Seller's Disclosure Schedule sets forth a
complete and accurate list of each pension, retirement, savings,
disability, medical, dental, health, or life plan or similar
arrangement (including any individual life, death benefit, group
insurance, profit sharing, deferred compensation, stock option, bonus,
incentive, vacation, severance, or other employee benefit plan, trust,
material arrangement, contract, agreement, material policy, or material
commitment (including without limitation, any pension plan ("PENSION
PLAN") as defined in Section 3(2) of ERISA, and any welfare plan as
defined in Section 3(1) of ERISA ("WELFARE PLAN")), whether funded,
insured, or self-funded for any directors, Employees or agents or the
dependents thereof, which as of the date hereof is maintained or
contributed to by any of the Acquired Companies ("EMPLOYEE PLANS").
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38
ii. None of the Acquired Companies currently
maintain or contribute to and have not at any time maintained or
contributed to any Pension Plan subject to Title IV of ERISA.
iii. Except as set forth in Seller's
Disclosure Schedule, none of the Employee Plans is a Pension Plan or is
or was a multiemployer plan (within the meaning of ERISA Section
3(37)(A)).
iv. Seller has delivered to Buyer true and
accurate copies of each Employee Plan and any associated funding
instruments or contracts with service providers that relate to any
Employee Plan, the most recent summary plan description for each
Employee Plan subject thereto, copies of all IRS determination letters
in the case of all Employee Plans intended to qualify under Code
Section 401(a), copies of all other correspondence with any
governmental agency relating to any Employee Plan and affecting any of
the Acquired Companies, and the annual reports required to be filed
under ERISA for the last two years with respect to any Employee Plans.
v. To the Knowledge of Seller, the Employee
Plans have been operated in material compliance with all federal, state
and local laws applicable to such Employee Plans, and have been
maintained and operated in all material respects in accordance with the
terms and conditions of the respective plan documents. There is no
pending Proceeding or, to Seller's Knowledge, Threatened Claim relating
to any Employee Plan, other than claims for benefits under the Employee
Plans.
vi. The Acquired Companies have made all
material required contributions or paid in full all material required
insurance premiums with regard to the Employee Plans for policy or plan
years or other applicable periods ending on or before the Closing Date
to the extent due or owing as of the Closing Date. Save for those
exceptions which would not individually or collectively have a Material
Adverse Effect and except as set forth in Seller's Disclosure Schedule,
the Acquired Companies have made appropriate entries in their
respective financial records and statements for all obligations and
liabilities under the Employee Plans that have accrued but are not yet
due.
vii. No Welfare Plan provides any benefits
or coverage to any retired or former Employees or active Employees
following such Employees' retirement or termination of service except
as required under Section 4980B of the Code.
viii. Each Foreign Employee Plan (as defined
below) has been maintained in material compliance with its terms and
with the requirements of any and all applicable laws and has been
maintained, where required, in good standing in all material respects
with applicable regulatory entities. Except as set forth in Seller's
Disclosure Schedule, none of the Acquired Companies has any unfunded
liability with respect to benefits under any such Foreign Employee Plan
or has incurred any material liabilities in connection with the
termination of or withdrawal from any Foreign Employee Plan. "FOREIGN
EMPLOYEE PLAN" means (i) any plan, fund or other similar program
established or maintained outside the United States of America by any
of the Acquired Companies
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primarily for the benefit of Employees residing outside of the United
States of America which plan, fund or other similar program provides
retirement income for such Employees, results in a deferral of income
for such Employees in contemplation of retirement or provides payments
to be made to such Employees upon termination of employment, and which
plan is not subject to ERISA or the Code, and (ii) any plan, fund or
other similar program established or maintained outside the United
States of America by any of the Acquired Companies primarily for the
benefit of Employees residing outside of the United States of America
which plan, fund or similar program is not described in (i) above
including, but not limited to, any plan, fund or other similar program
established or maintained outside the United States of America by any
of the Acquired Companies providing benefits comparable to those
provided under a Welfare Plan.
The representations and warranties of Seller contained in this Section 3.q.
constitute all of the representations and warranties of Seller concerning
matters relating to employee benefit matters and will not be construed or deemed
to be included in other, more general representations and warranties, including
without limitation those contained in Sections 3.i. and 3.j.
r. Brokers or Finders. Except as set forth in
Seller's Disclosure Schedule, Seller, Seller's Parent and their respective
Representatives have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement that are payable by Buyer or
any Acquired Company.
s. Insurance. Seller's Disclosure Schedule lists all
insurance policies owned or held by the Acquired Companies on the date hereof,
save for those insurance policies that the failure to so have would not
individually or collectively have a Material Adverse Effect. All such insurance
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date hereof have been paid to the
extent due and no notice of cancellation or termination has been received with
respect to any such policy, save for those matters that would not individually
or collectively have a Material Adverse Effect. The Acquired Companies
themselves or through their Affiliates have held insurance for all risks and in
the amounts typically insured against by a Person carrying on the same business
as the Company.
t. Transactions with the Seller and Seller's Parent.
As of the Closing Date, after giving effect to and except as contemplated by the
Intercompany Transactions or other Contemplated Transactions, none of the
Acquired Companies will be required to make any material payment to or perform
any material services for the Seller or Seller's Parent or any Affiliate thereof
except as set forth in Seller's Disclosure Schedule. Except as set forth in
Seller's Disclosure Schedule, neither Seller nor Seller's Parent nor any of
their Affiliates have any direct or indirect interest in any assets shown on the
Interim Balance Sheet.
u. Tangible Property. Seller has provided a fixed
assets register to Buyer prepared in accordance with the Controller's Manual
that sets forth all material tangible
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property owned by the Acquired Companies. All contracts and other agreements
pursuant to which the Acquired Companies may hold or use any interest owned or
claimed by the Acquired Companies (including, without limitation, options) in or
to the material tangible property are in full force and effect and, with respect
to the performance of the Acquired Companies, there is no default or event of
default (or event which, with notice or lapse of time or both, would constitute
a default) that would have a Material Adverse Effect. The tangible property of
the Company is in good operating condition and repair save any exceptions that
would not individually or collectively have a Material Adverse Effect.
v. Accounts and Notes Receivable. All accounts and
notes receivable reflected on the Balance Sheet and the Interim Balance Sheet
and all accounts and notes receivable arising subsequent to the date of the
Interim Balance Sheet, have arisen in the Ordinary Course of Business.
w. Computer Systems; Year 2000; Euro.
i. Except as set forth in the Seller's
Disclosure Schedule, the Acquired Companies own, lease or possess
adequate licenses or other rights to use all material computer hardware
and software and related materials used in connection with the
operation of the Business (collectively, the "COMPUTER SYSTEM").
Subject to the provisions of Section 3.w.ii., to Seller's Knowledge
there are no material malfunctions or design failures with respect to
any of the electronic data processing, communications,
telecommunications, disaster recovery, PC-based database technology or
other Computer System of the Acquired Companies required for effective
management and servicing of the Acquired Companies.
ii. The Company has developed an appropriate
plan for addressing problems associated with the ability of the
Computer System to process, provide, and receive, to the extent
properly formatted (1) date related data in connection with any valid
date in the twentieth and twenty-first centuries and (2) currency data
in connection with conversions into or from the Euro, and following the
implementation of such plan, the Seller reasonably believes the
Computer System will not malfunction in any material respect when
processing, providing and/or receiving any such date and currency
related data. The cost of implementation of such plan will not exceed
$150,000 in excess of the amounts reserved on the Acquired Companies'
consolidated balance sheets for periods on or after January 1, 1999.
x. Foreign Corrupt Practices Act. To the Knowledge of
Seller, no Acquired Company nor any officer, director, employee, consultant or
agent thereof acting on their behalf has made, directly or indirectly, any
payment or promise to pay, or gift or promise to give or authorized such a
promise or gift, of any money or anything of value, directly or indirectly, to:
(a) any foreign official (as such term is defined in the Foreign Corrupt
Practices Act of 1977, as amended (the "FCPA")), for the purpose of influencing
any official act or decision of such official or inducing him or her to use his
or her influence to affect any act or decision of a foreign government, or any
agency or subdivision thereof; or (b) any foreign
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political party or official thereof or candidate for foreign political office
for the purpose of influencing any official act or decision of such party,
official or candidate or inducing such party, official or candidate to use his,
her or its influence to affect any act or decision of a foreign government or
agency or subdivision thereof, in the case of both (a) and (b) above in order to
assist the Acquired Companies to obtain or retain business for, or direct
business to the Acquired Companies, and under circumstances which would subject
any of the Acquired Companies to liability under the FCPA.
The representations and warranties of Seller contained in this
Section 3.x. constitute all of the representations and warranties of Seller
concerning matters relating to this subject matter and will not be construed or
deemed to be included in other, more general representations and warranties,
including without limitation those contained in Section 3.i.
y. Extended Contracts. The Company's revenues for the
eleven months ended November 30, 1998, derived from the Extended Contracts,
including revenues only from those services provided on the date hereof and
excluding services previously cancelled by the parties, constituted at least
eighty (80%) of all of the Company's AMR Revenues during such period.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller and Seller's Parent the following as set forth in this
Section 4. No representations or warranties are made by Buyer or any Affiliate
or any Representative thereof in connection with the Contemplated Transactions,
except as expressly set forth in this Section 4.
a. Organization and Good Standing. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware.
b. Authority; No Conflict.
i. Each of this Agreement and the
Performance Guaranty constitutes and, when executed at Closing, each of
the Technical Services Agreement and the License Agreement will
constitute, the legal, valid, and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, subject to
bankruptcy, reorganization, insolvency and other similar laws affecting
the enforcement of creditors' rights in general and to general
principles of equity (regardless of whether considered in a proceeding
in equity or an action at law). Buyer has full corporate power and
authority to execute and deliver this Agreement and such other
agreements and to perform their respective obligations under this
Agreement and such other agreements. The execution, delivery and
performance of this Agreement, such other agreements and the
consummation of the Contemplated Transactions have been duly and
validly authorized by all corporate action on the part of Buyer.
ii. Neither the execution and delivery of
this Agreement by Buyer nor the consummation or performance of any of
the Contemplated Transactions by Buyer will give any Person the right
to prevent, delay, or otherwise interfere with any of the Contemplated
Transactions pursuant to:
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(1) any provision of the
Organizational Documents
of Buyer or Buyer's
Parent;
(2) any Legal Requirement or
Order to which Buyer or
Buyer's Parent may be
subject; or
(3) any Contract to which Buyer
or Buyer's Parent is a
party or by which Buyer or
Buyer's Parent may be
bound.
Except as required under the HSR Act, Buyer is not, and will not be,
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
c. Investment. Buyer is an accredited investor, as
defined in Regulation D promulgated under the Securities Act. Buyer has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its purchase of the Shares. Buyer confirms
that Seller and Seller's Parent have made available to the Buyer the opportunity
to ask questions of the officers and management employees of each Acquired
Company, Seller and Seller's Parent and to acquire additional information about
the businesses and financial condition of each Acquired Company. Buyer is
acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Buyer
agrees the Shares may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act or pursuant to an exemption from such registration.
d. Certain Proceedings. There is no pending
Proceeding that has been commenced against Buyer that challenges, or may have
the effect of preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions. To the Knowledge of Buyer, no such
Proceeding has been Threatened.
e. Brokers or Finders. Buyer, and its Representatives
have not incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement that are payable by Seller or Seller's Parent or
any Affiliate of Seller's Parent.
f. Funds Available. Buyer will obtain a legal, valid,
binding and enforceable debt commitment letter (the "DEBT COMMITMENT LETTER")
from BankBoston, N.A., in the form attached hereto as Exhibit "A", on or before
2:00 p.m. New York local time on December 24, 1998. If the executed Debt
Commitment Letter is not delivered to Seller by such deadline, this Agreement
shall become null and void ab initio. In addition, Buyer has obtained a legal,
valid, binding and enforceable equity commitment letter (the "EQUITY COMMITMENT
LETTER"). A true, correct and complete copy of the Equity Commitment Letter is
attached hereto as Exhibit "B" and is in full force and effect, without
modification or revision. On the date hereof, neither BankBoston, N.A. nor
Buyer's Parent has indicated to Buyer any unwillingness to
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advance to Buyer funds in accordance with the terms of such Commitment Letters,
and Buyer has no Knowledge of any facts or circumstances that would lead to any
such unwillingness.
g. No Additional Representations. Buyer acknowledges
that it and its Representatives have been permitted full and complete access to
the books and records, facilities, equipment, tax returns, contracts, insurance
policies (or summaries thereof) and other properties and assets of the Acquired
Companies which it and its Representatives have desired and requested to see
and/or review, and that it and its Representatives have had a full opportunity
to meet with the officers and employees of Seller and the Acquired Companies to
discuss the businesses and assets of the Acquired Companies. Buyer acknowledges
that none of Seller's Parent, Seller, any Acquired Company or any other Person
has made any representation or warranty, express or implied, as to the accuracy
or completeness of any information regarding the Acquired Companies furnished or
made available to Buyer and its Representatives, except as expressly set forth
in this Agreement or Seller's Disclosure Schedule, and none of Seller's Parent,
Seller, any Acquired Company or any other Person will have or be subject to any
liability to Buyer or any other Person resulting from the distribution to Buyer,
or Buyer's use of, any such information, including the Confidential Information
Memorandum prepared by Seller's investment banker dated October 1998 and any
information, documents or material made available to Buyer in records and files
stored on computer disks, certain "data rooms," management presentations or any
other forms in expectation of the Contemplated Transactions. Buyer has not
relied and is not relying upon any statement or representation not made in this
Agreement or Seller's Disclosure Schedule. To Buyer's Knowledge, as of the date
hereof, there is no Breach of any representation or warranty of Seller or
Seller's Parent that would reasonably be expected to result in the conditions
specified in Section 9 hereof to not be satisfied as of the Closing Date.
h. Support Services. Buyer understands that Seller
provides the Acquired Companies with certain support services, including cash
management, credit and accounts receivable, payroll and human resources, legal,
tax and benefit plan administration. Buyer acknowledges that all such support
services will be terminated as of the Closing Date, except as expressly
contemplated pursuant to the terms of this Agreement, including, without
limitation, Section 14.n.
i. Venture Capital Operating Company. Buyer's Parent
is a "venture capital operating company" as defined in the Department of Labor
regulations, Section 2510.3-101 of Part 2510 of Chapter XXV, Title 29 of the
Code of Federal Regulations (the "PLAN ASSETS REGULATIONS") so that no
investment as a limited partner in Buyer's Parent by any Pension Plan or Welfare
Plan will result in the assets of Buyer's Parent constituting "plan assets" of
said Pension Plan or Welfare Plan within the meaning of the Plan Assets
Regulations and ERISA.
5. REPRESENTATIONS AND WARRANTIES OF SELLER'S PARENT. Seller's
Parent represents and warrants to Buyer the following as set forth in this
Section 5. No representations or warranties are made by Seller's Parent, any
Affiliate (other than Seller pursuant to Section 3 hereof) or any Representative
in connection with the Contemplated Transactions, except as expressly set forth
in this Section 5.
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a. Organization and Good Standing. Seller's Parent is
a corporation duly organized, validly existing, and in good standing under the
laws of Delaware, with the requisite corporate power and authority to conduct
its business as it is now being conducted and to own or use the properties and
assets that it purports to own or use, with such exceptions as would not
individually or collectively have a Material Adverse Effect.
b. Authority; No Conflict.
i. This Agreement constitutes and, when
executed at the Closing, each of the Technical Services Agreement and
the License Agreement will constitute, the legal, valid, and binding
obligation of Seller's Parent, or an Affiliate of Seller's Parent, as
the case may be, enforceable against Seller's Parent, or an Affiliate
of Seller's Parent, as the case may be, in accordance with its terms,
subject to bankruptcy, reorganization, insolvency and other similar
laws affecting the enforcement of creditors' rights in general and to
general principles of equity (regardless of whether considered in a
proceeding in equity or an action at law). Seller's Parent, or an
Affiliate of Seller's Parent, as the case may be, has full corporate
power and authority to execute and deliver this Agreement and such
other agreements and to perform its obligations under this Agreement
and such other agreements. The execution, delivery and performance of
this Agreement, such other agreements and the consummation of the
Contemplated Transactions have been duly and validly authorized by all
necessary corporate action on the part of Seller's Parent.
ii. Neither the execution and delivery of
this Agreement nor the consummation or performance of any of the
Contemplated Transactions will give any Person the right to prevent,
delay or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(1) any provision of the
Organizational Documents of
Seller's Parent;
(2) any Legal Requirement or
any Order to which Seller's
Parent, or any of the
assets owned by Seller's
Parent, is subject; or
(3) result in the imposition or
creation of any Encumbrance
upon or with respect to any
of the assets owned or used
by Seller's Parent.
iii. Except as set forth in Seller's
Disclosure Schedule, Seller's Parent is not required to give any notice
to or obtain any Consent from any Person in connection with the
consummation or performance of any of the Contemplated Transactions.
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45
6. COVENANTS OF SELLER PRIOR TO THE CLOSING DATE.
a. Access and Investigation. Prior to Closing, Seller
will, and will cause the Acquired Companies to, give Buyer and its
Representatives reasonable access, during normal business hours and upon
reasonable notice, to the personnel, properties, books and records of the
Acquired Companies (excluding in all events employee files and medical records
and any documents that are subject to confidentiality commitments to Persons who
have declined Seller's request for permission to disclose such documents to
Buyer); provided, however, that such access must be upon reasonable notice and
must not unreasonably disrupt the normal operations of Seller or the Acquired
Companies, and such investigation will not include access to any item relating
to businesses of Seller or Seller's Parent other than the business conducted by
the Acquired Companies. All requests for access to the offices, plants,
properties, books, and records will be made to such Representatives of Seller as
Seller will designate, who will be solely responsible for coordinating all such
requests and all access permitted hereunder. It is further understood and agreed
that neither Buyer nor its Representatives will contact any of the Employees,
customers, suppliers, joint venture partners, or other associates or Affiliates
of Seller or Seller's Parent, in connection with the Contemplated Transactions,
whether in person or by telephone, mail or other means of communication, without
the prior authorization of such Representatives of Seller as Seller may
designate, which authorization shall not be unreasonably delayed or withheld;
provided, however, that Seller hereby authorizes Buyer to contact and
communicate with those employees identified in paragraph (ii) of Section 3.k. of
Seller's Disclosure Schedule, who as of the date hereof have executed employment
contracts with the Company. Notwithstanding the foregoing, it is understood that
Buyer will not be entitled to obtain Phase II environmental assessment reports
except for the Environmental Reports or conduct any drilling, boring or sampling
at the Facilities.
b. Operation of the Businesses of the Acquired
Companies.
i. Between the date of this Agreement and
the Closing Date and except as either (a) set forth in Seller's
Disclosure Schedule, including the Intercompany Transactions set forth
in Section 6.b.i. of Seller's Disclosure Schedule, (b) contemplated
pursuant to the terms hereof or (c) otherwise consented to in writing
by Buyer, Seller will, and will cause each Acquired Company to:
(1) conduct the business of
such Acquired Company in
accordance with the
Ordinary Course of
Business;
(2) use its Best Reasonable
Efforts to preserve intact
the current business
organization of such
Acquired Company and
maintain the relations and
good will with suppliers,
customers, lessors and
Employees of such Acquired
Company and any Transferred
Employees;
(3) confer with Buyer
concerning operational
matters of a material
nature;
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46
(4) otherwise report
periodically to Buyer
concerning the status of
the business, operations,
and finances of the
Acquired Companies; and
(5) not, without the prior
written consent of Buyer,
take any affirmative
action, or fail to take any
reasonable action within
their or its control, which
results in any of the
changes or events listed in
Section 3.k. with respect
to the Acquired Companies.
ii. Notwithstanding the foregoing, on or
prior to the Closing Date, Seller will use its Best Reasonable Efforts
to cause certain employees of Seller's Parent or its Affiliates (other
than the Acquired Companies) as listed in Section 6.b.ii. of Seller's
Disclosure Schedule (the "TRANSFERRED EMPLOYEES"), to the extent such
employees are then employed by Seller's Parent or its Affiliates, to be
transferred to the Acquired Companies and employed by one or more of
the Acquired Companies, so that the Transferred Employees will be
employees as of the Closing Date.
iii. (1) The Seller shall cause
the Acquired Companies,
prior to the Closing Date,
to proceed diligently with
capital improvements to the
assets of the Acquired
Companies in accordance
with an expected capital
budget of $500,000 per
month (the "MONTHLY CAPITAL
BUDGET") in each case upon
request of management of
the Company (each a
"CAPITAL IMPROVEMENT").
(2) As part of preparation of
the Working Capital
Statement pursuant to
Section 2.e.ii., and in
accordance with the
procedures set forth
therein, Seller shall cause
Seller's Accountants to
determine the aggregate
actual amount Seller or
Seller's Acquired Companies
have paid in connection
with Capital Improvements
during the period beginning
on the date hereof and
ending on the Closing Date,
excluding any Capital
Improvement for which there
is an accrued liability as
of the date hereof ("ACTUAL
PRE-CLOSING CAPITAL
EXPENDITURES"). Seller
shall concurrently with the
delivery to Buyer of the
Working Capital Statement
give notice to Buyer which
notice (the "CAPITAL
EXPENDITURE NOTICE") shall
set forth the difference
between (i) the aggregate
of the Monthly Capital
Budgets of $500,000 for
each month (or pro rata
portion thereof) between
the date hereof and the
Closing
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47
Date (the "AGGREGATE
CAPITAL BUDGET") and (ii)
the Actual Pre-Closing
Capital Expenditures as
determined by Seller's
Accountants. If the
Aggregate Capital Budget is
in excess of the Actual
Pre-Closing Capital
Expenditures (the "CAPITAL
EXPENDITURE SHORTFALL
AMOUNT"), then Seller shall
pay to Buyer the Capital
Expenditure Shortfall
Amount at the time the
payments referred to in
Section 2.e.ii. are made.
If the Actual Pre-Closing
Capital Expenditures are in
excess of the Aggregate
Capital Budget (the
"CAPITAL EXPENDITURE
SURPLUS AMOUNT"), then
Buyer shall pay the Seller
the Capital Expenditure
Surplus Amount at the time
the payments referred to in
Section 2.e.ii. are made,
excluding any capital
expenditures for which
approval was required under
Section 6.b.iii.(3), but
not obtained by Seller. All
payments will be made
together with interest per
annum at the prime rate as
published in the Wall
Street Journal on the
Closing Date for the Period
beginning on the Closing
Date and ending on the date
of payment. Any dispute
regarding any amount
described in this Section
6.b.iii. shall be resolved
in accordance with the
procedures set forth in
Section 2.e.i.
(3) Between the date of this
Agreement and the Closing
Date, and except as either
(a) set forth in Section
3.k.iv. of Seller's
Disclosure Schedule, or (b)
otherwise consented to in
writing by Buyer, Seller
will not approve any
capital expenditures in
excess of the Monthly
Capital Budget of $500,000
where such capital
expenditures exceed $50,000
individually or
cumulatively $250,000 in
the aggregate.
(iv) Between the date of this Agreement and
the Closing Date, Seller will cause American Airlines, Inc. to use its
Best Reasonable Efforts to renegotiate the Exhibit for YUL to the
letter agreement between American Airlines, Inc. and the Company dated
September 23, 1987 to contain fixed rate pricing equal to the fair
market rate for such services.
(v) From January 1, 1999, to the Closing
Date, Seller will cause the Company to accrue liabilities in respect of
the 1999 IC Plan in a manner consistent with past practices for
previous IC Plans.
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48
c. Required Approvals. As promptly as practicable
after the date of this Agreement, Seller will, and will cause each Acquired
Company to, make all filings required by any Legal Requirement to be made by
them as legally required to consummate the Contemplated Transactions (including
all filings under the HSR Act). Between the date of this Agreement and the
Closing Date, Seller will, and will cause each Acquired Company to (a) cooperate
with Buyer with respect to all filings that Buyer is required by any Legal
Requirement to make in connection with the Contemplated Transactions, and (b)
use its Best Reasonable Efforts to obtain all consents identified in Seller's
Disclosure Schedule. If at Closing all Non-Mandatory Consents have not been
obtained, Seller will continue to use its Best Reasonable Efforts for a period
through the Consent Deadline to obtain any such Non-Mandatory Consents. If
either party reasonably anticipates that a Non-Mandatory Consent will not be
obtained prior to Closing, then Buyer and Seller will negotiate in good faith to
structure and implement interim arrangements to preserve intact to the greatest
practicable extent the operations to which such consent pertains and to confer
the economic benefits of such operations on Buyer. If such interim arrangements
are not able to confer the economic benefits on Buyer, then Seller shall pay to
Buyer the Escrow Spread Rate on the Stipulated Consent Value with respect to
such operations until such time as the Non-Mandatory Consent in question is
obtained, the Stipulated Consent Value is paid to Buyer or Seller is able to
confer such economic benefits on Buyer.
d. Notice of Developments. At least two (2) Business
Days prior to the Closing Date (or on the Closing Date with respect to matters
occurring after such period but prior to the Closing), Seller will deliver to
Buyer an updated Seller's Disclosure Schedule reflecting any and all (i) events
that existed at the date of this Agreement, or (ii) that arose subsequent
thereto, which, in the case of (i) or (ii) would render untrue any
representation or warranty of Seller or Seller's Parent if made as of the
Closing Date or form a basis for any indemnification or other claim by Buyer
hereunder. Within two (2) Business Days of the delivery of the update of
Seller's Disclosure Schedule, Buyer may provide Seller with notification of its
intent to terminate this Agreement pursuant to Section 11.a.i. hereof, to the
extent permitted by, and only in accordance with, the provisions of Section
11.a.i.; provided, however, that the cure period provided therein shall not
extend beyond March 31, 1999. If Buyer is entitled to terminate this Agreement
pursuant to Section 11.a.i., and Buyer elects not to terminate this Agreement,
after the cure period, if applicable, then Seller's Disclosure Schedule shall be
deemed amended to reflect the information contained in such update and the
changes or events reflected in such update shall not (i) form the basis of any
claim by Buyer for indemnification, (ii) enable Buyer thereafter to terminate
this Agreement based on such update under Section 11, or (iii) be deemed to
result in the failure of a condition to be satisfied under Section 9.
e. 401(k) Plan Trust-to-Trust Transfer. Seller shall
cause a spin-off and transfer in compliance with Section 414(1) of the Code from
the trust for the $uper $aver 401(k) Capital Accumulation Plan for Employees of
Participating AMR Corporation Subsidiaries (the "SELLER'S PARENT'S 401(k) PLAN")
to a trust established by and for a defined contribution savings plan qualified
under Sections 401(a) and 401(k) of the Code maintained or established by the
Acquired Companies ("BUYER'S 401(k) PLAN") of an amount in cash equal to the
aggregate account balances, as of the date of such transfer, of the employees
who are
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49
participants under the Buyer's 401(k) Plan as of such transfer date, provided,
however, that if any employee has an outstanding loan under the Seller's
Parent's 401(k) Plan as of such transfer date, the Seller's Parent's 401(k) Plan
will transfer to the Buyer's 401(k) Plan such loan and the promissory note and
other documentation with respect to such loan. Any such transfer shall occur as
soon as practicable following the later of (i) the Closing date, (ii) the
designation (or establishment or amendment, if necessary) of Buyer's 401(k)
Plan, (iii) the receipt by Seller of a favorable determination letter issued by
the Internal Revenue Service for the Buyer's 401(k) Plan or an opinion of
counsel of Buyer reasonably satisfactory to Seller opining that the Buyer's
401(k) Plan is a qualified plan under Sections (401(a) and 401(k) of the code,
and (iv) an opinion of counsel of Buyer reasonably satisfactory to Seller
opining that the Buyer's 401(k) Plan contains all provisions necessary to permit
a transfer of assets in accordance with Section 414(l) of the Code and the
regulations thereunder, from the Seller's Parent's 401(k) Plan to Buyer's 401(k)
Plan, including, but not limited to, for example, an opinion that Buyer's 401(k)
Plan contains all provisions necessary to avoid an impermissible cutback under
Section 411(d)(6) of the Code with respect to the benefits, rights and features
associated with the amounts transferred from the Seller's Parent's 401(k) Plan.
The Buyer's 401(k) Plan shall provide that any employee that was eligible to
participate under the Seller's Parent's 401(k) Plan shall immediately be
eligible to participate under the Buyer's 401(k) Plan.
f. Best Reasonable Efforts. Between the date of this
Agreement and the Closing Date, Seller will use its Best Reasonable Efforts to
cause the conditions in Section 9 to be satisfied.
g. Acquisition Proposals. Between the date of this
Agreement and the earlier of its termination or the Closing Date:
i. the Seller, Seller's Parent, their
Affiliates and their respective Representatives (including, without
limitation, any investment banker, attorney or accountant retained by
the Seller or Seller's Parent or any of their Subsidiaries) shall,
except as set forth in Seller's Disclosure Schedule, or with respect to
transactions that would not require the consent of Buyer under Section
6.b.i., immediately cease any existing discussions or negotiations, if
any, with any Persons conducted heretofore with respect to any
acquisition or exchange of all or any material portion of the assets
of, or equity interest in, any of the Acquired Companies, or any
business combination, merger or similar transaction (including an
exchange of stock or assets) with or involving any of the Acquired
Companies (an "ACQUISITION TRANSACTION").
ii. Neither the Seller, Seller's Parent, nor
any of their Affiliates, nor any of their respective officers,
directors, employees, representatives or agents, shall, directly or
indirectly, encourage, solicit, participate in or initiate discussion
or negotiations with, or provide any information to, any Person (other
than Buyer and Buyer's Parent) with respect to any inquiries or the
making of any offer or proposal concerning an Acquisition Transaction
(an "ACQUISITION PROPOSAL"). The Seller shall notify Buyer and Buyer's
Parent immediately if any Acquisition Proposal is made after the date
of this Agreement and shall in such notice indicate the identity of the
offeror and
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the terms and conditions of any such proposal and, if the Acquisition
Proposal is written, shall include a copy thereof.
h. Non-Competition. Each of Seller's Parent and
Seller agrees that the going concern value of the Acquired Companies is
important to Buyer and acknowledge that Buyer would not have entered into this
Agreement or the Contemplated Transactions absent the provisions of this Section
6.h. As a result, Seller's Parent agrees that from and after the Closing Date it
will not, and will not permit its Affiliates to, until the fifth anniversary
date of the Closing Date (the "FIVE-YEAR PERIOD"), own, manage, operate, control
or participate in the ownership, management, operation or control of any Person
that is engaged in the business of providing ground handling, cargo handling or
passenger services ("GROUND HANDLING SERVICES") except that:
i. No Affiliate of Seller's Parent that
conducts passenger or cargo air transport operations (an
"AMR-CONTROLLED AIRLINE") will be precluded, prohibited or in any
manner restricted from providing Ground Handling Services for its own
internal operations;
ii. No AMR-Controlled Airline will be
precluded, prohibited or in any manner restricted from utilizing its
own employees, equipment and other assets to provide Ground Handling
Services to any third-party airline or other Person at those locations
where such AMR-Controlled Airline provides Ground Handling Services for
its own internal operations;
iii. Seller's Parent's Affiliate, Americas
Ground Services, Inc., and its Subsidiaries (collectively "AGS") will
not be precluded, prohibited or in any manner restricted from owning,
managing, operating or controlling any Ground Handling Services within
Mexico, the Caribbean and Central and South America ("MCLA"); provided,
however, that during the Five-Year Period, AGS will only provide Ground
Handling Services (whether to an AMR-Controlled Airline or to any
third-party airline or other Person) at locations at which it is
providing Ground Handling Services as of the date of this Agreement and
at any other locations within MCLA where any AMR-Controlled Airline now
or in the future conducts passenger or cargo air transport operations
(it being understood that once AGS provides Ground Handling Services at
any such present or future location, it may continue to provide Ground
Handling Services at such locations even if such air transport
operations by an AMR-Controlled Airline are subsequently discontinued);
iv. Neither Seller's Parent nor any
Affiliate shall be precluded, prohibited or in any manner restricted
from entering into any Acquisition Transaction involving any Person
whose principal business is the operation of passenger or cargo air
transport operations that owns, manages, operates or controls, or
participates in the ownership, management, operation or control of, a
Person that provides Ground Handling Services (an "ACQUIRED GROUND
HANDLING SUBSIDIARY"); provided that (A) if pursuant to such
Acquisition Transaction, the Acquired Ground Handling Subsidiary
becomes an
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Affiliate of Seller's Parent, then from and after the date of
consummation of such Acquisition Transaction (the "ACQUISITION DATE"),
and during the remainder of the Five-Year Period, such Acquired Ground
Handling Subsidiary may only provide Ground Handling Services at (x)
the locations at which it provides such services as of the Acquisition
Date and (y) any new locations at which any AMR-Controlled Airline (i)
thereafter conducts passenger or cargo air transport operations and
(ii) utilizes such Acquired Ground Handling Subsidiary to perform
Ground Handling Services for its own internal operations (it being
understood that once such Acquired Ground Handling Subsidiary expands
its business to any such new locations, it may provide Ground Handling
Services to any third-party airlines or other Person at such location
and continue to conduct business at such locations even if such AMR
Controlled Airline's air transport operations are subsequently
discontinued), and (B) if pursuant to such Acquisition Transaction, the
Acquired Ground Handling Subsidiary does not become an Affiliate of
Seller's Parent, and provided further that acquisition of ownership or
control of such Acquired Ground Handling Subsidiary by Seller's Parent
or any Affiliate is not the primary purpose of such Acquisition
Transaction, then such Acquired Ground Handling Subsidiary shall not be
subject to the restrictions set forth in subclause (A) of this Section
6.h.iv. or any other provision hereof; and
v. Seller's Parent and its Subsidiaries will
not be precluded, prohibited or in any manner restricted from
purchasing or otherwise acquiring up to five percent (5%) of any class
of equity securities of any Person if such purchase or acquisition is
solely for investment purposes or part of a larger transaction, the
primary purpose of which is not to create an affiliation between
Seller's Parent and a Person engaged in providing Ground Handling
Services.
Seller and Seller's Parent agree that, in addition to any other relief
to which Buyer may be entitled, Buyer would be entitled to seek and
obtain injunctive relief (without the requirement of any bond) from a
court of competent jurisdiction for the purposes of restraining
Seller's Parent from any actual or threatened breach of this covenant.
i. Nonsolicitation. For a period of two (2) years
after the Closing Date, each of Seller's Parent and Seller severally agree that
it will not, and will not permit its Subsidiaries to, knowingly solicit for
employment any Employees of the Acquired Companies as of the Closing Date or any
Transferred Employees. In addition, for a period of one (1) year after the
Closing Date, Seller's Parent will not, and will not permit its Subsidiaries to,
without the prior consent of Buyer, hire any officer or employee of the Acquired
Companies listed on Section 6.i. of Seller's Disclosure Schedule. Seller and
Seller's Parent agree that, in addition to any other relief to which Buyer may
be entitled, Buyer would be entitled to seek and obtain injunctive relief
(without the requirement of any bond) from a court of competent jurisdiction for
the purposes of restraining Seller's Parent from any actual or threatened breach
of this covenant.
j. Taxes.
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i. Without the prior written consent of
Buyer, neither Seller nor the Company, any Subsidiary or any Affiliate
of Seller shall, to the extent it may affect or relate to the Company
or any Subsidiary, make or change any tax election, change any annual
tax accounting period, adopt or change any method of tax accounting,
file any amended Return, enter into any closing agreement, settle any
Tax claim or assessment, surrender any right to claim a Tax refund,
consent to any extension or waiver of the limitation period applicable
to any Tax claim or assessment or take or omit to take any other action
(other than the Contemplated Transactions), if any such action or
omission would have the effect of materially increasing the Tax
liability or reducing any Tax Asset, of the Company, any Subsidiary,
Buyer or any affiliate of Buyer.
ii. For purposes of this Agreement, "TAX
ASSET" shall mean any net operating loss, net capital loss, investment
tax credit, or any other credit or tax attribute which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum taxes).
k. Audit Consent. Seller shall cause Seller's
Accountants to agree to provide consents, without cost to Buyer, to use of
Seller's Accountant's report and name with respect to such audited financial
statements in connection with any public or private offering of securities of
the Acquired Companies or any Affiliate thereof or any similar use thereof.
l. Insurance Claims. With respect to any claims
arising out of events, occurrences, or acts prior to the Closing, regardless of
when such claims are brought, each of Seller and Seller's Parent shall cooperate
with Buyer and the Acquired Companies in the Buyer's and Acquired Companies'
tendering of claims to the appropriate carrier of any occurrence insurance
policies, facilitate the payment of insurance proceeds with respect thereto, and
not take any action to cause the coverage of the Acquired Companies under any
such policy to be reduced or restricted.
m. No Termination of Contract. Between the date
hereof and the Closing Date, Seller shall not terminate or modify or allow its
Affiliates to terminate or modify any Contract between the Company on the one
hand and the Seller or an Affiliate of Seller on the other hand other than in
the Ordinary Course of Business or as provided in Seller's Disclosure Schedule.
n. Compliance. Seller covenants that it will use its
Best Reasonable Efforts to comply on or before the Closing Date in all material
respects with any applicable property transfer laws under any Environmental Law
for each jurisdiction where the Acquired Companies own or conduct business as of
the date hereof.
o. Acquisition of SAP System. Seller will cause the
Company to commence acquisition of an SAP accounting system (including hardware,
software and related services and expenses) or another substantially comparable
accounting system to be owned by the Company. Such system will contain
substantially similar capabilities as exist in the SAP system as utilized by the
Company as of the date hereof. Seller will pay, prior to or after the Closing
(provided that expenditures prior to the Closing shall not constitute a Capital
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Improvement), up to three million dollars ($3,000,000) of the cost of acquiring
such system, in accordance with a project scope, timeline, and budget approved
by Buyer, which approval shall not be unreasonably withheld or delayed. For
purposes of calculating the Working Capital, the Company will not be required to
reflect any current liability accruals for SAP project costs on its balance
sheet prior to or as of the Closing Date.
7. COVENANTS OF BUYER PRIOR TO THE CLOSING DATE.
a. Approvals. As promptly as practicable after the
date of this Agreement, Buyer will make all filings required by any Legal
Requirement to be made by it to consummate the Contemplated Transactions
(including all filings under the HSR Act). Between the date of this Agreement
and the Closing Date, Buyer will (i) cooperate with Seller and Seller's Parent,
as the case may be, with respect to all filings that Seller or Seller's Parent,
as the case may be, elects to make or is required by any Legal Requirement to
make in connection with the Contemplated Transactions, and (ii) cooperate with
Seller, Seller's Parent and the Acquired Companies in obtaining all Consents
identified in Seller's Disclosure Schedule. Buyer agrees that Seller and
Seller's Parent will not have any liability whatsoever to Buyer arising out of
or relating to the failure to obtain any such Consents that may be required in
connection with the Contemplated Transactions or because of any termination of
any Contract as a result of the failure to obtain such Consent. Buyer further
agrees that no representation, warranty or covenant of Seller or Seller's Parent
contained herein will be Breached or deemed Breached as a result of (i) the
failure to obtain any such Consent, (ii) any termination of any such Contract as
a result of the failure to obtain any such Consent, or (iii) any Proceeding or
Threatened Claim by or on behalf of any Person arising out of or relating to the
failure to obtain any such Consent or any such resulting Contract termination,
except as provided in Sections 6.c.ii. and 6.f. to the extent relating to
Consents.
b. Releases of Seller and Affiliates. From the date
of this Agreement to the Closing Date, Buyer hereby agrees to use its Best
Reasonable Efforts to assist Seller in obtaining releases reasonably
satisfactory to Seller of the obligations of Seller, Seller's Parent and their
respective Affiliates (other than the Acquired Companies) under all guarantees,
surety bonds, and letters of credit obligations listed on Section 7.b. of
Seller's Disclosure Schedule. Buyer hereby covenants that it will substitute
itself as necessary, as obligor with respect to all such guarantees, surety
bonds, and letters of credit obligations, if necessary to obtain the release of
Seller, Seller's Parent and their respective Affiliates (other than the Acquired
Companies) from such obligations and will provide all financial and other credit
information requested in connection with any such substitution of Buyer as
obligors with respect to such guarantees, surety bonds and letters of credit
obligations. If Buyer is unable to effect such a substitution with respect to
any such guaranty, surety bond or letter of credit obligation after using its
Best Reasonable Efforts to do so, Buyer will obtain letters of credit for the
benefit of Seller, Seller's Parent and their respective Affiliates (other than
the Acquired Companies), on terms and from financial institutions satisfactory
to Seller, with respect to the obligations covered by each of the guarantees,
surety bonds and letters of credit obligations for which Buyer does not effect
such substitution.
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c. Notifications. Buyer will (a) promptly notify
Seller and Seller's Parent in writing of any development which could reasonably
be anticipated to affect the ability of Buyer to consummate the Contemplated
Transactions, and (b) promptly notify Seller and Seller's Parent in writing of
any events, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be anticipated to result in any Breach of any
representation or warranty or any covenant of Buyer contained in, or which could
reasonably be anticipated to have the effect of making any of the
representations and warranties in, this Agreement false or misleading in any
respect.
d. Best Reasonable Efforts. Between the date of this
Agreement and the Closing Date, Buyer will use its Best Reasonable Efforts to
cause the conditions in Section 10 to be satisfied.
8. COVENANTS OF BUYER SUBSEQUENT TO THE CLOSING DATE.
a. Post-Closing Access to Records. Seller and
Seller's Parent may after Closing retain copies of any Acquired Company's books,
records and other documents, including records and files stored in computer
disks or tapes or any other storage medium (collectively, "RECORDS"), that are
delivered to Buyer as may be required by Seller and Seller's Parent to meet
accounting, auditing and tax requirements or any Legal Requirement or to
litigate any matters relating in whole or in part to any Acquired Company. Buyer
will after Closing retain the Records delivered to it by Seller for at least a
period of seven (7) years after Closing and will allow Seller and Seller's
Parent reasonable access at Seller's and Seller's Parent's cost and expense to
such Records and the right to make copies thereof at Seller's and Seller's
Parent's expense at any reasonable time upon written request in the event any
such Records are required by Seller or Seller's Parent in connection with
accounting or auditing requirements or any Legal Requirement or in connection
with any claim or Proceeding, including, but not limited to, any financial
reporting obligation.
b. No Use of Name and Cancellation of Registrations.
Buyer hereby acknowledges that (i) the Acquired Companies do not own the names,
"American," "American Airlines," "AA," "AMR," "AMRS" or the scissors eagle
design or any confusingly similar derivative thereof, and (ii) the Acquired
Companies' use of those names is pursuant to a non-exclusive, royalty-free
license subject to the terms and conditions of the License Agreement. During the
term of the License Agreement and without limiting the express provisions
thereof, Buyer will use its Best Reasonable Efforts to cease and discontinue use
of the names covered by the License Agreement and will otherwise comply with the
terms thereof. After the termination of such License Agreement, Buyer hereby
covenants that it will not, and it will cause each Acquired Company not to, use
the names "AMR," "American Airlines," "AA," "AMRS" or "American" or the scissors
eagle design or any other name that is likely to result in confusion or dilution
of the name "AMR," "American Airlines," "AA," "AMRS" or "American" or the
scissors eagle design. Upon termination or expiration of the License, Buyer will
cause the Company to cancel its registrations of all service marks and
trademarks which include "AMR" in every class and every jurisdiction in which
they are currently registered and will provide to Seller evidence of such
cancellations. In no event will Buyer be in breach of this Section for failure
to
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cancel a registration unless Seller has given Buyer written notice of such
registration (either through this Agreement or otherwise) and Buyer has had a
reasonable opportunity to effect such cancellation. Notwithstanding the above,
it is understood that the Acquired Companies may represent in a truthful and ad
hoc manner that they were formerly associated with AMR Services, provided that
such use is not likely to result in confusion with Seller, result in dilution of
Seller's Marks or otherwise unfairly trade on the goodwill of Seller.
x. Xxxxxxxxx Amounts. In the event that subsequent to
the Closing Date but prior to the first anniversary of the Closing Date Buyer
terminates the employment of any Transferred Employee or any Employee of the
Acquired Companies, who was an Employee as of the Closing Date, Buyer will be
responsible for and will pay, and will indemnify and hold harmless Seller and
Seller's Parent in respect of, in accordance with the provisions set forth in
Section 12 hereof, all applicable severance amounts to such Employees in
accordance with the amounts, procedures and timing contemplated by Seller's
existing severance policies as set forth in Section 3.q. of Seller's Disclosure
Schedule.
d. One-Year Benefit Standstill. Commencing on the
Closing Date and continuing until the first anniversary of the Closing Date,
Buyer will provide and maintain for the benefit of the Employees and their
eligible spouses and dependents, compensation and Employee Plans that at a
minimum provide compensation and benefits substantially equivalent in aggregate
value to the compensation paid and Employee Plans maintained by the Acquired
Companies or on their behalf as of the Closing Date. Notwithstanding the
foregoing, Buyer will not be required to offer the non-revenue travel privileges
currently offered to Employees or benefits equivalent to those offered under the
AMR Employee Stock Purchase Plan and the AMR Long-Term Incentive Plan or the
benefits provided to Transferred Employees prior to their transfer to the
Acquired Company, except to the extent those benefits are also generally
provided to other Employees of the Acquired Companies. In partial satisfaction
of the foregoing obligations, Buyer will use its Best Reasonable Efforts to
continue for the balance of calendar year 1999 following the Closing Date the
medical, dental, vision, life insurance, death, disability, accident and similar
benefits in effect at the Closing Date; and for one year following the Closing
Date, will continue the same vacation, holiday and leave policies in effect as
of the date hereof. In addition, without limiting the generality of the
foregoing and in addition to the requirements specified in Section 8.g. below,
Buyer will be required to maintain an incentive compensation plan that will
provide to Employees the economic benefits they would have received under the IC
Plan attributable to the period beginning on January 1, 1999 and ending on the
Closing Date.
e. Reimbursement for Certain Intercompany
Transactions and Employee Loans. On or prior to the date that any Adjustment
Amount becomes payable in accordance with Section 2.e.ii. hereof and in any
event, no later than ninety (90) days from the Closing Date, Buyer will, or will
cause the Acquired Companies to, reimburse Seller's Parent or its Affiliates
(other than the Acquired Companies) for all costs for health insurance benefits
provided by Seller's Parent or any of its Subsidiaries or Affiliates to any
Acquired Company or any of its Employees prior to the Closing Date, and which,
in either case, represent an account payable, liability, obligation or accrual
of any of the Acquired Companies as of the Closing Date. Without limiting the
generality of the foregoing, to the extent permitted by law, Buyer will use
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Best Reasonable Efforts to cause the Acquired Companies to withhold from each
employee's pay checks amounts equal to the payments required to be made (i) in
respect of any non-revenue travel on flights of American Airlines and American
Eagle or otherwise by such employee or his or her relatives or acquaintances
prior to and through the Closing Date and (ii) if requested by Seller, on any
loans to such employee outstanding from American Airlines Employees Federal
Credit Union (as shown by such Acquired Companies as owing to such Credit
Union.) Buyer will cause the Acquired Companies to remit promptly such withheld
amounts to the Credit Union, American Airlines or American Eagle, as the case
may be, without setoff, counterclaim or reduction for any reason.
f. Pre-Closing Date Obligations. The Company shall
retain responsibility under all Employee Plans (except as set forth in Section
8.g. and h., both of which shall be the responsibility of Seller), for all cost
of coverage and all amounts payable by reason of claims incurred by Employees or
former Employees prior to the Closing Date, including claims which are not
submitted until after the Closing Date.
g. Performance Bonus Plan. Seller shall retain
responsibility for the timely payment of all performance bonuses under the
Company's incentive compensation plan (the "IC PLAN") with respect to the year
ended December 31, 1998. Buyer will assist Seller in distributing such bonus
payments to Employees in accordance with Seller's instructions. Promptly
following the Closing Date, Seller shall pay to eligible Employees those
transition benefits identified in Section 3.k. of Seller's Disclosure Schedule.
h. Workers Compensation Claims. On or prior to each
of the first, second, and third anniversary of the Closing Date, respectively,
Buyer shall pay to Seller an amount equal to one-third of the Workers
Compensation Accrual.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
a. Accuracy of Representations. All of Seller's and
Seller's Parent's representations and warranties in this Agreement must have
been accurate as of the date of this Agreement and must be accurate as of the
Closing as if made on the Closing Date (except that representations and
warranties that are confined to a specific date or period will be accurate only
as of such date or period) in either case, after giving effect to all updates
and amendments of Seller's Disclosure Schedule under Section 6.d. that have not
resulted in Buyer's termination pursuant to Section 6.d and 11.a.i.; provided,
however, that this condition will be deemed to be satisfied notwithstanding that
any representation or warranty that is not qualified by a materiality or a
Material Adverse Effect exception may not be accurate so long as all such
inaccuracies considered together would not be deemed to have a Material Adverse
Effect.
b. Seller's Performance.
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i. All of the covenants and obligations that
Seller is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing Date, must have been duly
performed and complied with in all material respects; and
ii. Each document required to be delivered
pursuant to Section 2.d.i. must have been delivered to Buyer.
c. Consents. Each of the Consents that are identified
or referred to in Parts A and B of Section 10.c. of Seller's Disclosure Schedule
must have been obtained and must be in full force and effect as of the Closing
Date.
d. Additional Documents. Buyer will have received a
certificate executed by Seller stating that all conditions set forth in Sections
9.a. to 9.c. have been satisfied.
e. No Proceedings. On the Closing Date, there shall
be no Proceeding or Order instituted by any court or any Governmental Body that
would reasonably be expected to (i) prohibit or invalidate the sale of the
Shares or (ii) affect materially and adversely the right of Buyer to own the
Shares and to control the Company.
f. Certificates. The Seller shall have delivered to
Buyer (i) copies of the respective Certificates of Incorporation, including all
amendments thereto, of each of the Acquired Companies, certified by the
appropriate official of its jurisdiction of incorporation or, to the extent such
certification cannot be obtained in any non-U.S. jurisdiction, on a timely basis
prior to the Closing Date, then by an officer of such Acquired Company; and (ii)
a certificate from the appropriate official in each jurisdiction in the United
States in which the Acquired Companies are incorporated or qualified to do
business to the effect that each of the Acquired Companies is in good standing
in such state, or in the case of an Acquired Company incorporated outside of the
United States, equivalent documentation if customarily available; in each case,
dated as of a recent date.
g. Resignations. Buyer shall have the received the
resignations, dated the Closing Date, of, (or shall have removed from office)
those officers and directors of the Acquired Companies as shall be designated by
Buyer in writing to Seller not less than five Business Days prior to the Closing
Date.
h. Incumbency Certificates. Seller and Seller's
Parent shall have delivered to Buyer incumbency certificates with respect to
each of the persons signing this Agreement and any other document or certificate
in connection herewith on behalf of Seller and Seller's Parent.
i. Opinion. Buyer shall have received an opinion of
Xxxxxx and Xxxxx, LLP, dated the Closing Date, addressed to Buyer substantially
in the form of Exhibit 2.d.i(4).
j. Debt. Seller shall have paid, or caused to be
paid, or assumed full and complete liability for the outstanding balance of
indebtedness for borrowed money from
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Seller, Seller's Parent or any other Person and shall have paid or discharged
any capitalized leases.
k. Financing. Buyer shall have obtained debt
financing in at least the amount set forth in the Debt Commitment Letter.
l. EBITDA. The consolidated net income of the
Acquired Companies before net interest, expense, income taxes, depreciation and
amortization expense as set forth on the audited income statement of the
Acquired Companies for the year ended December 31, 1998 shall have been no less
than $14 million.
m. Audit. Prior to the Closing Date, an audit of the
Acquired Companies on a consolidated basis for the year 1998 in accordance with
GAAP shall have been completed by Seller's Accountants and delivered to Buyer.
n. No Material Adverse Change. Since the date of this
Agreement, there shall have been no event or circumstance or series of related
events or circumstances that have caused or could reasonably be expected to
cause a material adverse change in the Business or the financial condition,
operations, properties, assets or results of operations of the Acquired
Companies, taken as a whole (a "MATERIAL ADVERSE CHANGE"), however, no Material
Adverse Change will be deemed to have occurred if such event or circumstance is
caused by (i) one or more downturns in the economy or the securities market in
general, or (ii) one or more downturns in the industries in which the Business
operates.
o. AA Agreement. The Company and American Airlines,
Inc. shall have entered into the Restated Amendment of Airline Services Contract
in the form attached hereto as Exhibit "C" (the "UMBRELLA AMENDMENT").
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
Seller's obligation to sell the Shares and to take the other actions required to
be taken by Seller at the Closing is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part):
a. Accuracy of Representations. All of Buyer's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement and
must be accurate in all material respects as of the Closing Date as if made on
the Closing Date.
b. Buyer's Performance.
i. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and
each of these covenants and obligations (considered individually), must
have been performed and complied with in all material respects; and
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ii. Buyer must have delivered each of the
documents required to be delivered by Buyer pursuant to Section 2.d.ii.
and must have paid the Unadjusted Purchase Price.
c. Consents. Each of the Consents that is
specifically identified in Part A of Section 10.c. of the Seller's Disclosure
Schedule must have been obtained and must be in full force and effect as of the
Closing Date.
d. Additional Documents. Seller will have received
the following documents:
i. a certificate executed by Buyer stating
that all conditions set forth in Sections 10.a. and 10.b. have been
satisfied; and
ii. a certificate executed by Buyer
verifying that all necessary actions have been taken to change the name
of the Company and of all Subsidiaries of the Company and the names
under which such entities conduct operations to remove all references
to "American," "American Airlines," "AA," "AMR," "AMRS" and all
derivatives thereof; provided, however, that in the case of name
changes in foreign jurisdictions, such changes shall be implemented as
soon as practicable following the Closing (but in no event later than
10 Business days following the Closing Date).
e. No Proceedings. On the Closing Date, there shall
be no Proceeding or Order instituted by or before any court or any Governmental
Body that would reasonably be expected to (i) prevent consummation of the
purchase and sale of the Shares, or (ii) cause the purchase and sale of the
Shares to be rescinded following Closing.
f. Opinion. Seller shall have received an opinion of
Xxxxxxx Xxxx & Xxxxx L.L.P. dated the Closing Date, addressed to Seller and
Seller's Parent substantially in the form of Exhibit 2.d.ii.(6).
11. TERMINATION.
a. Termination Events. This Agreement may, by notice
given prior to or at the Closing, be terminated:
i. by Buyer if a Breach of any
representation, warranty, or covenant of Seller's Parent or Seller in
this Agreement has occurred that would constitute a failure of the
conditions set forth in Sections 9.a. or 9.b.i., and such Breach has
not been cured by Seller or waived by Buyer within thirty (30) days
following written notice from Buyer;
ii. by Seller if a Breach of any
representation, warranty, or covenant of Buyer in this Agreement has
occurred that would constitute a failure of the conditions set forth in
Sections 10.a. or 10.b.i. and such Breach has not been cured by Buyer
or waived by Seller within thirty (30) days of notice from Seller;
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iii. by Buyer if any of the conditions in
Section 9 has not been satisfied as of March 31, 1999 (other than
through the failure of Buyer to comply with its obligations under this
Agreement) and Buyer has not waived such condition on or before the
Closing Date;
iv. by Seller, if any of the conditions in
Section 10 has not been satisfied as of March 31, 1999 (other than
through the failure of Seller or Seller's Parent to comply with their
obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date;
v. by mutual consent of Buyer and Seller; or
vi. by either Buyer or Seller if the Closing
has not occurred (other than through the failure of any party seeking
to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before March 31, 1999 or such later date as the
parties may agree upon in writing.
b. Effect of Termination. Each party's right of
termination under Section 11.a. is in addition to any other rights it may have
under this Agreement, and the exercise of a right of termination will not be an
election of remedies, except as may be specifically provided in Section 11.c. of
this Agreement. If this Agreement is terminated pursuant to Section 11.a., all
further obligations of the parties under this Agreement will terminate, except
as provided in Sections 14.a. and 14.d. or as otherwise expressly provided in
this Agreement or the Performance Guaranty.
c. Limited Remedies of Buyer Upon Termination. In the
event the Agreement is terminated by Buyer (a) pursuant to Section 11.a.i. as a
result of a Breach by Seller (which is not cured within the applicable grace
period), or (b) pursuant to Section 11.a.iii. if the Closing does not occur by
March 31, 1999 because of a failure by Seller to meet the conditions set forth
in Sections 9.a., b., d. (to the extent the failure of the condition set forth
in Section 9.d. is not related to an inability to obtain a Consent), f., g., h.,
i., j., m., n. (to the extent the failure of the condition set forth in Section
9.n. could reasonably have been avoided by Seller) and o., or by Seller (i)
pursuant to Section 11.a.ii. as a result of a Breach by Buyer (which is not
cured within the applicable grace period) or (ii) pursuant to Section 11.a.iv.
if the Closing does not occur by March 31, 1999 because of a failure by Buyer to
meet the conditions set forth in Sections 10.a., b., d., and f., then the
non-breaching party will, in addition to any equitable remedies (including,
without limitation, specific performance) that may be available to such
non-breaching party, be entitled to receive reimbursement of its reasonable
out-of-pocket expenses in connection with the Contemplated Transactions, not to
exceed the aggregate amount of $500,000, within five (5) Business Days of the
claiming party's submission of vouchers evidencing such expenses. EXCEPT FOR ANY
EQUITABLE REMEDIES AVAILABLE TO THE PARTIES, NO OTHER REMEDIES, INCLUDING THE
REMEDIES SPECIFIED IN SECTION 12 HEREOF, WILL BE AVAILABLE TO EITHER PARTY IN
SUCH EVENTS. IT IS UNDERSTOOD AND AGREED THAT (A) BUYER WILL RECOVER THE
FOREGOING AMOUNTS SOLELY FROM THE ACQUIRED COMPANIES, AND BUYER COVENANTS NOT TO
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XXX SELLER OR SELLER'S PARENT THEREFOR AND (B) SELLER AND SELLER'S PARENT WILL
RECOVER SUCH AMOUNTS SOLELY FROM BUYER, OR BUYER'S PARENT PURSUANT TO THE
PERFORMANCE GUARANTY. SUCH REIMBURSEMENT OF EXPENSES WILL CONSTITUTE A PARTY'S
SOLE MONETARY REMEDY AGAINST THE OTHER PARTY IN RESPECT OF ITS TERMINATION OF
THIS AGREEMENT PURSUANT TO SUCH PROVISIONS. TO THE EXTENT IT IS DETERMINED THAT
A PARTY IS ENTITLED TO A REMEDY, THE PARTIES ACKNOWLEDGE AND AGREE THAT THE
AMOUNT SET FORTH IN THIS SECTION 11.c. AS SUCH PARTY'S SOLE MONETARY REMEDY UPON
SUCH TERMINATION, IS A REASONABLE ESTIMATE, AS LIQUIDATED DAMAGES AND NOT AS A
PENALTY, OF ACTUAL DAMAGES TO SUCH PARTY RESULTING FROM ANY BREACH BY THE OTHER
PARTY.
12. INDEMNIFICATION; REMEDIES.
a. Survival. Subject to the provisions set forth in
Section 12.d. below, all representations, warranties, covenants, and obligations
contained in this Agreement, Seller's Disclosure Schedule, and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing.
b. Indemnification and Payment of Damages by Seller
and Seller's Parent. Subject to the limitations otherwise set forth in this
Section 12, from and after the Closing Date, Seller and Seller's Parent jointly
and severally will indemnify and hold harmless Buyer, the Acquired Companies,
and their respective Representatives, stockholders, and Affiliates
(collectively, the "BUYER INDEMNIFIED PERSONS") for, and will pay to the Buyer
Indemnified Persons the amount of, any loss, liability, claim, damage (excluding
incidental, punitive, lost opportunity and consequential or special damages of
any nature), reasonable expenses (including reasonable costs of investigation
and reasonable defense and attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "DAMAGES"), arising, directly
or indirectly, from or in connection with:
i. any Breach as of the Closing Date of any
representation or warranty made by Seller or Seller's Parent in this
Agreement, Seller's Disclosure Schedule or any certificate delivered by
Seller pursuant to this Agreement;
ii. any Breach by Seller of any covenant or
obligation of Seller in this Agreement;
iii. any Damages resulting from any claim
made under and to the extent covered by any U.S. federal, state, or
local workers compensation law with respect to Employees employed by
the Acquired Companies prior to the Closing Date and with respect to
Transferred Employees arising out of or relating to any accident,
injury or other similar event that occurred prior to the Closing Date;
iv. any Damages resulting from any
third-party claims made under and to the extent covered by the Aviation
Liability Insurance Policy arising out of
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occurrences prior to the Closing Date net of insurance proceeds
received by the Acquired Companies; and
v. those certain matters set forth in
Section 12.b.v. of Seller's Disclosure Schedule.
vi. any Damages resulting from or relating
to the assignment of the Love Field Lease and Dalfort Merger Agreement;
vii. any Damages arising out of liabilities
of the Seller or any of its ERISA Affiliates (defined as any other
person that, together with the Seller, would be treated as a single
employer under Section 4001(b) of ERISA and the regulations thereunder)
under any and all Pension Plans subject to Title IV of ERISA currently
or at any time in the past maintained or contributed to by the Seller
or any of its ERISA Affiliates.
c. Indemnification and Payment of Damages by Buyer.
Prior to the Closing Date Buyer will, and after the Closing Date Buyer will, and
will cause the Acquired Companies jointly and severally with Buyer to, indemnify
and hold harmless Seller and Seller's Parent, and their respective
Representatives, stockholders, controlling persons, and Affiliates (collectively
the "SELLER INDEMNIFIED PERSONS"), and will pay to the Seller Indemnified
Persons, the entire amount of any Damages arising, directly or indirectly, from
or in connection with:
i. any Breach as of the Closing Date of any
representation or warranty made by Buyer in this Agreement or any
certificate delivered by Buyer or Buyer's Parent pursuant to this
Agreement; and
ii. any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement.
d. Time Limitations.
i. Seller and Seller's Parent. If the
Closing occurs, neither Seller nor Seller's Parent will have any
liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed
and complied with by Seller prior to the Closing Date, other than those
specified in Sections 3.b.i., 3.c. (except for the last two sentences
of Section 3.c.i.), 3.h., 3.m., 3.q., 12.b.iii., 12.b.v., 00.x.xx.,
12.b.vii., 12.e. and 13. hereof, unless on or before the second
anniversary of the Closing Date, Buyer notifies Seller and Seller's
Parent of a claim, specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. Claims with
respect to Sections 3.b.i., 3.c. (except for the last two sentences of
Section 3.c.i.), 3.h., 3.q., 12.b.iii., 12.b.v., 00.x.xx., 00.x.xxx.
and 13 hereof or other covenants of Seller or Seller's Parent which, by
their terms apply after or survive the Closing may be made at any time
after the Closing Date, subject to any applicable statute of
limitations. Claims with respect to the representations and warranties
of Seller set forth in Section 3.m. hereof will in no event survive the
Closing Date for any purpose.
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Claims with respect to Section 12.e. hereof may be made at any time on
or before the fifth anniversary of the Closing Date.
ii. Buyer. If the Closing occurs, Buyer will
have no liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be
performed and complied with by Buyer prior to the Closing Date, other
than those specified in Sections 4.b.i., 4.i., 8 and 13 hereof, unless
on or before the second anniversary of the Closing Date, Seller or
Seller's Parent notifies Buyer of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Seller
or Seller's Parent. Claims with respect to Sections 4.b.i., 4.i. and 13
hereof or other covenants of Buyer or Buyer's Parent which by their
terms apply after or survive the Closing may be made at any time
hereafter, subject in each case to any applicable statute of
limitations.
e. Environmental Indemnification.
i. Seller Indemnification. In addition to
the indemnification provided by Seller pursuant to Section 12.b.
hereof, Seller will defend, indemnify and hold harmless the Buyer
Indemnified Persons from and against any and all Environmental
Liabilities arising from (i) any Release or Threatened Release of a
Hazardous Material which occurred prior to the Closing Date at any
Facility; (ii) any violation of any environmental permit or
Environmental Law with respect to any period after the Closing Date;
and (iii) Environmental Claims arising from a condition existing at any
of the Facilities prior to the Closing Date (collectively, "SELLER
ENVIRONMENTAL LIABILITIES"). Notwithstanding the foregoing and in
addition to the other limitation which may arise pursuant to the terms
of Section 12.e.iii. below, Seller Environmental Liabilities will be
subject to a deductible of $50,000 per Station (i.e., airport or other
location at which one or more Facilities are or were located), or an
aggregate deductible of $250,000, and Seller will have no liability
with respect to Seller Environmental Liabilities until such amounts are
exceeded; the foregoing will in no event affect Seller's rights with
respect to Remedial Actions under Section 12.e.iv. below, it being
understood that at Seller's option, in lieu of Buyer assuming any
responsibility for Seller Environmental Liabilities which fall within
the foregoing deductible, Seller may request reimbursement for the
foregoing amounts from Buyer to the extent Seller Environmental
Liabilities subsequently exceed the foregoing.
ii. Buyer Indemnification. For a period of
five (5) years from the Closing Date, in addition to the
indemnification provided by Buyer pursuant to Section 12.b. hereof,
Buyer will defend, indemnify and hold harmless the Seller Indemnified
Persons from and against (i) any and all Environmental Liabilities
arising from any Release or Threatened Release of a Hazardous Material
caused by an Acquired Company which occurs after the Closing Date at
any Facility; (ii) any violation of any environmental permit or
Environmental Law caused by an Acquired Company with respect to any
period after the Closing Date; and (iii) Environmental Claims arising
from
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a condition existing at any of the Facilities after the Closing Date
caused by any Acquired Company.
iii. Exclusive Indemnities. Notwithstanding
anything to the contrary in this Agreement, the indemnities contained
in this Section 12.e. are the sole indemnity provisions concerning
Environmental Liabilities under this Agreement and will operate with
respect to the matters covered to the exclusion of any and all other
indemnity provisions herein, but subject to Section 12.d., 12.f.iii.,
12.g., 12.h. and 12.i.
iv. Procedures with Respect to Covered
Liabilities
(1) Seller will take Remedial
Action with respect to
Seller Environmental
Liabilities in compliance
with any applicable
Environmental Laws in a
manner acceptable to the
appropriate Governmental
Body. Remedial Action may
include the use of risk
assessments and/or
institutional controls to
the extent approved by a
Governmental Body in order
to obtain approval of any
plan of Remedial Action
with respect thereto.
Seller will negotiate the
requirements for any
Remedial Action with the
appropriate Governmental
Bodies, employ all
consultants and contractors
necessary for any Remedial
Action, pay all costs
associated with such
Remedial Action and be
entitled to manage, control
and conduct any such
Remedial Action that
constitutes a Seller
Environmental Liability.
Seller will consult with
Buyer regarding discussions
with any Governmental Body
concerning any Remedial
Action. Buyer or any
Acquired Company may have a
Representative present
during any meeting with any
Governmental Body;
provided, however, that
such Representative will
not actively participate in
any such meetings. To the
extent Buyer or any
Acquired Company requests
any material changes to any
Remedial Action or RAW
which exceed to any extent
the requirements of any
Governmental Body or
Environmental Law, Buyer or
such Acquired Company will
be solely responsible for
any increased costs
attributable to such
material changes. Seller
will use its Best
Reasonable Efforts to
conduct any Remedial Action
in a manner to reasonably
minimize interference with
the operations of the
Acquired Companies at any
Facility, although Buyer or
any Acquired Company
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recognizes that
interference is probable.
Seller and Buyer or any
Acquired Company, as
applicable, will execute an
access agreement if the
Remedial Action materially
interferes with the
Acquired Companies'
operations, which access
agreement will be in
accordance with customary
industry practice.
(2) Neither Buyer nor any
Acquired Company will
(without the express
written consent of Seller
which will not be
unreasonably withheld)
initiate or conduct any
subsurface investigation of
an environmental condition
at any Facility which may
constitute a Seller
Environmental Liability,
unless and except to the
extent required to do so
under Environmental Law or
in fulfillment of the
express requirement of an
appropriate Governmental
Body and, then, only with
prior notice to Seller and
after providing Seller with
an opportunity to be
present at any subsurface
investigation and an
ability to split any
samples taken. Activities
conducted by the Buyer or
any Acquired Company in the
Ordinary Course of
Business, including
improvements or repairs,
will not be considered
subsurface investigation,
unless Buyer or any
Acquired Company reasonably
anticipates that a
subsurface condition
exists.
(3) Buyer will promptly (but in
no event greater than
fourteen (14) calendar
days) notify Seller upon
Buyer's receipt of any
Environmental Claim of or
upon gaining of any
knowledge of a Seller
Environmental Liability.
Buyer also hereby agrees to
provide Seller with prompt
written notice of any
Release or Threatened
Release of a Hazardous
Material that is reportable
to a Governmental Body at
any Facility after the
Closing Date. Failure to
provide such notice on a
timely basis will not
result in the Damages
relating thereto being
excluded as Seller
Environmental Liabilities,
except to the extent the
Seller is prejudiced
thereby.
(4) Notwithstanding anything
herein to the contrary,
Seller will have the
absolute right to manage,
control and resolve any
settlement or defense of
any
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Environmental Claim arising
in connection with any
Seller Environmental
Liability. Buyer will have
the right to participate in
the settlement or defense
of any such Environmental
Claim, with its own counsel
and at its own expense, so
long as it does not
interfere with or delay in
any manner Seller's
resolution of any such
Environmental Claim.
(5) Upon reasonable written
notice from Seller, Buyer
agrees to provide
reasonable access to Seller
to any Facility and to
Buyer's or the Acquired
Companies' Employees or
Representatives at all
reasonable times necessary
to carry out any Remedial
Action at any Facility and
to prepare any materials
for submission to a
Governmental Body.
(6) Seller will propose a
remedial action workplan
("RAW") with respect to any
Remedial Action relative to
a Seller Environmental
Liability and will provide
Buyer with a copy of the
RAW prior to submission to
the Governmental Body for
review by Buyer, which
review must be conducted by
Buyer within fourteen (14)
calendar days after
receipt. Seller will
incorporate any reasonable
comments or reasonable
modifications proposed by
the Buyer into the RAW.
Upon approval of the RAW,
Seller will implement the
RAW in all material
respects. Seller will
provide Buyer with a status
report of the Remedial
Action within fourteen (14)
calendar days of the end of
each quarterly period (the
"QUARTERLY REPORT"). Seller
will provide the Buyer with
copies of any submissions
and applications to the
Governmental Body at least
ten (10) days prior to
filing with the
Governmental Body for
Buyer's review (it being
understood that comments
must be received at least
two (2) Business Days prior
to the date the submission
is due). Seller will
incorporate any reasonable
comments made by Buyer to
such documents; provided,
however, that neither Buyer
nor any Acquired Company
will take any action or
fail to take any action
hereunder which could
materially delay the RAW or
materially increase
Seller's Environmental
Liabilities covered by such
RAW. Seller will further
promptly (but in no event
greater
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than ten (10) calendar
days) provide Buyer with
copies of all material
correspondence from the
Governmental Body,
environmental consultant's
reports and other material
documents relating to the
Remedial Action.
f. Other Limitations.
(i) Threshold. Except as provided in
Sections 12.e. and 13 hereof or with respect to the matters set forth
in Sections 12.b.iii., 12.b.iv., 12.b.v., 00.x.xx. and 00.x.xxx. of
Seller's Disclosure Schedule, Seller and Seller's Parent (considered
jointly) will not have any obligation to indemnify Buyer and/or any
other Buyer Indemnified Person for claims under this Agreement or in
connection with the Contemplated Transactions until Buyer's and/or any
other Buyer Indemnified Person's indemnifiable Damages exceed $1.0
million and then Seller and Seller's Parent will indemnify Buyer and/or
any other Buyer Indemnified Person for all Damages subject to Section
12.f.ii. without regard to such threshold.
(ii) Cap. Except as provided in Section
13.b.i.(2) hereof, or with respect to the matters set forth in Section
12.b.v. of Seller's Disclosure Schedule or Section 12.e. hereof, Seller
and Seller's Parent (considered jointly) will not have any liability to
Buyer and/or any other Buyer Indemnified Person for indemnifiable
Damages under this Agreement or in connection with the Contemplated
Transactions in excess of 50% of the Purchase Price (after which point
Seller and Seller's Parent will have no obligation to indemnify Buyer
and/or any other Buyer Indemnified Person from and against further
Damages).
(iii) Indemnification Based Upon Net Damage.
The duty and obligation of either Seller, Seller's Parent or Buyer or
any Acquired Company to provide indemnification hereunder will be
limited to the net amount of any Damages actually sustained and/or
paid. In determining the net amount of Damages, the actual amount of
Damages will be reduced by the aggregate value of any assets,
properties and rights, including without limitation, proceeds of
insurance, claims, cross-claims, counterclaims and the like which are
either received directly by the indemnified party, or by the
indemnifying party on behalf of the indemnified party and remitted to
the indemnified party, and federal or state income or franchise Tax
benefits realized or reasonably expected to be realized by such party
as a direct result of the event giving rise to the claim for
indemnification. In such connection, an indemnified party will fully
cooperate with the indemnifying party in pursuing and realizing all
amounts which may be available from third persons (without being
obligated to incur any additional non-reimbursable expense, or
liability in respect of specious or unfounded lawsuits filed in its
name). In addition, in determining the net amount of such Damages for
which indemnification is required, the amount of indemnification will
be increased to include any federal or state income or franchise Tax
liability incurred or reasonably expected to be incurred by a party as
a direct result of such indemnification. If any Tax benefit expected to
be realized
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is in fact not realized, or any Tax liability expected to be incurred
is not in fact incurred, then an adjustment will be made to compensate
the other party. This Section 12.f.iii. shall not apply to any
indemnification obligations under Section 13.
g. Procedure for Indemnification -- Third Party
Claims.
i. Promptly after receipt by an indemnified
party under Section 12.b. or 12.c. of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be
made against an indemnifying party under such Section, give prompt
notice in writing to the indemnifying party of the assertion and
commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it
may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
ii. If any Proceeding referred to in Section
12.g.i. is brought against an indemnified party and the indemnified
party gives notice to the indemnifying party of the commencement of
such Proceeding, the indemnifying party will be entitled to participate
in such Proceeding and, to the extent that it wishes (unless the
indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation
would be inappropriate because of a conflict of interest) the
indemnifying party shall be entitled to assume the defense of such
Proceeding with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such Proceeding within
fifteen (15) days after the indemnified party has given notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under this Section 12.g.
for any fees of other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding. If
the indemnifying party assumes the defense of a Proceeding, (1) no
compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements
or any violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the
indemnifying party; and (2) the indemnified party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent (other than in accordance with clause (1)
hereof), which will not be unreasonably withheld. If notice is given to
an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within fifteen (15) days after the
indemnified party's notice is given, give notice to the indemnified
party of its election to assume the defense of such Proceeding, then
the indemnifying party will remain responsible for any Damages the
indemnified party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Proceeding to the fullest extent
provided by this Section 12.
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iii. EACH PARTY HEREBY CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES COURT IN WHICH A
PROCEEDING IS BROUGHT AGAINST ANY INDEMNIFIED PERSON FOR PURPOSES OF
ANY CLAIM THAT AN INDEMNIFIED PERSON MAY HAVE UNDER THIS AGREEMENT WITH
RESPECT TO SUCH PROCEEDING OR THE MATTERS ALLEGED THEREIN, AND AGREE
THAT PROCESS MAY BE SERVED ON IT WITH RESPECT TO SUCH A CLAIM ANYWHERE
IN THE UNITED STATES.
iv. The provisions of this Section 12.g.
will not be deemed to apply to the matters set forth in Section 12.b.v.
of Seller's Disclosure Schedule; it being understood that Seller has
already assumed the defense of such Proceedings and will have the
right, in its sole discretion, to compromise or settle such matters,
without Buyer's or an Acquired Company's consent or participation.
Buyer's rights with respect to such matters will instead be limited to
the right to be informed from time to time by Seller with respect to
the status of such matters, subject in any case to confidentiality
concerns of Seller or Seller's counsel. In addition, the provisions of
this Section 12.g. will not apply with respect to proceedings related
to Taxes, which and proceedings shall be governed by Sections 13.e.
h. Procedure for Indemnification -- Other Claims. A
claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
i. Exclusivity of Indemnification Provisions. The
parties acknowledge and agree that the purpose of the representations and
warranties, and covenants and obligations in this Agreement is to give the
aggrieved party the right to be indemnified pursuant to Sections 12. and 13.
Accordingly, the parties agree that breaches of such representations and
warranties will not be deemed to constitute fraud or misrepresentation under
state or federal law. Additionally, the following limitations will apply:
EXCEPT AS PROVIDED IN SECTIONS 6.h. AND
6.i., FOLLOWING THE CLOSING DATE, THE INDEMNIFICATION
PROVISIONS AS PROVIDED IN THIS AGREEMENT WILL BE THE SOLE AND
EXCLUSIVE REMEDY AND RECOURSE FOR ANY BREACH OF THIS AGREEMENT
BY SELLER OR SELLER'S PARENT OR ANY OTHER CLAIM BY BUYER UNDER
OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED
TRANSACTIONS AND BUYER WILL HAVE NO OTHER ENTITLEMENT, REMEDY
OR RECOURSE, WHETHER IN CONTRACT, TORT OR OTHERWISE, AGAINST
SELLER OR SELLER'S PARENT, OR THEIR RESPECTIVE AFFILIATES OR
REPRESENTATIVES UNDER OR WITH RESPECT TO THIS AGREEMENT, ALL
OF SUCH ENTITLEMENTS, REMEDIES AND RECOURSE BEING HEREBY
EXPRESSLY WAIVED BY BUYER TO
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THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS.
IN ADDITION, THE AMOUNT OF THE CAPS APPLICABLE TO SELLER OR
SELLER'S PARENT SET FORTH IN SECTION 12.f WILL BE THE MAXIMUM
AMOUNT OF THE INDEMNIFICATION OBLIGATIONS OF SELLER AND
SELLER'S PARENT HEREUNDER, AND NEITHER SELLER, SELLER'S
PARENT, NOR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
WILL HAVE FURTHER PERSONAL OR OTHER LIABILITY THEREFOR. IF THE
CLOSING OCCURS, AND TO THE EXTENT PERMITTED BY APPLICABLE
LEGAL REQUIREMENTS, BUYER WILL NOT BE ENTITLED TO A RESCISSION
OF THIS AGREEMENT OR TO ANY FURTHER INDEMNIFICATION RIGHTS OR
CLAIMS OF ANY NATURE WHATSOEVER HEREUNDER, ALL OF WHICH BUYER
HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LEGAL REQUIREMENTS.
FOLLOWING THE CLOSING DATE, THE
INDEMNIFICATION PROVIDED IN THIS AGREEMENT WILL BE THE SOLE
AND EXCLUSIVE REMEDY AND RECOURSE FOR ANY BREACH OF THIS
AGREEMENT BY BUYER OR ANY OTHER CLAIM BY SELLER OR SELLER'S
PARENT UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE
CONTEMPLATED TRANSACTIONS AND SELLER AND SELLER'S PARENT WILL
HAVE NO OTHER ENTITLEMENT, REMEDY OR RECOURSE, WHETHER IN
CONTRACT, TORT OR OTHERWISE, AGAINST BUYER OR ITS RESPECTIVE
AFFILIATES OR REPRESENTATIVES UNDER OR WITH RESPECT TO THIS
AGREEMENT, ALL OF SUCH ENTITLEMENTS, REMEDIES AND RECOURSE
BEING EXPRESSLY WAIVED BY SELLER AND SELLER'S PARENT TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS. IF
THE CLOSING OCCURS, AND TO THE EXTENT PERMITTED BY APPLICABLE
LEGAL REQUIREMENTS, NEITHER SELLER NOR SELLER'S PARENT WILL BE
ENTITLED TO A RESCISSION OF THIS AGREEMENT OR TO ANY FURTHER
INDEMNIFICATION RIGHTS OR CLAIMS OF ANY NATURE WHATSOEVER
HEREUNDER, ALL OF WHICH SELLER AND SELLER'S PARENT HEREBY
WAIVE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL
REQUIREMENTS.
13. TAX MATTERS.
a. Section 338(h)(10) Election. If requested by
Buyer, Seller's Parent will join with Buyer in making an election under Section
338(h)(10) of the Code or any comparable provision of state, local or foreign
law (the "SECTION 338(h)(10) ELECTION") with respect to Buyer's acquisition of
the Shares and, in such case, Seller's Parent agrees to file all
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necessary forms and schedules as may be required under applicable Treasury
Regulations to effectuate the Section 338(h)(10) Election. If Buyer elects to
make the Section 338(h)(10) Election, Buyer and Seller's Parent agree that they
will use their Best Reasonable Efforts to agree on the appropriate "fair market
value" of the assets of the Company as of the Closing Date and the allocation of
the "modified adjusted deemed sale price" (as defined in Treasury Regulation
Section 1.338(h)(10)-1(f)) among the assets of the Company and the Acquired
Companies. If, sixty days before the last date on which the Section 338(h)(10)
Election must be filed, no agreement has been reached, then Buyer and Seller's
Parent shall each submit its respective determination of the proper allocation
to an independent valuation firm mutually acceptable to the parties (the
"APPRAISER"). The Appraiser shall select either the allocation submitted by
Buyer or by Seller's Parent as the more reasonable of the two allocations, and
thereafter such allocation shall be binding on Buyer and Seller's Parent and
their respective affiliates, successors and assigns for all Federal, state,
local and foreign income tax purposes. The fees and disbursements of the
Appraiser shall be borne by the party whose allocation was not selected as the
more reasonable by the Appraiser.
b. Liability for Taxes.
i. Seller will be liable for (1) any Taxes
imposed on or incurred by the Acquired Companies for any taxable period
ending on or before the Closing Date (the "PRE-CLOSING PERIOD") or
allocated to Seller pursuant to this paragraph (i), including any Taxes
resulting from the Section 338(h)(10) Election, but excluding any
Federal Income Taxes caused by, or arising from, an actual or deemed
election under Section 338(g) of the Code with respect to the purchase
of the Share and (2) any income Taxes imposed on the Acquired Companies
pursuant to Treasury Regulation Section 1.1502-6 or any comparable
state, local or foreign tax provision with respect to the taxable
income of any member of the AMR Group or any other affiliated,
consolidated, combined or unitary group of which any Acquired Company
was a member prior to the Closing Date (other than the Acquired
Companies) for any taxable period and (3) and Taxes imposed as a result
of the breach or inaccuracy of any representation or warranty contained
in Section 3.h. hereof. The liability for foreign, state or local
income Taxes imposed on or incurred by the Acquired Companies for any
taxable period which begins on or before the Closing Date and ends
after the Closing Date will be allocated between Seller and Buyer in
the same manner as taxable income is reported for that taxable period
for federal income tax purposes. In the case of ad valorem, franchise
(other than such Taxes that are a substitute for income taxes) and
similar Taxes that are imposed for a taxable period beginning before
and ending after the Closing Date, the portion attributable to the
Pre-Closing Period will be determined by prorating such Taxes for the
taxable period on a daily basis.
ii. Buyer will be liable for (1) any Federal
Income Taxes imposed on or incurred by any member of the AMR Group
caused by, or arising from, an actual or deemed election under Section
338(g) of the Code (excluding any Taxes resulting from the Section
338(h)(10) Election) with respect to the purchase of the Shares, (2)
any Taxes imposed on or incurred by the Acquired Companies for any
taxable period
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(the "POST-CLOSING PERIOD") beginning after the Closing Date, and (3)
any excise or transfer Tax arising from the sale of Shares. Buyer will
also be liable for any foreign, state or local Taxes incurred by any
Acquired Company which are not the liability of the Seller pursuant to
Section 13.b.i. of this Agreement.
iii. Seller will be entitled to any refunds
(whether by payment, credit, offset or otherwise) in respect to any
Taxes for which Seller is liable under Section 13.b.i. of this
Agreement. Buyer and its Affiliates will cooperate with Seller in order
to permit Seller to take all necessary steps to claim any such refunds.
Any such refund received after the Closing by Buyer or its Affiliates,
including the Acquired Companies, will be paid to Seller within thirty
(30) days after its receipt.
iv. Buyer will cause an election under
Section 172(b)(3)(C) of the Code to be made to relinquish the net
operating loss carryback period with respect to any losses incurred by
the Acquired Companies following the Closing.
v. Seller and Buyer agree that none of the
AMR Group's unused minimum tax credit under Section 53 of the Code
arising in any Pre-Closing Period (the "AMT CREDIT CARRYOVER") is
allocable, apportionable or attributable to the Acquired Companies and
that none of the Acquired Companies will claim any of the AMR Group's
AMT Credit Carryover for any Return that includes any taxable period
after the Closing Date.
vi. It is expressly understood and agreed
that the limitations set forth in Section 12.f.i. hereof will not apply
to any liability of Seller or Seller's Parent for Taxes, as set forth
in this Section 13.
c. Tax Returns.
i. Seller is responsible for preparing and
filing with the appropriate Governmental Bodies all Returns of the
Acquired Companies for any Pre-Closing Period and for which the due
date (with regard to waivers or extensions) of any such Return is after
the Closing Date. All such Returns shall be prepared on a basis that is
consistent with the manner in which Seller prepared or filed such Tax
Returns for prior periods. Buyer and its Affiliates, including the
Acquired Companies, will cooperate with Seller and will make available
all necessary records and timely take all action necessary to allow
Seller or its Affiliates to file, or prepare and file, as the case may
be, any such Returns (including, without limitation, providing or
causing to be provided to Seller or its Affiliates any powers of
attorney that Seller may request for purposes of filing any such
Returns).
ii. Buyer and its Affiliates, including the
Acquired Companies, are responsible for preparing and filing with the
appropriate Governmental Bodies all Returns that relate to the Taxes of
the Acquired Companies other than those described in Section 13.c.i.
above. Seller, Seller's Parent and their Affiliates will cooperate with
Buyer and will make available all necessary records and timely take all
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action necessary to allow Buyer or its Affiliates (including the
Acquired Companies) to file, or prepare and file, as the case may be,
any Returns of the Acquired Companies.
iii. With respect to any Return to be filed
by Buyer for a Tax period beginning on or before the Closing Date and
ending after the Closing Date, Buyer shall deliver, at least thirty
(30) days prior to the due date for filing such Return (including
extensions), to Seller a statement setting forth the amount of Tax for
which Seller is responsible pursuant to this Agreement, and copies of
such Return. Any disagreement between Buyer and Seller with respect to
the treatment of any item on such Return shall be submitted to an
independent accounting firm of national standing mutually agreed upon
by Buyer and Seller (the "ACCOUNTING REFEREE") for prompt final
resolution. The Accounting Referee may resolve any dispute with respect
to a Return in a manner which is consistent with the position which
results in the least tax to be paid on such Return unless taking such
position would result in a significant risk that penalties would be
imposed with respect thereto.
iv. The costs of referring the dispute to
the Accounting Referee shall be shared equally by Buyer and Seller.
Seller shall pay Buyer the Taxes for which Seller is liable pursuant to
Section 13.b.i. but which are payable with Returns to be filed by Buyer
pursuant to this Section 13.c.iii. within ten (10) Business Days prior
to the due date for the filing of such Tax Returns. If the Accounting
Referee has not resolved the treatment of any disputed items by the
date which is ten (10) Business Days prior to the due date for the
filing of such Tax Returns, the Seller shall pay Buyer the amount
claimed by Buyer to be owed with respect thereto by such date and Buyer
shall refund to Seller the amount, if any, by which the Accounting
Referee determines that such amount exceeded Seller's actual liability
under Section 13.b.i. once such final determination has been made.
d. Tax Allocation Arrangements. Effective as of the
Closing, all liabilities and obligations between the Acquired Companies on the
one hand and Seller or its Affiliates (other than the Acquired Companies) on the
other hand under any Tax allocation agreement or arrangement in effect prior to
the Closing will be extinguished in full, and any liabilities or rights existing
under any such agreement or arrangement will cease to exist and will no longer
be enforceable. Seller and its Affiliates (including the Acquired Companies)
will execute any documents necessary to effectuate the provisions of this
Section 13.d.
e. Tax Proceedings. In the event Buyer or any of its
Affiliates, including the Acquired Companies, receives any oral or written
communication regarding any pending or threatened examination, claim, adjustment
or other proceeding with respect to the liability of any of the Acquired
Companies for Taxes for any period for which Seller is or may be liable under
Section 13.b.i., Buyer will within ten (10) days notify Seller in writing
thereof. As to any such Taxes for which Seller is or may be liable under Section
13.b.i., Seller will be entitled to control, or settle the contest of, such
examination, claim, adjustment or Proceeding. Buyer and its Affiliates,
including the Acquired Companies, will cooperate fully with Seller in handling
any such Tax audit, or administrative Tax proceeding, or other Tax Proceeding.
Buyer
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will provide, or cause to be provided to Seller or its designee, necessary
authorizations, including powers of attorney, to control any proceedings which
Seller is entitled to control pursuant to this Section 13.e. In addition,
regardless of which party is responsible for the payment of the Tax, no Tax
audit, administrative Tax proceeding, or other Tax Proceeding which may affect a
Return of any member of the AMR Group, including any of the Acquired Companies,
for any Pre-Closing Period will be concluded by Buyer or any of its Affiliates,
including the Acquired Companies, without the prior written consent of Seller's
Parent, which consent will not be unreasonably withheld. No Tax audit,
administrative Tax proceeding or other Tax proceeding which may affect a Return
of Buyer, any Acquired Company or any group that includes Buyer or any Acquired
Company for any period that includes any day after the Closing Date will be
concluded by Seller or any Affiliate thereof without the prior written consent
of Buyer, which consent shall not be unreasonably withheld.
f. Cooperation and Exchange of Information. Except as
otherwise provided in this Section 13, any amount to which a party is entitled
under this Section 13 will be promptly paid to such party by the party obligated
to make such payment following written notice to the party so obligated that the
Taxes to which such amount relates have been paid or incurred and that provides
details supporting the calculation of such amount. Each Party subject to
indemnification under this Section 13 (an "INDEMNIFIED PARTY") will provide, or
cause to be provided, to the party liable to indemnify such Indemnified Party
(the "INDEMNIFYING PARTY") copies of all correspondence received from any Taxing
authority by such Indemnified Party or any of its Affiliates, including the
Acquired Companies, in connection with the liability of any of the Acquired
Companies for Taxes for any period for which such Indemnifying Party is or may
be liable under Section 13.b.i. or Section 13.b.ii. The parties will provide
each other with such cooperation and information as they may reasonably request
of each other in preparing or filing any Return, amended Return or claim for
refund, in determining a liability or a right to refund or in conducting any
audit or other Proceeding in respect of Taxes imposed on the parties or their
respective Affiliates. Buyer and its Affiliates will preserve and retain all
Returns, schedules, work papers and other Records relating to any such Returns,
claims, audits or other Proceedings until the expiration of the statutory period
of limitations (with regard to waivers and extensions) of the taxable periods to
which such Records relate and until the final determination of any payments
which may be required with respect to such periods under this Agreement and will
make such documents available to Representatives of Seller or its Affiliates
upon reasonable notice and at reasonable times, it being understood that such
Representatives will be entitled to make copies of any such Records as they deem
necessary. Buyer further agrees to permit Representatives of Seller or its
Affiliates to meet with employees of Buyer or the Acquired Companies on a
mutually convenient basis in order to enable such Representatives to obtain
additional information and explanations of any documents provided pursuant to
this Section 13.f. Buyer will make available, or cause the Acquired Companies to
make available, to the Representatives of Seller or its Affiliates sufficient
work space and facilities to perform the activities described in the two
preceding sentences. Any information obtained pursuant to this Section 13.f.
will be kept confidential in accordance with Section 14.d., except as may be
otherwise necessary in connection with the filing of Returns or claims for
refund or in conducting any audit or other proceeding. Each of the parties will
provide the cooperation and information required by this Section 13.f. at its
own expense.
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g. Treatment of Payments. Solely for all Tax
purposes, any payments to or from Seller or to or from Buyer pursuant to this
Section 13 will be treated by Buyer and Seller as adjustments to the Purchase
Price.
14. GENERAL PROVISIONS.
a. Expenses. Except as otherwise expressly provided
in this Agreement, each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and performance
of this Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
b. Public Announcements. Except as may be required by
law, any public announcement or similar publicity prior to or on the Closing
Date with respect to this Agreement or the Contemplated Transactions will be
issued, if at all, at such time and in such manner as agreed by Seller, Seller's
Parent and Buyer. Unless agreed by Seller, Seller's Parent and Buyer in advance
or otherwise required by Legal Requirements, prior to Closing, Buyer, Seller and
Seller's Parent will, and will cause the Acquired Companies to, keep this
Agreement and the existence of the Contemplated Transactions strictly
confidential and may not make any disclosure of this Agreement and the existence
of the Contemplated Transactions to any Person. Seller, Seller's Parent and
Buyer will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions.
c. Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (i) delivered by hand (with written confirmation of
receipt), (ii) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(iii) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
SELLER: AMR Services Holding Corporation
0000 Xxxx Xxxxxx Xxxx.
MD 5675
Ft. Xxxxx, Xxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attn: Corporate Secretary
SELLER'S PARENT: AMR Corporation
0000 Xxxx Xxxxxx Xxxx.
MD 5675
Ft. Xxxxx, Xxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attn: Corporate Secretary
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BUYER: MR Services Acquisition Corp.
c/o Xxxxxx Xxxxxx Partners III, L.P.
Xxxx 00xx Xx.
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
WITH COPY TO: Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
d. Confidentiality. Buyer acknowledges that the
information being provided to it in connection with the purchase and sale of the
Shares and the consummation of the other Contemplated Transactions is subject to
the terms of a confidentiality agreement between Buyer and Seller (the
"CONFIDENTIALITY AGREEMENT"), the terms of which are incorporated herein by
reference. In addition to, and without prejudice to or limiting the foregoing,
between the date of this Agreement and the earliest of (i) October 8, 2001, (ii)
the Closing Date, or (iii) the date of termination of this Agreement pursuant to
Section 11, Buyer and Seller will maintain in confidence, and will cause their
respective Representatives to maintain in confidence, and not use to the
detriment of the other party or an Acquired Company any written, oral, or other
information obtained in confidence from the other party or an Acquired Company
(the "DISCLOSING PARTY") in connection with this Agreement or the Contemplated
Transactions, unless such information (i) is or becomes generally available to
the public other than as a result of a disclosure by the Disclosing Party's
Representatives, (ii) was within a party's (the "RECEIVING PARTY") possession
prior to its being furnished to the Receiving Party by or on behalf of a
Disclosing Party or its Representatives; provided, however, that the source of
such information was not known by the Receiving Party to be bound by an
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Disclosing Party or any other party with respect to such
information, or (iii) becomes available to the Receiving Party on a
non-confidential basis from a source other than the Disclosing Party or any of
its Representatives, provided, further, that such source is not bound by an
agreement with, or other contractual, legal or fiduciary obligation of
confidentiality to, the Disclosing Party, the Company or any other party with
respect to such information. If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
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e. Further Assurances. The parties agree (i) to
furnish upon request to each other such further information, (ii) to execute and
deliver to each other such other documents, and (iii) to do such other acts and
things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and of the documents referred to in
this Agreement. Without limiting the foregoing, after the Closing Date, Seller
and Seller's Parent, on the one hand, and Buyer and the Acquired Companies, on
the other hand, will each cooperate with the other, at the other's request and
expense, in furnishing such information, testimony and other assistance in
connection with any Proceedings with other Persons or investigations involving
the Acquired Companies and the Contemplated Transactions, and in connection with
the preparation of any Tax returns.
f. Waiver. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (i) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(ii) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (iii) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
g. Entire Agreement and Modification. This Agreement
supersedes all prior agreements, understandings, representations and warranties
between the parties relating to its subject matter, including the statements in
the Confidential Information Memorandum dated October 1998, and constitutes
(along with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
h. Disclosure Schedules. In the event of any
inconsistency between the statements in the body of this Agreement and those in
any Disclosure Schedule, the statements in such Disclosure Schedule will
control.
i. Assignments, Successors, and No Third-Party
Rights. Neither party may directly or indirectly assign any of its rights under
this Agreement, whether by agreement, operation of law or otherwise without the
prior consent of the other parties, and any attempted assignment in violation of
this Section 14.i. will be void; provided, however, (i) that after the Closing,
Seller may assign its rights and delegate its obligations hereunder to Seller's
Parent or another Affiliate of Seller's Parent at which xxxx Xxxxxx will be
deemed released from any obligations hereunder, and (ii) Buyer may assign its
right to purchase all or portion of the
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Shares to one or more of its Affiliates and may assign any or all of its rights
hereunder to a lender providing financing for the Contemplated Transactions.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties and nothing expressed or referred to in this Agreement
will be construed to give any Person other than the parties to this Agreement
any legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement, except as otherwise expressly
provided in Section 12. This Agreement and all of its provisions and conditions
are for the sole and exclusive benefit of the parties to this Agreement and
their successors and permitted assigns.
j. Severability. If any provision of this Agreement
is held invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable. Notwithstanding the foregoing, this subparagraph will not apply
if doing so would materially alter the recourse or benefits to any party.
k. Section Headings, Construction. The headings of
Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement. All words used
in this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
l. Governing Law; Venue. This Agreement will be
governed by the laws of the State of New York without regard to conflicts of
laws principles. Any Proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement, the License Agreement, the Technical
Services Agreement and the Training Material Agreement (but excluding the
Umbrella Amendment and the Intercompany Transactions identified in Part A of
Section 6.b.i. of Seller's Disclosure Schedule) may be brought against any of
the parties only in the courts of the State of New York, sitting in the Borough
of Manhattan, City of New York, or, if it has or can acquire jurisdiction, in
the United States District Court for the Southern District of New York and each
of the parties consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any Proceeding referred to in the
preceding sentence may be served on any party anywhere in the world. The parties
hereby waive their right to a trial by jury.
m. Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
n. Transition Cooperation. Buyer and Seller will
cooperate with each other, and will cause their Representatives to cooperate
with each other, for a period of 180 days after the Closing to ensure the
orderly transition of the Acquired Companies from Seller to Buyer
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and to minimize any disruption to the respective businesses of Seller, Buyer or
the Acquired Companies that might result from the Contemplated Transactions.
After the Closing, upon reasonable written notice, Buyer and Seller will furnish
or cause to be furnished to each other and their Representatives access, during
normal business hours, to such information and assistance relating to the
Acquired Companies as is reasonably necessary for financial reporting and
accounting matters, the preparation and filing of any Returns, reports or forms
or the defense of any Tax claim or assessment. Each party will reimburse the
other for reasonable out-of-pocket costs and expenses incurred in assisting the
other pursuant to this Section 14.n. Neither party will be required by this
Section 14.n. to take any action that would unreasonably interfere with the
conduct of its business or unreasonably disrupt its normal operations (or, in
the case of Buyer, the business or operations of the Acquired Companies). The
rights and obligations described in this Section 14.n. are in addition to those
rights and obligations described in that certain Technical Services Agreement to
be dated as of the Closing Date between the Buyer, Seller and Seller's Parent.
o. Antitrust Notification. Each of Seller and Buyer
will as promptly as practicable, but in no event later than ten (10) Business
Days following the execution and delivery of this Agreement, file with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form, if any,
required for the Contemplated Transactions and any supplemental information
requested in connection therewith pursuant to the HSR Act. Any such notification
and report form and supplemental information will be in substantial compliance
with the requirements of the HSR Act. Each of Buyer and Seller will furnish to
the other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. Seller and Buyer will keep each other apprised of
the status of any communications with, and any inquiries or requests for
additional information from, the FTC and the DOJ and will comply promptly with
any such inquiry or request. Each of Seller and Buyer will use its Best
Reasonable Efforts to obtain any clearance required under the HSR Act for the
purchase and sale of the Shares. Buyer will be solely responsible for any filing
(but not for legal or other) fees payable by Buyer or Seller under the HSR Act.
p. Confidentiality Agreements. Effective as of the
Closing, and to the extent permitted in the agreements in question, Seller,
Seller's Parent and any applicable Affiliates thereof shall be deemed to have
transferred to the Acquired Companies all rights and privileges such parties
have under all confidentiality and exclusivity agreements and like agreements,
letters of intent and memoranda of understanding (whether written or oral)
relating to the Business or any Acquired Company. Effective as of the Closing,
and to the extent such transfer is not permitted by the agreements in question,
Seller, Seller's Parent and any applicable Affiliates shall enforce these
agreements on Buyer's and the Acquired Companies' behalf at Buyer's request and
reasonable expense.
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
BUYER:
MR SERVICES ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title:
SELLER:
AMR SERVICES HOLDING CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxx
--------------------------------
Name: Xxxxxxx XxxXxxx
Title: Corporate Secretary
SELLER'S PARENT:
AMR CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxx
--------------------------------
Name: Xxxxxxx XxxXxxx
Title: Corporate Secretary
