EXHIBIT 10.7
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XXX XXXXXX, XXXX X. XXXXXXXX
AND XXXXX FINE
- and -
AMERICAN ECO CORPORATION
ACQUISITION AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
ENVIRONMENTAL EVOLUTIONS, INC.
INDEX TO SCHEDULES
Schedule 4.1(b) - Jurisdictions where Target Company
Carries
on Business
Schedule 4.1(e) - List of Pending and Threatened Legal
Proceedings and Claims
Schedule 4.1(f) - List of Registered Shares and Share
Ownership
Schedule 4.1(m) - Articles and By-Laws of Target Company
Schedule 4.1(m)(1) - Directors and Officers of Target Company
Schedule 4.1(o) - Permits and Licenses of Target Company
Schedule 4.1(p) - Target Company Financial Statements
Schedule 4.1(u) - Dividends and Distributions
Schedule 4.1(x) - Secured and Unsecured Indebtedness of
Target Company
Schedule 4.1(y)(1) - Real Property of Target Company
Schedule 4.1(y)(2) - Personal Property of Target Company
Schedule 4.1(y)(3) - Sales and Purchase Commitments of Target
Company
Schedule 4.1(y)(4) - Leases of Target Company
Schedule 4.1(y)(5) - Intellectual Property of Target Company
Schedule 4.1(y)(6) - Bank Accounts of Target Company
Schedule 4.1(y)(7) - Insurance of Target Company
Schedule 4.1(y)(8) - Major Clients of Target Company
Schedule 4.1(y)(9) - Major Suppliers of Target Company
Schedule 4.1(y)(10) - Target Company's Employee Particulars
Schedule 4.1(aa) - Contracts of Target Company
Schedule 8.1(h) - Xxxxx Fine Employment Agreement
Schedule 8.1(i) - Xxx Xxxxxx Employment Agreement
Schedule 8.1(j) - Xxxx X. Xxxxxxxx Employment Agreement
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION made
as of the 1st day of January, 1996.
B E T W E E N:
XXX XXXXXX, XXXX X. XXXXXXXX AND XXXXX FINE
individuals resident and domiciled in the State of
Texas
(collectively the "Shareholders")
OF THE FIRST PART
- and -
AMERICAN ECO CORPORATION
a corporation amalgamated pursuant to the laws of
the Province of Ontario
("ECO")
OF THE SECOND PART
WHEREAS the Shareholders are the owners, in the proportions and
amounts set forth below, of 100% of the issued and outstanding
shares in the capital of the Target Company (as hereinafter
defined) and the Shareholders seek to exchange the Target Company
Shares (as hereinafter defined) solely for voting stock in ECO
and ECO seeks to acquire the Target Company Shares from the
Shareholders, pursuant to this plan of reorganization within the
meaning of 368 (a) (1) (B) of the U.S. Internal Revenue Code of
1986, as amended, all on and subject to the terms and conditions
of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of
the mutual covenants, agreements and premises herein contained
and other good and valuable consideration (the receipt and
sufficiency whereof being hereby acknowledged by each party), the
parties hereto do hereby covenant and agree as follows:
1. DEFINITIONS AND SCHEDULES
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1.1 Definitions. In this Agreement:
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"Accounts Receivable" means all accounts receivable and
other book debts due or accruing to the Target Company as at
the Reference Date and the full benefit of all security, if
any, for such accounts or debts.
"Affiliate" has the meaning ascribed thereto in the OBCA.
"Agreement", "this Agreement", "hereto" and "herein" means
this Agreement and all schedules attached hereto, as may be
amended from time to time.
"Associate" has the meaning ascribed thereto in the OBCA.
"Best Knowledge" or "known" means actual knowledge or
awareness of the Party.
"Business Day" means a day other than a Saturday or a Sunday
or any other day which is a statutory holiday in the State
of Texas.
"Closing" means the consummation of the Transaction as
herein contemplated.
"Closing Date" means March 15, 1996 or such earlier or later
date as may be agreed to in writing by the Parties.
"Contract" means any agreement, indenture, contract, bond,
debenture, security agreement, lease, deed of trust,
license, option, instrument or other legally binding
commitment, whether written or oral.
"Direct Claim" has the meaning ascribed thereto in
subsection 6.3.
"ECO" means American ECO Corporation.
"ECO Shares" has the meaning ascribed thereto in Section
2(3).
"EEI" means Environmental Evolutions, Inc., a Texas
corporation
"Encumbrances" means any and all claims, liens, security
interests, mortgages, pledges, pre-emptive rights, charges,
options, equity interests, encumbrances, proxies, voting
agreements, voting trusts, leases, tenancies, easements or
other interests of any nature or kind whatsoever, howsoever
created.
"Five-Year Gain Recognition Agreement" means the agreement
to be executed and delivered by the Shareholders and the
Internal Revenue Service.
"Indemnified Party" has the meaning ascribed thereto in
section 6.3.
"Indemnifying Party" has the meaning ascribed thereto in
section 6.3.
"Indemnification Claim" has the meaning ascribed thereto in
section 6.3.
"Intellectual Property" means all patents, copyrights,
trademarks and trade names, service marks and all software,
data bases, trade secrets, know-how and other proprietary
rights as at the Reference Date.
"Losses" means any and all claims, demands, debts, suits,
actions, obligations, proceedings, losses, damages,
liabilities, deficiencies, costs and expenses (including
without limitation, all reasonable legal and other
professional fees and disbursements, interest, penalties and
amounts paid in settlement).
"Material Adverse Effect" means a material adverse effect on
the business, assets, liabilities, condition (financial or
otherwise), operations or prospects of the Party in question
or upon such Party's ability to perform its obligations
under this Agreement or to consummate the Transaction.
"OBCA" means the Business Corporations Act, Ontario.
"Parties" means collectively, the parties to this Agreement.
"Person" means any individual, partnership, company,
corporation, unincorporated association, joint venture,
trust, the Crown or any other agency or instrumentality
thereof or any other judicial entity or person, government
or governmental agency, authority or entity howsoever
designated or constituted.
"Reference Date" means January 1, 1996.
"Subsidiary" has the meaning ascribed thereto in the OBCA.
"Survival Period" has the meaning ascribed thereto in
section 5.1
"Target Company" means EEI.
"Target Company Contracts" has the meaning ascribed thereto
in section 4.1(aa).
"Target Company Shares" means 100% of the issued and
outstanding shares of capital stock of the Target Company,
registered in the names of the Shareholders, as set forth on
Schedule 4.2(f), hereto.
"Target Company Financial Statements" has the meaning
attributed thereto in section 4.1(p).
"Taxes" means all income, profits, franchise, royalty,
withholding, payroll, excise, sales, value added, use,
occupation and property taxes and any liability, whether
disputed or not, imposed by the U.S. or any state,
municipality, country or foreign government or subdivision
or agency thereof.
"Third Party" has the meaning ascribed thereto in section
6.3.
"Third Party Claim" has the meaning ascribed thereto in
section 6.3.
"Time of Closing" means 11:00 a.m. (Houston time) on the
Closing Date or if the Transaction is not completed at such
time, then such other time on the Closing Date on which the
Transaction is completed.
"Transaction" means the transfer of the Target Company
Shares in exchange for the ECO Shares as contemplated by
this Agreement.
"TSE" means The Toronto Stock Exchange.
1.2 Disclosure. Any fact or circumstance or combination of
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facts and/or circumstances disclosed in this Agreement or in any
schedules hereto shall be deemed to be disclosed for all purposes
of this Agreement.
1.3 Act. Any reference in this Agreement to any act, by-law,
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rule or regulation or to a provision thereof shall be deemed to
include a reference to any act, by-law, rule or regulation or
provision enacted in substitution or amendment thereof.
1.4 Houston Time. Except where otherwise expressly provided in
------------
this Agreement any reference to time shall be deemed to be a
reference to Houston, Texas time.
1.5 Gender and Extended Meanings. In this Agreement words and
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personal pronouns relating thereto shall be read and construed as
the number and gender of the party or parties referred to in each
case require and the verb shall be construed as agreeing with the
required word and pronoun. For greater certainty and without
limitation, in this Agreement the word "shall" has the same
meaning as the word "will".
1.6 U.S. Dollars and Payment. All dollar amounts referred to in
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this Agreement are in U.S. funds, unless otherwise expressly
specified.
1.7 Section Headings. The division of this Agreement into
----------------
sections is for convenience of reference only and shall not
effect the interpretation or construction of this Agreement.
1.8 Business Day. In the event that the date for the taking of
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any action under this Agreement falls on a day which is not a
Business Day, then such action shall be taken on the next
following Business Day.
2. AGREEMENT TO EXCHANGE
2.1 Transfer. Subject to the terms and conditions hereof, on
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the Closing Date at the Time of Closing, the Shareholders shall
transfer to ECO and ECO shall accept from the Shareholders the
Target Company Shares and the Assets and the Shareholders shall
deliver to ECO certificates representing the Target Company
Shares duly endorsed in blank for transfer together with new
certificates therefor, which shall be as at the Reference Date.
2.2 [Purposely Deleted]
2.3 Purchase Price. The purchase price for the Target Company
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Shares shall equal the sum of $2,400,000.00 and shall be
satisfied by the issuance to the Shareholders of 400,000 fully
paid and non-assessable common shares in the capital of ECO (the
"ECO Shares") issued at $6.00 per share. The ECO Shares shall be
fully tradeable 41 days after the Closing Date provided that the
buyer thereof is not a person in the United States and at the
time the buy order is originated, the buyer is outside the United
States or the Shareholders and any person acting on their behalf
reasonably believe that buyer is outside the United States or the
transaction is executed on or through the facilities of the TSE
and neither the Shareholders nor any person acting on their
behalf knows that the transaction has been pre-arranged with a
buyer in the United States.
2.4 Closing. Closing shall occur at the Time of Closing on the
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Closing Date at the offices of Moore, Landrey, Garth, Jones,
Xxxxxxxxxx & Xxxxxx, L.L.P. at 000 Xxxx Xxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxx, or at such other place or other time and date as
the Parties may agree.
2.5 Rollover. At or within sixty (60) days after Closing, the
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Shareholders shall provide to ECO with an executed copy of the
Five-Year Gain Recognition Agreement.
2.6 Release from Personal Guarantees. ECO shall use its best
--------------------------------
efforts to have the Shareholders released from any and all
outstanding personal guarantees of Target Company indebtedness
with all such guarantees being assumed by ECO. In the event ECO
cannot obtain such releases from the lenders of any such
guaranteed indebtedness within forty-five (45) days subsequent to
the Closing Date, ECO shall pay off or otherwise retire such
indebtedness.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF ECO
3.1 Covenants, Representations and Warranties. ECO hereby
-----------------------------------------
covenants, represents and warrants to the Shareholders as follows
and acknowledges and confirms that the Shareholders are relying
upon such covenants, representations and warranties in connection
with the Transaction and that unless otherwise indicated herein,
such covenants, representations and warranties shall be true and
correct as at the Closing Date:
(a) Organization. ECO is duly incorporated and validly
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subsisting under the laws of the Province of Ontario
and has the corporate power to own or lease its
property and to carry on its business as it is now
being conducted and subject to receipt of requisite
regulatory approval including approval from the TSE
with respect to the Transaction, on the Closing Date
ECO will have the corporate power to execute, deliver
and perform its obligations under this Agreement. ECO
is duly qualified to do business in those jurisdictions
wherein the failure to so qualify could have a Material
Adverse Effect on ECO.
(b) Corporate Authority. Subject to receipt of requisite
-------------------
regulatory approval including approval from the TSE
with respect to the Transaction, on the Closing Date
ECO will have taken all requisite corporate action to
authorize the valid execution, delivery and performance
of this Agreement and the consummation of the
Transaction.
(c) Agreement Enforceable. Subject to receipt of requisite
---------------------
regulatory approval including approval from the TSE
with respect to the Transaction, this Agreement
constitutes a valid and legally binding obligation of
ECO enforceable against ECO in accordance with its
terms.
(d) Securities Laws Matters. The common shares of ECO are
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listed and posted for trading on the TSE and on NASDAQ.
ECO is in compliance in all material respects with all
applicable requirements of the TSE and NASDAQ
concerning maintenance of such listings and has
received no notification nor has any reasonable basis
to believe that such listings may or will be
terminated. ECO is a "reporting issuer" under the
Securities Act, Ontario and the Securities Act, Quebec
and is not in material default of any of its
requirements under any such legislation, regulations or
published policies thereunder.
(e) No Violations. Subject to receipt of requisite
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regulatory approval including approval from the TSE
with respect to the Transaction, the execution and
delivery of this Agreement and all other agreements
contemplated herein by ECO and the observance and
performance of the terms and provisions of this
Agreement and any such agreements; (i) does not and
will not require ECO to obtain or make any consent,
authorization, approval, filing or registration under
any law, by-law, rule, regulation, judgment, order,
writ, injunction or decree which is binding upon ECO;
(ii) does not and will not constitute a violation or
breach of the charter documents or by-laws of ECO;
(iii) does not and will not constitute a violation or
breach of applicable law, any material provision of any
Contract to which ECO is a party or by which ECO is
bound or any law, by-law, rule, regulation, judgment,
order, writ, injunction or decree applicable to ECO;
and (iv) does not and will not constitute a material
default (nor would with the passage of time or the
giving of notice or both or otherwise, constitute a
material default) under any Contract, to which ECO is a
party or by which ECO is bound.
(f) Brokers. ECO shall be responsible for the payment of
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all brokerage commissions, and finder's fees or other
like payment incurred by ECO in connection with this
transaction, and ECO will indemnify and save harmless
the Shareholders of and from any such claims.
(g) Regulatory Approval. ECO shall diligently take all
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steps necessary or desirable to expeditiously obtain
requisite approval from the TSE with respect to the
Transaction. ECO shall not take any action that ECO
has reason to believe would result in the disapproval
by the TSE of the Transaction.
(h) Reorganization. The Transaction qualifies as a
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reorganization within the meaning of 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended, (the
"Code") and no gain or loss shall be recognized by the
Shareholders upon the exchange of their Target Company
Shares for ECO shares provided that Shareholders fully
comply with the undertakings of Shareholders described
in this Agreement and provided that Shareholders comply
with all filing and other requirements imposed upon
them by the Code and the regulations.
4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS
4.1 Covenants, Representations and Warranties. The Shareholders
-----------------------------------------
hereby jointly and severally covenant, represent and warrant
to ECO as follows and acknowledge and confirm that ECO is
relying upon such covenants, representations and warranties
in connection with the Transaction and that unless otherwise
indicated herein, such covenants, representations and
warranties shall be true and correct as at the Closing Date:
(a) Legal Capacity. The Shareholders have the legal
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capacity and competence to execute, deliver and perform
their obligations under this Agreement.
(b) Organization. The Target Company is duly incorporated
------------
and validly subsisting under the laws of the State of
Texas and has the corporate power to own or lease its
property and to carry on its business as it is now
being conducted and has the corporate power to execute,
deliver and perform its obligations under this
Agreement. The Target Company is duly qualified to do
business in those jurisdictions wherein the failure to
so qualify could have a Material Adverse Effect on the
Target Company, being those jurisdictions set forth on
Schedule 4.1(b).
(c) Corporate Authority. The Target Company has taken all
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requisite corporate action to authorize the valid
execution, delivery and performance of this Agreement
and the consummation of the Transaction.
(d) No Violations. The execution and delivery of this
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Agreement and all other agreements contemplated herein
by the Shareholders and the observance and performance
of the terms and provisions of this Agreement and any
such agreements; (i) does not and will not require the
Shareholders or the Target Company to obtain or make
any consent, authorization, approval, filing or
registration under any law, by-law, rule, regulation,
judgment, order, writ, injunction or decree which is
binding upon the Shareholders or the Target Company;
(ii) does not and will not constitute a violation or
breach of the charter documents or by-laws of the
Target Company; (iii) does not and will not constitute
a violation or breach of applicable law, any material
provision of any Contract to which the Shareholders or
the Target Company is a party or by which the
Shareholders or the Target Company is bound or any law,
by-law, rule, regulation, judgment, order, writ,
injunction or decree applicable to the Shareholders or
the Target Company; (iv) does not and will not
constitute a default (nor would with the passage of
time or the giving of notice or both or otherwise,
constitute a default) under any Contract, to which the
Shareholders or the Target Company is a party or by
which the Shareholders or the Target Company is bound;
and (v) does not and will not result in the creation or
imposition of any Encumbrance on the Target Company
Shares or any property or assets of the Shareholders or
the Target Company.
(e) Issued Shares. All of the issued and outstanding
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shares of the Target Company, being the Target Company
Shares, have been duly authorized, created and issued
as fully paid and non-assessable shares. There are
outstanding no other shares, warrants, rights or
securities convertible into shares or any other
evidence whatsoever of an interest in the Target
Company.
(f) Owner of the Target Company Shares. The Shareholders
----------------------------------
are the owners beneficially and of record of the Target
Company Shares in the amounts and proportions
identified on Schedule 4.1(f), hereto, and have good
and marketable title thereto, free and clear of any
Encumbrances and/or preemptive rights. The Shareholders
have the exclusive right and full power to transfer the
Target Company Shares to ECO as herein contemplated,
free and clear of any Encumbrances.
(g) Subsidiaries. The Target Company has no Subsidiaries
------------
and owns no shares of any other corporation or entity
nor any rights, warrants or other securities
convertible into shares of any other corporation or
entity. The Target Company is not bound by or a party
to any Contract which contemplates its amalgamation,
merger, consolidation or other acquisition with or by
any other entity.
(h) Acts of Bankruptcy. Neither the Shareholders nor the
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Target Company is insolvent, has proposed a compromise
or arrangement to its or their creditors generally, has
taken any proceeding with respect to a compromise or
arrangement, has taken any proceeding to have itself
declared bankrupt or wound-up, has taken any proceeding
to have a receiver appointed of any part of their
assets and at present, no encumbrancer or receiver has
taken possession of any of their property and no
execution or distress is enforceable or levied upon any
of its property and no petition for a receiving order
in bankruptcy is filed against them.
(i) Private Company. The Target Company does not
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distribute its securities to the public.
(j) Resident. Each of the Shareholders is a resident of
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the United States. The Target Company's principal
place of business is within the United States.
(k) Actions - Target Company Shares. There is not pending
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or, to the Best Knowledge of the Shareholders,
threatened or contemplated, any suit, action, legal
proceeding, litigation or governmental investigation of
any sort which would; (i) in any manner restrain or
prevent the Shareholders from effectually and legally
transferring the Target Company Shares to ECO in
accordance with this Agreement; (ii) cause an
Encumbrance to attach to the Target Company Shares;
(iii) divest title to the Target Company Shares in any
manner whatsoever; or (iv) make ECO liable for damages
in connection with the Transaction.
(l) Litigation. Except as set forth on Schedule 4.1(e),
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there is not pending, or, to the Best Knowledge of the
Shareholders, threatened or contemplated, any suit,
action, legal proceeding, litigation or governmental
investigation of any sort relating to the Shareholders,
the Target Company or the Transaction nor is there any
present state of facts or circumstances which can be
reasonably anticipated to be a basis for any such suit,
action, legal proceeding, litigation or governmental
investigation nor is there presently outstanding
against the Shareholders or the Target Company any
judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency,
instrumentality or arbitrator.
(m) Minute Books. The minute book of the Target Company
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contains accurate and complete copies of its
organizational documents together with minutes of all
meetings of directors, committees and shareholders of
the Target Company. The articles and the by-laws of
the Target Company are attached as Schedule 4.1(m).
There are outstanding no applications or filings which
would alter in any way the organizational documents or
corporate status of the Target Company. No resolutions
or by-laws have been passed, enacted, consented to or
adopted by the directors or shareholders of the Target
Company except as are contained in the minute book of
the Target Company. The directors and officers of the
Target Company are as set forth on Schedule 4.1(m)(1).
(n) Books of Account. The books of account and financial
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records of the Target Company fairly set out and
disclose in all material respects, the current
financial position of the Target Company. All material
transactions involving the Target Company have been
accurately recorded in such books and records. All
bonuses, commissions and other payments relating to the
employees of the Target Company are reflected in the
books of the Target Company in a manner consistent with
past record keeping practices and none of such payables
are in arrears.
(o) Permits and Licenses. The Target Company has all
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necessary permits, certificates, licenses, approvals,
consents and other authorizations required to carry on
and conduct business and to own, lease or operate its
assets at the places and in the manner in which such
business is conducted. Schedule 4.1(o) contains a
full, complete and accurate list of such permits,
certificates, licenses, approvals, consents and other
authorizations.
(p) Financial Statements. A true copy of the unaudited
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financial statements of the Target Company and the
statements of operations (the "Target Company Financial
Statements") of the Target Company as of December 31,
1995, is annexed hereto as Schedule 4.1(p). The Target
Company Financial Statements:
(1) Have been prepared in accordance with U.S.
generally accepted accounting principles applied
on a basis consistent with those of the preceding
fiscal period.
(2) Present fairly the assets, liabilities and
financial position of the Target Company as of
December 31, 1995, and the results of operations
for the period then ended subject to normal year
end adjustments, if applicable. Other than the
liabilities specified in the balance sheet forming
part of the Target Company Financial Statements or
incurred since the Reference Date in the ordinary
course of business (all of which is consistent
with past practice) or otherwise noted or
disclosed in this Agreement, to the Best Knowledge
of the Shareholders, there are no known
liabilities or obligations of the Target Company
(whether absolute, contingent or otherwise)
including without limitation, any Tax liabilities
due or to become due or contingent losses for
unasserted claims which are capable of assertion.
(3) Are substantially in accordance with the books and
records of the Target Company.
(4) Contain and reflect all necessary adjustments for
a fair presentation of the results of operations
and financial position of the Target Company for
the period covered thereby.
(5) Contain and reflect adequate provision or
allowance for all reasonably anticipated
liabilities, expenses and losses of the Target
Company.
(q) Guarantees. The Target Company does not have any
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outstanding guarantees or has any outstanding security
for any liability, debt or obligation of any Person.
(r) Bonds, Debentures. The Target Company does not have --
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any outstanding bonds, debentures or other indebtedness
or is under any agreement to create or issue any bonds,
debentures or other indebtedness.
(s) No Further Expenditures. No capital expenditures or
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leasehold improvements have been made by the Target
Company since the date of the Target Company Financial
Statements, other than in the ordinary course of
business.
(t) Related Parties. Except as disclosed on Schedule 4.1
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(aa), since the Reference Date, the Target Company has
not made any payment or loan to or borrowed any moneys
from and is not otherwise indebted to, any officer,
director, employee, shareholder or any other Person not
dealing at arm's length with the Target Company. The
Target Company is not a party to any Contract with any
officer, director, employee, shareholder or any other
Person not dealing at arm's length with the Target
Company. No officer, director or shareholder of the
Target Company and no entity that is an Affiliate or
Associate of one or more of such individuals:
(1) Owns, directly or indirectly, any interest in
(except for shares representing less than 2% of
the outstanding shares of any class of securities
of any publicly traded company) or is an officer,
director, employee or consultant of, any Person
which is or is engaged in business as a competitor
of the Target Company or a lessor, lessee, client
or supplier of the Target Company.
(2) Owns, directly or indirectly, in whole or in part,
any property that the Target Company uses in the
operation of its business.
(3) Has any cause of action or any other claims
whatsoever against or owes any amount to the
Target Company.
(u) Dividends or Distributions. Except as disclosed on
--------------------------
Schedule 4.1(u), no dividends or other distributions on
any of the shares in the capital of the Target Company
have been authorized, declared or paid since the date
of the Target Company Financial Statements and there
has not been any direct or indirect redemption,
purchase or acquisition of any such shares.
(v) No Changes. Since the Reference Date, the Target
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Company has carried on business and conducted its
operations and affairs only in the ordinary and normal
course consistent with past practice and there has not
been:
(1) Any material adverse change in the condition
(financial or otherwise), assets, liabilities,
operations, earnings, business or prospects of the
Target Company.
(2) Any damage, destruction or loss (whether or not
covered by insurance) affecting the property or
assets of the Target Company or any failure to
regularly maintain and repair such property and
assets in the ordinary course of business.
(3) Any payment, discharge or satisfaction of any
Encumbrance, liability or obligation of the Target
Company (whether absolute, accrued, contingent or
otherwise and whether due or to become due)
greater than $1,000.00 other than payment of
accounts payable and Tax liabilities incurred in
the ordinary course of business consistent with
past practice.
(4) Any issuance or sale by the Target Company or any
Contract entered into by the Target Company for
the issuance or sale by the Target Company of any
shares in the capital of or securities convertible
into or exercisable into shares in the capital of
the Target Company.
(5) Any labor disturbances have a Material Adverse
Affect on the Target Company.
(6) Any license, sale, assignment, transfer,
disposition, pledge, mortgage or granting of a
security interest or other Encumbrance on or over
any property or assets of the Target Company other
than in the ordinary course of business.
(7) Any write-off as uncollectible of any Accounts
Receivable or any portion there of the Target
Company in amounts exceeding the allowance set out
in the Target Company Financial Statement.
(8) Any cancellation of any other debts or claims or
any amendment, termination or waiver of any other
rights of value to the Target Company in amounts
exceeding $1,000.00 in each instance or $5,000.00
in the aggregate.
(9) Any general increase in the compensation of
employees of the Target Company (including without
limitation, any increase pursuant to any employee
plan or commitment) or any increase in any such
compensation or bonus payable to any officer,
employee, consultant or agent thereof (having an
annual salary or remuneration in excess of
$30,000.00), the execution of any employment
contract with any officer or employee (having an
annual salary or remuneration in excess of
$30,000.00) or the making of any loan to or
engagement in any transaction with any employee,
officer or director of the Target Company.
(10) Any material change in the accounting or tax
practices followed by the Target Company.
(11) Any material change adopted in the depreciation or
amortization policies or rates or any material
change in the credit terms offered to customers of
or by suppliers to the Target Company.
(12) Any acquisition, transfer, assignment, sale or
other disposition of any of the assets shown in
the Target Company Financial Statements other than
in the ordinary course of business.
(13) Any institution or settlement of any litigation,
action or proceeding before any court or
governmental body by or against the Target
Company.
(14) The creation of any debts and/or liabilities
whatsoever (whether accrued, absolute, contingent
or otherwise) than in the ordinary course of
business.
(w) Taxes. Except as reserved for in the Target Company
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Financial Statements:
(1) All returns, including reports of every kind with
respect to Taxes, which are due to have been filed
by the Target Company in accordance with
applicable law, have been duly filed by the dates
prescribed by law and are complete and accurate.
(2) All Taxes, deposits or other payments for which
the Target Company may have any liability arising
prior to Closing have been paid in full or accrued
as liabilities for Taxes on the books of the
Target Company.
(3) All installments for Taxes which the Target
Company may be required to make have been made on
a timely basis.
(4) The amount so paid on or before the Reference Date
together with any amounts accrued as liabilities
for Taxes (whether accrued as currently payable or
deferred taxes) on the books and in the Target
Company Financial Statements will be adequate to
satisfy all liabilities for Taxes of the Target
Company in any jurisdiction in respect of the
periods covered.
(5) There are not now any extensions of time in effect
with respect to the dates on which any returns,
including elections, or reports of Taxes were or
are due to be filed by the Target Company and
there are no outstanding requests therefor.
(6) All assessments or reassessments of Taxes asserted
as a result of any examination of any return or
report of Taxes have been paid by the Target
Company, have been accrued on the books of the
Target Company and in the Target Company Financial
Statements or finally settled and no issue has
been raised in any such examination which, by
application of the same or similar principles,
reasonably could be expected to result in a
proposed deficiency for any other period not so
examined.
(7) No payments are or will be required to be made by
the Target Company pursuant to any tax indemnity,
allocation or sharing agreement and all such
agreements will be terminated with respect to the
Target Company as of the Reference Date.
(8) No claims, proposals, assessments or reassessments
for any Taxes are being asserted or, to the Best
Knowledge of the Shareholders, proposed or
threatened and, to the Best Knowledge of the
Shareholders, no audit or investigation of any
return or report of Taxes is currently under way,
pending or threatened.
(9) There are no outstanding waivers or agreements by
the Target Company for the extension of time for
the assessment or reassessment of any Taxes or
deficiency thereof nor are there any requests for
rulings, outstanding subpoenas or requests for
information, notice of proposed reassessment of
any property owned or leased by the Target Company
or any other matter pending between the Target
Company and any taxing authority.
(10) There are no liens for Taxes upon the Target
Company shares or upon any property or assets of
the Target Company except liens for current Taxes
not yet due.
(11) To the Best Knowledge of the Shareholders there
are no facts which exist or have existed which
would constitute grounds for the assessment of any
Taxes of the Target Company with respect to the
periods which have not been audited by the
Internal Revenue Service or other taxing
authorities.
(12) The Target Company has withheld from each payment
made to its officers, directors and employees and
former officers, directors and employees, the
amount of all Taxes and other deductions required
to be withheld therefrom and has paid the same to
the proper tax and other receiving officers within
the time required under applicable legislation.
(13) Adequate provision, including provision in the
deferred tax account, has been made for all
deferred and accrued Tax liabilities with respect
to operations of the Target Company for the period
ending on the Reference Date.
(14) The Target Company and the Shareholders have made
provision for the filing with the Internal Revenue
Service of all necessary statements and consents
required to revoke the status of the Target
Company as an S Corporation, effective for the
Target Company's fiscal year beginning January 1,
1996.
(x) Assets. The Target Company has good and
------
marketable title to all of its assets as reflected
on the Target Company Financial Statements, free
and clear of all Encumbrances save and except for
those assets sold, assigned, transferred or
disposed of in the ordinary course of business and
save and except for the encumbrances identified in
Schedule 4.1(x), hereto.
(y) Schedules. The Schedules hereto contain full,
---------
complete and accurate lists and descriptions of
the following as at the Reference Date:
(1) Schedule 4(y)(1): All real property owned of
record or beneficially of the Target Company.
(2) Schedule 4.1(y)(2): All items of tangible personal
property (other than raw material, purchased
parts, work in process, finished goods and other
items of inventory), if any, not reflected on any
other Schedule hereto having a book value of
$200.00 or more and owned of record or
beneficially by the Target Company, including
without limitation, automobiles, trucks and other
vehicles.
(3) Schedule 4.1(y)(3): All purchase commitments of
the Target Company where the amount remaining
unpaid is in excess of $500.00 and all sales
commitments where the total value of the
commitment which is presently unpaid exceeds
$1,000.00 of the Target Company.
(4) Schedule 4.1(y)(4): Each lease (including all
amendments thereto) where the total amount
remaining to be paid thereunder exceeds $500.00
under which the Target Company is a lessee of any
personal property and each real property lease.
All rentals due under all such leases have been
paid up to and including the Reference Date and
there are no defaults by the Target Company under
the terms of such leases and no event has occurred
which, upon the passage of time or the giving of
notice or both would result in an event of default
by the Target Company or would prevent the Target
Company from exercising and obtaining the benefits
of any rights or options contained therein. The
Target Company has all right, title and interest
of the lessee under the terms of each such lease
free and clear of any Encumbrances and all such
leases are valid and in full force and effect.
The Transaction does not constitute a default by
the Shareholders or the Target Company under any
such leases and the consent of the lessors under
such leases is not required with respect to this
Transaction.
(5) Schedule 4.1(y)(5): All Intellectual Property that
is directly or indirectly owned, licensed, used,
required for use or controlled in whole or in part
by the Target Company and the Shareholders and all
material licenses and other agreements allowing
the Target Company and the Shareholders to use the
Intellectual Property of other Persons. None of
the Intellectual Property of the Target Company
and the Shareholders infringes upon the
Intellectual Property of any other Person and to
the Best Knowledge of the Shareholders, no
activity of any other Person infringes upon any of
the Intellectual Property of the Target Company or
the Shareholders to the extent that any such
infringement in either case could have a Material
Adverse Effect on the Target Company or the
Shareholders. To the Best Knowledge of the
Shareholders, the Target Company has been and is
now conducting business in a manner which has not
been and is not now in violation of any
Intellectual Property of any other Person and does
not require a material license to operate such
business as currently conducted except as
disclosed on Schedule 4.1(o). The Intellectual
Property of the Target Company is sufficient for
the conduct of business of the Target Company as
currently conducted.
(6) Schedule 4.1(y)(6): The name and address of each
bank, trust company or other financial institution
in which the Target Company has an account and the
names of all Persons authorized to draw thereon as
well as all powers of attorney granted by the
Target Company.
(7) Schedule 4.1(y)(7): All insurance policies now in
full force and effect (specifying the insurer, the
amount of coverage, type of insurance, the amount
of deductible if any, the policy number, expiry
date and any pending claims thereunder) maintained
by the Target Company on its assets including
without limitation, business interruption,
personal and product liability coverage and by the
Target Company on the lives of its directors and
officers, together with true copies thereof. The
proceeds of such policies are fully payable to the
Target Company. All premiums in connection with
such policies are fully paid. Such insurance is
in amounts deemed by the Shareholders to be
sufficient for all policy periods prior to the
Reference Date with respect to the assets,
properties, business, operations, products and
services owned or conducted by the Target Company.
There are no claims, actions, suits or proceedings
arising out of or based upon any of such insurance
policies and to the Best Knowledge of the
Shareholders, no basis for any such claim, action,
suit or proceeding exists. The Target Company is
not in default with respect to any provisions
contained in any such insurance policy which would
adversely affect its rights to make any claim
under any such insurance policy.
(8) Schedule 4.1(y)(8): All major clients of the
Target Company (being those clients of the Target
Company accounting for more than 5% of revenues
for the financial year ended on December 31, 1995.
There has been no termination or cancellation of
the business relationship of the Target Company
with any major client or group of major clients.
(9) Schedule 4.1(y)(9): All suppliers or vendors of
products or services to the Target Company
aggregating more than $10,000.00 during the period
ending on the Reference Date, the address of each
such supplier or vendor and the amount sold to the
Target Company during such period.
(10) Schedule 4.1(y)(10):
(a) All written contracts or arrangements for the
employment of any officer, employee, agent or
consultant of the Target Company.
(b) A complete list of all permanent and
full-time employees of the Target Company,
their salaries and wage rates, their
positions and their length of service and
particulars of any Contracts, arrangements or
understandings, written or oral, with them.
(c) All bonus, deferred compensation, severance
or termination pay, insurance, medical,
dental, drug, profit sharing, pension,
retirement, stock option, stock purchase,
hospitalization insurance or other material
plans or arrangements providing employee
benefits to any current or former director,
officer, employee or consultant of the Target
Company and all relevant vacation policies.
(aa) Certain Contracts and Commitments. Schedule 4.1 (aa)
---------------------------------
sets forth a list and description of all contracts,
leases and licenses of the Target Company (the "Target
Company Contracts") not included on any other Schedule.
The enforceability of the Target Company Contracts will
not be affected in any manner by the execution and
delivery of this Agreement or the consummation of the
Transaction. The Target Company is not in default and
there does not exist any event that, with notice or
lapse of time or both, would constitute an event of
default by the Target Company under any of the Target
Company Contracts. None of the Shareholders has
knowledge of any breach or default by any other party
to the Target Company Contracts. A true and complete
copy of each such Target Contract has been delivered to
ECO or will be delivered to ECO prior to the Closing
Date.
(ab) No Other Contracts. For greater certainty and without
------------------
limitation, except as set forth in Schedule 4.1 (aa) or
otherwise herein, the Target Company is not a party to
or bound by any Contract which in any way has or could
have a Material Adverse Effect on the Target Company.
The Contracts set forth in the Schedules hereto are not
subject to renegotiation or cancellation resulting from
the Transaction. Except as described in the Schedules,
the Target Company is not a party to or bound by:
(1) Any Contract for the purchase of materials,
supplies, equipment or services which involves the
payment of $1,000.00 or more.
(2) Any Contract for the sale, license or provision of
any assets or services which involve the receipt
of $1,000.00 or more.
(3) Any trust indenture, mortgage, promissory note,
loan agreement, guarantee or other Contract for
the borrowing of money or a leasing transaction of
the type required to be capitalized in accordance
with generally accepted accounting principles.
(4) Any Contract for charitable contributions in
excess of $500.00 in the aggregate.
(5) Any Contract relating to a distributorship, sales
representative or sales agency agreement.
(6) Any Contract which involves the sharing of
profits, a joint venture, partnership, joint
development or bidding arrangement or any material
advertising contracts.
(7) Any Contract not made in the ordinary course of
business.
(8) Any Contract restricting in any manner the conduct
of the Target Company or the ownership or use of
the assets thereof.
(9) Any material warranties relating to products
distributed or services provided by the Target
Company.
(10) Any Contract involving the payment or receipt of
$5,000.00 or more in any 12 month period.
(11) Any Contract required to be disclosed on a
Schedule to this Agreement that is not so
disclosed.
(ac) Default of Contracts. The Target Company has performed
--------------------
all of the obligations required to be performed by it
to the extent performance is due and is entitled to all
benefits under and is not in default or alleged to be
in default in respect of, any Contract to which it is a
party or by which it is bound. No event, condition or
occurrence exists that, after notice or lapse of time
or both, would constitute a default under any of such
Contracts. The Target Company has the capacity,
including the necessary personnel, equipment and
supplies, to materially perform all its obligations
under all such Contracts.
(ad) Compliance with Laws. The Target Company has conducted
--------------------
and is now conducting business in compliance with all
statutes, regulations, by-laws, orders, covenants,
restrictions or plans of all federal, state or
municipal authorities, agencies or boards applicable to
such business. The Target Company is not in default
under any such statutes, regulations, by-laws, orders,
covenants, restrictions or plans applicable to it.
Neither the Target Company nor any of its directors,
officers, agents, employees or other Persons acting on
behalf of the Target Company have, directly or
indirectly, used any corporate funds of the Target
Company for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to
political activity, made any unlawful payments on
behalf of the Target Company to foreign or domestic
government officials or employees or to foreign or
domestic political parties or campaigns from corporate
funds, knowingly made any false or fictitious entry on
the books or records of the Target Company or made any
bribe, rebate, payoff, influence payment, kickback or
other unlawful payment on behalf of the Target Company.
(ae) Leased Premises. The occupation and use to which the
---------------
leased premises of the Target Company have been put by
the Target Company is not in breach of any applicable
statute, by-law, regulation, covenant or restriction
applicable to the leased premises. The zoning by-laws
applicable to the leased premises of the Target Company
permit the operation of business and the intended use
to be made of the leased premises by the Target
Company. There are no outstanding work orders against
the leased premises of the Target Company or any part
thereof nor are there any matters under discussion
between the Target Company and any governmental or
municipal authority which may give rise to work orders.
(af) Environmental Matters. To the Best Knowledge of the
---------------------
Shareholders, the buildings and premises at which the
Target Company carries on business does not contain any
material quantities of noxious substances including
without limitation, urea formaldehyde foam insulation,
aluminum wiring, asbestos, materials containing
asbestos, polychlorinated byphenyls or substances
containing polychlorinated byphenyls or radon at levels
deemed unacceptable by any health, labor or
environmental authority or any federal, state or
municipal government. The operations of the Target
Company in all material respects complies with all
applicable environmental statutes, regulations and
decrees, whether federal, state or municipal. The
Target Company has not received any notices to the
effect that the business carried on by the Target
Company is not in compliance with the requirements of
applicable environmental statutes, regulations or
decrees or is subject to any remedial control or action
or any investigation or evaluation as to whether any
remedial action is required to respond to a release or
threatened release of any contaminant into the
environment or into any facility or structure which
forms part of or is adjacent to the leased premises at
which the business is carried on.
(ag) Employee Plans and Arrangements. All of the contracts,
-------------------------------
plans and arrangements referred to in Schedule
4.1(y)(10) are in good standing and the Target Company
has made all payments required to be made by it in
connection therewith. All employee plans requiring
funding on the part of the Target Company are fully
funded. The Target Company does not have any employees
receiving or claiming long term disability benefits or
workers' compensation benefits. No notice has been
received by the Target Company of any complaints filed
by any employees claiming that the Target Company has
violated any applicable employee or human rights or
similar legislation in any other jurisdiction in which
the Target Company carries on business or of any
complaints or proceedings of any kind involving the
Target Company or any employees of the Target Company
before any labor relations board. There are no
outstanding orders or charges against the Target
Company under any applicable heath and safety
legislation in the jurisdictions in which the Target
Company carries on business. All levies, assessments
and penalties made against the Target Company pursuant
to any applicable workers' compensation legislation in
any jurisdictions in which any of the Target Company
carries on business have been paid by the Target
Company and the Target Company has been reassessed
under any such legislation during the past 3 years.
The Target Company has not made any agreements with any
labor union or employee association or made commitments
to or conducted negotiations with any labor union or
employee association with respect to any future
agreements and none of the Shareholders is aware of any
current attempts to organize or establish any labor
union or employee association relating to the Target
Company. The Target Company has not entered into any
agreement or made any arrangements with any employees
and consultants which would have the effect of
depriving the Target Company of the continued services
of any such employees and consultants following the
Closing.
(ah) No Brokers. All negotiations relating to this
---------
Agreement and the Transaction have been carried on by
the Shareholders directly with ECO without the
intervention of any other Person on behalf of the
Shareholders in such manner as to give rise to any
valid claim against ECO for a brokerage commission,
finder's fee or other like payment and the Shareholders
will indemnify and save harmless ECO of and from any
such claim.
(ai) Omissions and Misrepresentations. None of the
--------------------------------
foregoing covenants, representations and warranties
knowingly contains any untrue statement of material
fact or knowingly omits to state any material fact
necessary to make any such covenant, warranty or
representation not misleading to a prospective
purchaser of the Target Company Shares and the Assets
seeking full information as to the Target Company.
5. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
-----------------------------------------------------
5.1 Survival. No investigations made by or on behalf of any
--------
Party at any time shall have the effect of waiving, diminishing
the scope of or otherwise affecting any covenant, representation
or warranty made by any Party. No waiver by any Party of any
condition, in whole or in part, shall operate as a waiver of any
other condition. The covenants, representations and warranties
contained in Article 3 and 4 respectively or in any certificate
or other document delivered in connection with the Closing shall
survive the making of this Agreement and the Closing for a period
of 2 years and only 2 years, except the representations and
warranties set forth in Paragraphs (h) Reorganization of Section
3.1 and Section 4.1(w) Taxes and Section 4.1(af) Environmental
Matters, which representations and warranties shall survive the
Closing for a period of 5 years and only 5 years (the applicable
period of survival being herein referred to as the "Survival
Period"); provided, however, that if a claim for a breach of any
such covenant, representation or warranty is brought prior to the
expiration of the applicable Survival Period such covenant,
representation or warranty shall, for the purposes of such claim,
survive the applicable Survival Period until such claim is
finally resolved and all obligations with respect thereto have
been fully satisfied.
6. INDEMNITY
---------
6.1 Indemnity by ECO. ECO agrees to indemnify and save harmless
----------------
the Shareholders from all Losses actually incurred by the
Shareholders as a result of any breach by ECO or any inaccuracy
of any covenant, representation or warranty contained in this
Agreement.
6.2 Indemnity by the Shareholders. Each of the Shareholders
-----------------------------
agree to jointly and severally indemnify and save harmless ECO
from all Losses actually incurred by ECO as a result of:
(a) Any breach by the Shareholders or any inaccuracy of any
covenant, representation or warranty contained in this
Agreement.
(b) All debts and liabilities whatsoever (whether accrued,
absolute, contingent or otherwise) of the Target
Company as at the Reference Date which are not
disclosed on, provided for or included in the balance
sheets forming part of the Target Company Financial
Statements or which did not arise in the ordinary
course of business since the date of the Target Company
Financial Statements up to the Time of Closing.
(c) Any assessment or reassessment of Taxes, interest
and/or penalties for any period up to the Reference
Date for which no adequate reserve has been provided
and disclosed in the Target Company Financial
Statements;
provided, however, that the liability of each of the Shareholders
under this indemnity shall be limited to the value at Closing of
the pro rata portion of the purchase price received by each
Shareholder.
6.3 Notice of Claims
----------------
(a) In the event that a Party (the "Indemnified Party")
shall become aware of any Loss in respect of which
another Party (the "Indemnifying Party") agreed to
indemnify the Indemnified Party pursuant to this
Agreement (the "Indemnification Claim"), the
Indemnified Party shall promptly give written notice
thereof to the Indemnifying Party. Such notice shall
specify whether the Indemnification Claim arises as a
result of a claim by a Person against the Indemnified
Party (a "Third Party Claim") or whether the Loss does
not so arise (a "Direct Claim") and shall also specify
with reasonable particularity (to the extent that the
information is available) the factual basis for the
Indemnification Claim and the amount of the Loss if
known.
(b) If through the fault of the Indemnified Party the
Indemnifying Party does not receive notice of any
Indemnification Claim in time to contest effectively
the determination of any liability susceptible of being
contested, the Indemnifying Party shall be entitled to
set off against the amount claimed by the Indemnified
Party the amount of any Losses incurred by the
Indemnifying Party resulting from the Indemnified
Party's failure to give such notice on a timely basis.
6.4 Investigation of Claims. With respect to any Direct Claim,
-----------------------
following receipt of notice from the Indemnified Party of the
Indemnification Claim, the Indemnifying Party shall have 60 days
to make such investigation of the Indemnification Claim as is
considered necessary or desirable. For the purpose of such
investigation, the Indemnified Party shall make available to the
Indemnifying Party the information relied upon by the Indemnified
Party to substantiate the Indemnification Claim, together with
all such other information as the Indemnifying Party may
reasonably request. If all Parties agree at or prior to the
expiration of such 60 day period (or any mutually agreed upon
extension thereof) to the validity and amount of such
Indemnification Claim, the Indemnifying Party shall immediately
pay to the Indemnified Party the full agreed upon amount of the
Indemnification Claim, failing which the matter shall be
determined by a court of competent jurisdiction.
6.5 Supplemental Rights. The rights and benefits provided in
-------------------
this Article are supplemental to and are without prejudice to any
other rights, actions or causes of action which may arise
pursuant to any other section of this Agreement or pursuant to
applicable law.
7. PRE-CLOSING COVENANTS
7.1 Operations Before Closing. For greater certainty and
-------------------------
without limitation, without the prior written consent of ECO
during the period commencing on the Reference Date and
terminating at the close of business on the Closing Date, the
Shareholders; (i) shall not make nor shall the Shareholders
permit to be made any material change in the way the Target
Company is being operated; and (ii) shall comply with all laws in
connection with the business of the Target Company.
8. CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS AT
--------------------------------------------------------
CLOSING
-------
8.1 Conditions Precedent. All obligations of the Shareholders
--------------------
to sell the Target Company Shares and the Assets at Closing under
this Agreement are subject to the fulfillment (or waiver in
writing by the Shareholders) prior to or at the Closing of each
of the following conditions:
(a) Covenants, Representations and Warranties. The
-----------------------------------------
covenants, representations and warranties made by ECO
in or under this Agreement shall be true in all
material respects on and as of the Closing Date and the
Shareholders shall have received from ECO a certificate
signed as of the Closing Date to such effect.
(b) Actions, Etc. All actions, proceedings, instruments
------------
and documents required to carry out the Transaction
including without limitation the issue of the ECO
Shares as contemplated in this Agreement and all other
related legal matters shall have been approved by the
Shareholders and the Shareholders shall have been
furnished with such certified copies of actions and
proceedings and other such instruments and documents as
the Shareholders shall have requested.
(c) Approvals. ECO shall have received all requisite
---------
regulatory approvals including approvals of the TSE and
board of director approvals in connection with the
Transaction.
(d) Compliance with Covenants. ECO shall have complied ---
----------------------
with all covenants and agreements herein agreed to be
performed or caused to be performed by ECO.
(e) Approvals and Consents. At or before Closing there ---
-------------------
shall have been obtained from all appropriate federal,
state, provincial, municipal or other governmental or
administrative bodies all such approvals and consents,
if any, in form and on terms satisfactory to the
Shareholders as may be required in order to permit the
issue of the ECO Shares as provided in this Agreement.
(f) Corporate Authorizations. ECO shall have delivered to
------------------------
the Shareholders evidence satisfactory to the
Shareholders that all necessary corporate
authorizations by ECO authorizing and approving the
Transaction have been obtained. The Closing ECO Shares
shall have been duly authorized, created and validly
issued as fully paid and non-assessable shares free and
clear of all Encumbrances and shall be listed and
posted for trading on the TSE and NASDAQ, subject only
to routine filings and subject to the matters contained
in this Agreement.
(g) No Orders. No order of any court or administrative
---------
agency shall be in effect which restrains or prohibits
the Transaction and no suit, action, inquiry,
investigation or proceeding in which it will be or it
is sought to restrain, prohibit or change the terms of
or obtain damages or other relief in connection with
the Transaction and which in the reasonable judgment of
the Shareholders makes it inadvisable to proceed with
the consummation of the Transaction shall have been
made, instituted or threatened by any Person.
(h) Employment Agreement - Xxx Xxxxxx. EEI shall have
---------------------------------
entered into an employment agreement with Xxx Xxxxxx in
the form set out in Schedule 8.1(h).
(i) Employment Agreement - Xxxx Xxxxxxxx. EEI shall have
------------------------------------
entered into an employment with Xxxx Xxxxxxxx in the
form set out in Schedule 8.1(i).
(j) Employment Agreement - Xxxxx Fine. EEI shall have
---------------------------------
entered into an employment agreement with Xxxxx Fine in
the form set out in Schedule 8.1(j).
In case any of the foregoing conditions cannot be fulfilled
at or before the Time of Closing to the reasonable satisfaction
of the Shareholders, the Shareholders may rescind this Agreement
by notice to ECO and in such event all of the Parties shall be
released from all obligations hereunder. Provided however that
any such conditions may be waived in whole or in part by the
Shareholders without prejudice to the Shareholders' rights of
rescission in the event of the non-fulfillment of any other
condition or conditions, any such waiver to be binding on the
Shareholders only if the same is in writing.
9. CONDITIONS PRECEDENT TO ECO'S OBLIGATIONS AT CLOSING
----------------------------------------------------
9.1 Conditions Precedent. All obligations of ECO to purchase
--------------------
the Target Company Shares this Agreement are subject to the
fulfillment (or waiver in writing by ECO) prior to or at the
Closing of each of the following conditions:
(a) Actions, Etc. All actions, proceedings, instruments
------------
and documents required to carry out the Transaction
including without limitation, the transfer of the
Target Company Shares and all other related legal
matters shall have been approved by ECO and ECO shall
have been furnished with such certified copies of
actions and proceedings and other such instruments and
documents as ECO shall have requested.
(b) Covenants, Representations and Warranties. The
-----------------------------------------
covenants, representations and warranties made by the
Shareholders in or under this Agreement shall be true
in all material respects on and as of the Closing Date
and ECO shall have received from the Shareholders a
certificate signed as of the Closing Date and to such
effect.
(c) Approvals. ECO shall have received all requisite
---------
regulatory approval including without limitation
approvals of TSE and board of director approvals in
connection with the Transaction.
(d) Resignations. All of the directors and officers of the
------------
Target Company shall have resigned as directors and
officers of the Target Company in favor of nominees of
ECO and the resigning directors and officers of the
Target Company shall have delivered releases to the
Target Company and ECO in form and substance.
(e) Compliance with Covenants. The Shareholders shall have
-------------------------
complied with all covenants and agreements herein
agreed to be performed or caused to be performed by the
Shareholders.
(f) Approvals and Consents. At or before Closing there ---
-------------------
shall have been obtained from all appropriate federal,
state, municipal or other governmental or
administrative bodies all such approvals and consents,
if any, in form and on terms reasonably satisfactory to
ECO as may be required in order to transfer the Target
Company Shares at Closing as herein provided.
(g) Permits and Licenses. ECO shall have been furnished
--------------------
with evidence that the Target Company holds all valid
permits and licenses as may be requisite for carrying
on business.
(h) Corporate Authorizations. The Shareholders shall have
------------------------
delivered to ECO evidence satisfactory to ECO that all
necessary corporate authorizations by the Shareholders
and the Target Company authorizing and approving the
Transaction have been obtained.
(i) No Orders. No order of any court or administrative
---------
agency shall be in effect which restrains or prohibits
the Transaction and no suit, action, inquiry,
investigation or proceeding in which it will be or it
is sought to restrain, prohibit or change the terms of
or obtain damages or other relief in connection with
the Transaction and which in the judgment of ECO makes
it inadvisable to proceed with the consummation of the
Transaction shall have been made, instituted or
threatened by any Person.
(j) Undertaking. The Shareholders shall have executed and
-----------
delivered to ECO an undertaking concerning those
matters to which the Shareholders covenanted in the
Five Year Gain Recognition Agreement in the form set
out in Schedule 9.1(k).
(k) Employment Agreement - Xxx Xxxxxx. EEI shall have
---------------------------------
entered into a 36-month employment agreement with Xxx
Xxxxxx in the form set out in Schedule 8.1(h).
(l) Employment Agreement - Xxxx X. Xxxxxxxx. EEI shall
---------------------------------------
have entered into a 36-month employment with Xxxx X.
Xxxxxxxx in the form set out in Schedule 8.1(i).
(m) Employment Agreement - Xxxxx Fine. EEI shall have
---------------------------------
entered into a 36-month employment contract with Xxxxx
Fine in the form set out in Schedule 8.1(j).
In case any of the foregoing conditions cannot be fulfilled
at or before the Time of Closing to the satisfaction of ECO, ECO
may rescind this Agreement by notice to the Shareholders and in
such event the Parties shall be released from all obligations
hereunder. Provided however that any such conditions may be
waived in whole or in part by ECO without prejudice to ECO's
rights of rescission in the event of the non-fulfillment of any
other condition or conditions, any such waiver to be binding on
ECO only if the same is in writing.
10. MISCELLANEOUS
--------------
10.1 Tender. Any tender of documents or money hereunder may be
------
made upon the Parties or upon their respective solicitors as set
forth herein.
10.2 Notice. All notices, requests, demands or other
------
communications by the Parties required or permitted to be given
by one Party to another shall be given in writing by personal
delivery, telecopy or by registered or certified mail, postage
prepaid, addressed, telecopied or delivered to such other Party
as follows:
(a) if to the Shareholders, to:
(1) Xxx Xxxxxx
00000 Xxxxxxx Xxxxx
Xxxxxx Xxxxxxx, XX 00000
(2) Xxxx X. Xxxxxxxx
P. O. Xxx 00000
Xxxxxx Xxxxxxx, XX 00000
(3) Xxxxx Fine
P. O. Xxx 0000
Xxxxxx Xxxxx, XX 00000
(b) if to ECO, to:
0000 Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx
00000
Attention: Xxxxxxx X. XxXxxxxx, President
Telefax No.: 000-000-0000
Telephone No.: 000-000-0000
or at such other address or telecopier number as may be given by
any of them to the others in writing from time to time and such
notices, requests, demands or other communications shall be
deemed to have been received when delivered, if personally
delivered, on the date telecopied (with receipt confirmed) if
telecopied and received at or prior to 5:00 p.m. local time and,
if not, on the next Business Day, and if mailed, on the date
received as certified.
10.3 Further Assurances. The Parties shall sign such other
------------------
papers, cause such meetings to be held, resolutions passed and
by-laws enacted and exercise their vote and influence, do and
perform and cause to be done and performed such further and other
acts and things as may be necessary or desirable in order to give
full effect to this Agreement and every part hereof.
10.4 Laws. This Agreement shall be governed by the laws of Texas
----
and the Parties hereby irrevocably attorn to the Courts of Xxxxxx
County, Texas.
10.5 Expenses. All out-of-pocket expenses (including legal and
--------
accounting expenses) incurred in connection with the Transaction
shall be borne by the respective Parties.
10.6 Time of the Essence. Time shall be of the essence of this
-------------------
Agreement and of every part hereof and no extension nor variation
of this Agreement shall operate as a waiver of this provision.
10.7 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the Parties with respect to all of the matters
herein. This Agreement supersedes any and all agreements,
understandings and representations made between the Parties prior
to the date hereof including without limitation, that certain
letter of intent dated February 1, 1996. This Agreement shall
not be amended except by a memorandum in writing signed by all of
the Parties and any amendment hereof shall be null and void and
shall not be binding upon any Party which has not given its
consent as aforesaid.
10.8 Assignment. No Party may assign this Agreement or any part
----------
hereof without the prior written consent of the other Parties
which consent may be unreasonably withheld. Subject to the
foregoing, this Agreement shall enure to the benefit of and be
binding upon the Parties and their respective successors and
permitted assigns, but no other Person.
10.9 Invalidity. In the event that any of the covenants,
----------
representations and warranties or any portion of them contained
in this Agreement are unenforceable or are declared invalid for
any reason whatsoever, such unenforceability or invalidity shall
not affect the enforceability or validity of the remaining terms
or portions thereof contained in this Agreement and such
unenforceable or invalid covenant, representation and warranty or
covenant or portion thereof shall be severable from the remainder
of this Agreement.
10.10 Counterpart. This Agreement may be executed in several
-----------
counterparts, each of which so executed shall be deemed to be an
original and such counterparts when taken together shall
constitute one and the same original agreement which shall be
binding on the Parties hereto.
10.11 Schedules. The parties acknowledge that as of the
---------
Closing Date, all of the Schedules and exhibits referred to in
this Agreement have been approved by the parties and are attached
to this Agreement.
IN WITNESS WHEREOF the Parties have duly executed this
Agreement, in multiple counterparts, as of the date and year
first above written.
/s/ Xxx Xxxxxx
_____________________________________
XXX XXXXXX
/s/ Xxxx X. Xxxxxxxx
__________________________________
XXXX X. XXXXXXXX
/s/ Xxxxx Fine
_____________________________________
XXXXX FINE
AMERICAN ECO CORPORATION
BY: /s/ Xxxxxxx X. XxXxxxxx
_____________________________________
ITS: President
FIRST AMENDMENT TO ACQUISITION AGREEMENT
__________________________________________
This First Amendment to Acquisition Agreement (the "First
Amendment") is made and entered into by and between American Eco
Corporation, an Ontario corporation ("Eco") and Xxx Xxxxxx, Xxxx
X. Xxxxxxxx and Xxxxx Fine, residents of the State of Texas
(collectively, the "Shareholders").
WHEREAS, Eco and the Shareholders have heretofore entered into a
certain Acquisition Agreement and Plan of Reorganization (the
"Agreement"), as of the Reference Date, whereby Eco exchanged
400,000 shares of its common stock to the Shareholders for 100%
of the issued and outstanding stock of Environmental Evolutions,
Inc., a Texas corporation (the "Target Company"); and
WHEREAS, the parties desire to amend and supplement the
Acquisition Agreement, in the manner hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants, agreements and
premises herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by each party, the parties hereto do hereby agree
that the Agreement shall be amended and modified in the following
respects:
1. Section 3.1 of the Agreement shall be amended and
supplemented by the addition of the following sub-paragraphs:
(i) ECO CAPITALIZATION. Immediately after the closing of
the acquisition of the Target Company, Eco will have only
one class of stock outstanding, all such shares of
outstanding stock will have the same voting rights and the
total number of issued and outstanding shares of stock of
Eco, after giving effect to the transaction described in
this Agreement, will be at least 9,300,000 shares.
(j) ACTIVE TRADE OR BUSINESS. Eco or one of its affiliates
(as defined in Section 1504(a) of the Internal Revenue code
of 1986, as amended, without regard to Section 1504(b)(3))
has been engaged in the active conduct of a trade or
business, within the meaning of Section 1.367(a)-2T(b)(2)
and (3) of the Income Tax Regulations (the "Regulations")
promulgated by the U.S. Treasury Department, that is
substantial in comparison to the trade or business of the
Target Company, for the entire 36-month period immediately
preceding the date of the closing of the acquisition of the
Target Company.
(k) COMPLIANCE WITH REGULATIONS. Eco shall cause the
Target Company to comply with the reporting requirements
contained in Regulations Section 1.367(a)-3T(c)(4).
2. All reference in the Agreement and the Schedules to a Five
Year Gain Recognition Agreement are hereby deleted, and said
Agreement shall be read and construed as if said reference were
not contained therein.
3. Unless otherwise defined herein, all capitalized terms used
herein shall have the same meanings ascribed to them in the
Agreement.
4. Except as specifically amended, modified and supplemented by
this First Amendment, all of the provisions of the Agreement are
incorporated herein by reference and are hereby reaffirmed as
being fully binding and in full force and effect with respect to
each of the parties hereto.
IN EVIDENCE WHEREOF, the parties have caused this First Amendment
to be duly executed on the date set forth opposite each party's
signature hereto, but effective as of the Reference Date.
AMERICAN ECO CORPORATION
DATED: March 15, 1996 BY: /s/ Xxxxxxx X. XxXxxxxx
________________________
XXXXXXX X. XXXXXXXX
ITS: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
SHAREHOLDERS:
DATED: March 15, 1996 /s/ Xxx Xxxxxx
________________________
XXX XXXXXX
DATED: March 15, 1996 /s/ Xxxxx Fine
________________________
XXXXX FINE
DATED: March 15, 1996 /s/ Xxxx X. Xxxxxxxx
_________________________
XXXX X. XXXXXXXX
