EXHIBIT 10.16
ACQUISITION AGREEMENT
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This Acquisition Agreement is made by American International Industries,
Inc. ("AIII") and Xxxx Xxxxxx Xxxxxxxx (the "Transferor".)
INTRODUCTION
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The Transferor wishes to transfer to AIII, and AIII wishes to acquire from
the Transferor, all of the outstanding shares of common stock of Marald, Inc.
d/b/a "Unlimited Coatings" in exchange for the consideration described in this
Agreement.
NOW, THEREFORE, AIII and the Transferor agree as follows:
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DEFINITIONS
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When used in this Agreement:
All accounting terms not otherwise defined in this Agreement have the meanings
assigned to them in accordance with generally accepted accounting principles
consistently applied.
"Agreement" means this Acquisition Agreement.
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"AIII" means American International Industries, Inc., a Nevada corporation.
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"Closing" is defined in section 3.0
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"Company" means Marald, Inc. dba "Unlimited Coatings" and/or "Toro Liners".
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"Marald Financial Statements" are defined in section 4.2.
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"Marald Shares" means all of the outstanding and validly issued shares of the
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common stock of Marald, Inc.
"AIII Shares" means 3.5 million restricted shares of the common stock of
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American International Industries, Inc. referred to as Exchange Securities.
"Effective Date" means January 1, 1999.
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"Exchange Securities" means 3.5 million AIII shares, restricted pursuant to
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rule 144 and bearing a legend reflecting such restriction on the sale or
transfer of such shares.
"Exchange Shares" means the shares of the common stock of AIII and each such
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share is herein referred to as an "Exchange Share".
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"Governmental Authority" means any foreign governmental authority, the United
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States of America, any state of the United States, and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court, or similar entity, having jurisdiction over a party to
this Agreement or its assets or properties.
"Indemnified Party" is defined in section 11.0.
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"Indemnifying Party" is defined in section 11.0.
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"Legal Requirement" means any material law, statute, ordinance, writ,
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injunction, decree, requirement, order, judgment, rule, or regulation (or
interpretation of any of the foregoing) of and the terms of any license or
permit issued by, any Governmental Authority.
"Permitted Liens" means (i) liens for taxes, assessments, and other
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governmental charges or levies, the payment of which is not past due, (ii)
mechanics', workmen's, repairmen's, warehousemen's, vendors', or carriers'
liens, or similar liens arising in the ordinary course of business and
securing sums that are not past due, or deposits or pledges to obtain the
release of any such liens, or (iii) easements, reservations, encroachments, or
minor defects in title that do not materially impair the use of the property
affected thereby.
"Securities Act" means the Securities Act of 1933, as amended.
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"Transferor" means Xxxx Xxxxxx Xxxxxxxx.
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THE TRANSACTION
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Subject to the terms and conditions set forth in this Agreement, and based on
the covenants, warranties and representations in this Agreement, the Transferor
hereby agrees to transfer and deliver all of the Marald, Inc. Shares to AIII in
exchange for the issuance and delivery to Transferor of 3,500,000 restricted
shares of AIII common stock (the "Exchange Securities"). AIII shall instruct its
transfer agent to issue such securities in the form of seven certificates
representing 500,000 shares each, and bearing the restrictive legend pursuant to
Rule 144.
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THE CLOSING
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3.0 The Closing. The closing (the "Closing") of the transaction
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contemplated in this Agreement shall be at the offices of AIII at 000 Xxxxxx
Xx., Xxxxx, Xxxxx 00000 at 3:00 PM on March 19, 1999 or such other place, time
and date as may be agreed by the Transferor and AIII.
3.1 Documents to be Delivered by the Transferor at the Closing. At the
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Closing, the Transferor shall deliver or cause to be delivered to AIII:
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3.1.1 Certificates for the Marald Shares being sold pursuant to this
Agreement, duly endorsed for transfer to AIII;
3.1.2 The minute books, stock transfer records, seals, all books of
account, records, contracts, tax returns, and all other original documents,
and records of the Companies;
3.1.3 The resignations, effective upon their acceptance by AIII, of
all the directors and officers of the Companies; and
3.1.4 Such other instruments of transfer, conveyance, and assignment
as AIII may reasonably request to more effectively consummate the
transactions contemplated in this Agreement.
3.2 Documents to be Delivered by AIII at the Closing. At the
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Closing, AIII shall deliver or cause to be delivered to Transferor:
3.2.1 Delivery of the Exchange Securities by AIII at the Closing.
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Upon delivery to AIII of the documents described in section 3.1, AIII
shall deliver to Transferor a certificate in Transferor's name for the
Exchange Securities duly registered on the stock transfer records of AIII.
3.2.2 Employment agreement for Xxxx Xxxxxx Xxxxxxxx.
3.2.3 AIII will make available to Unlimited Coatings a $75,000
secured line of credit.
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THE TRANSFERORS' REPRESENTATIONS AND WARRANTIES
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The Transferor represents and warrants to AIII that:
4.0 Organization and Corporate Status of the Companies. The Company is a
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corporation duly organized, validly existing, and in good standing under the
laws of the state of Texas and has all corporate power and authority and has
satisfied all Legal Requirements necessary to own and operate its properties and
to carry on its business as presently conducted. The Company is not qualified or
licensed to do business as a foreign corporation in any jurisdiction, and, to
the best knowledge of the Transferor, after due inquiry, in no jurisdiction does
the character of either Company's properties or the nature of its business make
such qualification necessary. Except as set forth at 4.15.5, the Company is not
a party to or subject to any agreement or commitment which will or may restrict
the conduct of its business in any jurisdiction or location. Complete and
correct copies of the Company's Articles of Incorporation and Bylaws, as
presently in effect, have been delivered to AIII. The Company does not own,
directly or indirectly, any capital shares or any equity, profit sharing,
participation or other interest in any other person.
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4.1 Capitalization. The authorized capital stock of Marald, Inc. consists
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of one million shares of common stock of $1.00 par value. One million shares of
such common stock are issued and outstanding on the Effective Date; one million
of those shares are owned beneficially and of record by Transferor and no other
shares are owned by any other party or parties. Each of the outstanding Marald
Shares is validly issued, fully paid, and non-assessable and none has been
issued in violation of any pre-emptive right or other agreement of any
shareholder. There are no outstanding subscriptions, options, rights, warrants,
convertible securities, or other agreements or commitments by which either
Company is or may become obligated to issue or to transfer from treasury any
additional shares of its capital stock of any class.
4.2 Marald Financial Statements. Exhibit 1 consists of the unaudited
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balance sheets of Marald as of November 30, 1998 and the related unaudited
income statements for the periods then ended (collectively, the "Marald
Financial Statements"). The unaudited balance sheets included in the Marald
Financial Statements present fairly, subject to the usual disclaimers made in
such unaudited balance sheets, the financial position of the Company as of their
dates. The unaudited income statements included in the Marald Financial
Statements present fairly, subject to the usual disclaimers made in such
unaudited income statements, the results of operations of the Company for the
periods indicated. Transferor warrants that no significant transactions,
transfers, or commitments other than in the normal course of business have
occurred subsequent to the November 30, 1998 financial statements.
4.3 Absence of Undisclosed Liabilities. The Company has not incurred any
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liabilities which have not been disclosed.
4.4 Taxes and Tax Returns. The Company has duly filed with the
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appropriate governmental agencies all federal tax returns and reports, all state
and local tax returns and reports with respect to income, payroll, sales and
franchise taxes and all other tax returns and reports, the filing of which is
necessary for the conduct of its business. All such tax returns properly reflect
the taxes of the Company for the periods covered. All federal, state, and local
taxes, assessments, interest, penalties, deficiencies, fees, or other
governmental charges or impositions called for by such tax returns, or claimed
to be due by any taxing authority, have been properly accrued or paid and all
deposits required by law to be made with respect to employees' withholding taxes
have been made. There are no material unresolved questions or claims concerning
Marald's tax liability. The Company has not received any notice of audit,
deficiency, or assessment or proposed deficiency or assessment by the Internal
Revenue Service or any other taxing authority, nor has the Company waived any
statute of limitations with respect to taxes or agreed to any extensions of time
with respect to a tax assessment or deficiency.
4.5 Material Contracts. Except as listed in Exhibit 2 there are no
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material agreements, contracts, and commitments written or oral, not in the
ordinary course or not consistent with prior practice, to which the Company is a
party or by which it or any of its properties are bound as of the date of the
Effective Date. None of the customers or suppliers of the Company has refused,
or communicated that it will or may refuse to purchase or supply goods or
services, as the case may
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be, or has communicated that it will or intends to substantially reduce the
amounts of goods or services that it is willing to purchase from or sell to the
Company.
4.6 Equipment. Exhibit 3 is a schedule of all of the material machinery,
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equipment, motor vehicles, furniture, fixtures, and other capital assets of
every kind and description of each Company as of the Effective Date (the
"Equipment"). All of the tangible properties and assets owned by the Company, or
in which it has an interest, currently being used by it are in good and normal
operating condition and repair, normal wear and tear excepted, free from defects
(except such minor defects as do not interfere with the continued use thereof in
the conduct of normal operations), are sufficient to carry on each Company's
business as conducted during the preceding three months, and conform with all
applicable governmental regulations, including, without limitation, those
governing the discharge of materials into the environment or the storage or
disposition of hazardous or toxic wastes.
4.7 Litigation. There are no judicial or administrative actions, suits,
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proceedings, or, to the knowledge of the Transferors, investigations pending or
threatened against or affecting either Company or the business assets or
goodwill of either Company, or the transactions contemplated by this Agreement
at law or equity or before any court, governmental agency or arbitrator, and the
Transferors know of no basis or grounds for any such investigation, action,
suit, proceeding, or claims against either Company, nor is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against either
Company.
4.8 Compliance with Laws. The Company is conducting its business and
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operations in compliance with all Legal Requirements applicable to its business
and operations, and the Transferors have no knowledge or reason to believe that
either Company is in violation or default under any Legal Requirement applicable
to it or any of its properties which violation or default resulted in or could
result in a material adverse effect.
4.9 Government Authorizations. Except as described in Exhibit 4 no
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material permit, concession, grant, franchise, license, or other governmental
authorization or approval is necessary for the conduct of the business of the
Company.
4.10 Intellectual Property Rights. Exhibit 5 identifies all of the
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material computer software programs, patents, patent applications, licenses,
trade names, assumed names, trademarks, service marks, brandmarks, brandnames,
copyrights, and registrations and applications therefor, franchises, technology,
know-how or other assets of like kind (the "Rights"), used in the business of
the Company, or which are presently owned by or registered in the name of the
Company or under which the Company owns or holds any license or other interest.
The expiration date, if any, of each of the Rights (other than processes,
formulae and trade secrets) is set forth in Exhibit 5 The Rights are adequate
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for the conduct of the Company's business. All of the Rights are free of all
liens and encumbrances, and the Company has not granted any licenses or
sublicenses under any of the Rights to others except as set forth in Exhibit 6.
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The Company has the sole and exclusive right to use the Rights, and the
consummation of the transactions contemplated by this Agreement will not alter
or impair the Rights. No proceedings
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have been instituted, are pending or threatened which challenge any Rights or
their validity, and, to the knowledge of the Transferor, none of the Rights or
their use by the Company infringes or otherwise violates the rights of others or
is being infringed by others. The Company has not received notice of
interference or infringement of any of the Rights. Except by virtue of the
Transferor's ownership of the Marald Shares, no shareholder, director, officer
or employee of the Company owns, directly or indirectly, in whole or in part,
any Rights which the Company has used, or the use of which is necessary for the
business of the Company as now conducted.
4.11 Employees; Employee Benefit Plans.
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4.11.1 Employees. Except for amounts accrued on the books of the
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Company, at the Closing no present or former employee of the Companies will
have any claim against the Company (whether under federal or state law,
under any employee agreement or otherwise) on account of or for (a)
overtime pay, other than overtime pay for the payroll period ending on or
after the Closing, (b) wages or salaries, or (c) vacations, time off or pay
in lieu of vacation or time off, other than vacation or time off (or pay in
lieu thereof) earned with respect to the current fiscal year of the
Company. To the knowledge of the Transferor, at the Closing no present or
former employee of the Company will have any claim against the Company
(whether under federal or state law, under any employee agreement or
otherwise) on account of or for any violation of any law related to minimum
wages or maximum hours of work.
4.11.2 Employee Benefit Plans. The Company has no employee benefit
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plan or arrangement, whether formal or informal, and whether legally
binding or not, under which or to which it contributes to or for the
benefit of its employees (including, without limitation, life insurance,
hospitalization medical, dental, bonus, incentive, deferred compensation
and similar plans, severance or termination pay, club memberships, and
similar benefits and perquisites) (the "Plans").
4.11.3 Qualified Plans. The Company is not and has never been a
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party to any Plan which is an "employee pension benefit plan", as such
terms defined in section 3(2) of ERISA and the rules and regulations
promulgated thereunder, and the Company is not and never has been a party
to a "multi-employer plan" as that term is defined in section 3(37) of
ERISA.
4.12 Labor Matters.
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4.12.1 No employees of the Company are currently represented by any
labor union, nor is the Company a party to any collective bargaining
agreement, and, to the knowledge of the Transferors, there is no
organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of either Company;
4.12.2 The Company has substantially complied with the Occupational
Safety and Health Act, the regulations promulgated thereunder, and all
other applicable laws
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respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor
practice;
4.12.3 There is no unfair labor practice complaint against the
Company pending before the National Labor Relations Board or any comparable
state agency;
4.12.4 There is no labor strike, dispute, slowdown, representation
campaign or work stoppage actually pending or, to the knowledge of the
Transferors, threatened against or affecting either Company; and
4.12.5 No grievance or arbitration proceeding is pending and no
claim therefor has been asserted against either Company.
4.13 Transactions with Related Parties. Except as described in Exhibit 7
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the Company is not a party to any material transaction or proposed transaction,
including, without limitation, the leasing of property, the purchase or sale of
raw materials or finished goods, or the furnishing of services, with either
Transferor, and neither has the Company, directly or indirectly, entered into
any agreement or commitment which could result in it becoming obligated to
provide funds in respect of or to guarantee or assume any debt or obligation of
either Transferor, or of any director, officer or employee of the Company. It is
understood that the purchases from the manufacturer owned by the family of Xxxx
Xxxxxx Xxxxxxxx will be at best terms being offered to any purchaser except the
single customer which currently has a supply agreement with said manufacturer on
terms slightly more favorable than those offered to Marald. Negotiations with
any entities owned or controlled by relatives of Xxxx Xxxxxx Xxxxxxxx will be
conducted at arms length, with full and complete disclosure, in writing to the
Chief Financial Officer or Chief Executive Officer of AIII, prior to entering
into any commitment to purchase materials in quantities or at terms other than
those which have been the usual practice in such dealings.
4.14 Books and Records. The financial books and records of the Company
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accurately reflect the transactions to which it is or was a party or by which
its properties are or were bound. All of the corporate records of each Company
have been made available to representatives of AIII and are substantially
complete, accurate, and current.
4.15 Warranties. The Company has not given or made any warranties to
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third parties with respect to any products sold or services performed by it,
except for the limited warranties stated in standard forms of warranty used by
it, copies of which have been delivered to AIII. There is no claim against or
liability of the Company on account of product warranties or with respect to the
manufacture, sale, or rental of defective products and there is no basis for any
such claim on account of defective products heretofore manufactured, sold, or
rented which is not covered by insurance.
4.15.5 The Company has entered into a contract with Custom Sprayed on
Liners and Xxxxxxx Xx Xxxxxxx, according to the terms of which, the Company may
not establish distributorships within the "Greater Houston" trade area. That
contract expires in March, 2001 and will not be renewed. The Company has not
entered into any similar agreements, will not do
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so, and transferor warrants and represents that, other than the "one mile
radius" protected trade territories granted to distributors, no agreements have
been entered into limiting the geographic area in which distributorships may be
established or products sold. Transferor also represents that no similar
agreements exist between the Mexican manufacturing company controlled by
Transferor's family and affecting the ability of the Company to sell any of the
products manufactured by that company. Transferor also represents that the
Company shall have notice of any negotiations, activities, or circumstances of
the Mexican company which might limit the Company's access to products or the
ability to sell such products.
4.16 Title and Related Matters. Other than properties leased by the
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Companies or as noted on Exhibit 8, the Company has good, marketable, and
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insurable title to all of the properties and assets owned or used by it or in
its possession free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (a) statutory liens for property
taxes not yet delinquent or payable subsequent to the Effective Date; (b) such
imperfections or irregularities of title, liens, easements, charges or
encumbrances as do not materially detract from or materially interfere with the
use of the properties or assets subject thereto, or affected thereby, or
otherwise materially impair business operations or such properties; (c) such
imperfections or irregularities of title, liens, easements, charges or
encumbrances as would not materially interfere with the sale, or materially
detract from the aggregate value of, such properties and assets; or (d) as
reflected in the Marald Financial Statements. The Transferor has no actual
knowledge of any violations of zoning, building, health or safety laws,
statutes, ordinances or regulations relating to such properties or assets.
4.17 Disclosure. Neither this Agreement nor any of the annexes, exhibits,
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schedules, attachments, statements, documents, certificates, or other items
prepared or supplied to AIII by or on behalf of the Transferor with respect to
the transactions contemplated by this Agreement knowingly contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading. No responsible officer or
director of either Company has intentionally concealed any fact known by such
person to have a material adverse effect upon the Companies' existing or
expected financial condition, operating results, assets, customer relations,
employee relations, or business prospects taken as a whole.
4.18 Power of Attorney. No material power of attorney or similar
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authorization given by the Company is in effect on the Effective Date.
4.19 Accounts Receivable. All accounts receivable of Marald reflected in
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the marald Financial Statements represent bona fide sales actually made in the
ordinary course of business.
4.20 Real Property. Exhibit 9 lists all real property currently owned or
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leased by the Company and used or useful in the conduct of the business
operations of the Company. The Transferor has delivered to AIII copies of all
leases listed in Exhibit 8 (including any and all amendments and other
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modifications of such leases), which leases are valid and binding. The Company
is not in material default under any such leases. All of the property listed in
Exhibit 9 (including improvements thereon) is in satisfactory condition and
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repair consistent with its present use and is available for immediate use in the
conduct of the business of the Company. None of the
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property listed in Exhibit 9 violates in any material respect any applicable
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environmental, building or zoning code or regulation of any governmental
authority having jurisdiction. The property and leases described in Exhibit 8
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include all such property or property interests necessary to conduct the
business and operations of the Companies as they are presently conducted.
4.21 Power and Authority of the Transferors. The execution, delivery, and
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performance by each Transferor of this Agreement are within his requisite power.
4.22 Enforceability. This Agreement, when duly executed and delivered in
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accordance with its terms, will constitute the legal, valid, and binding
obligations of the Transferor, enforceable against him in accordance with its
terms, except as may be limited by bankruptcy, insolvency, and other similar
laws affecting creditors' rights generally or by general equitable principles.
4.23 No Violation of Law. The execution, delivery, and performance of this
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Agreement by the Transferor do not materially conflict with, violate, or
constitute a breach of or a default under, or result in the creation or
imposition of any lien, claim, or encumbrance of any kind upon, any of his
Marald Shares being sold pursuant to this Agreement.
4.24 Brokers and Finders. Finders fees of $45,000.00 are payable by
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Marald, Inc. in conjunction with services provided on behalf of Marald in
connection with negotiations relative to this Agreement and the transactions
contemplated by this Agreement. Additionally, a discount of $150.00 per drum of
chemicals sold to Toro Spray on Liners, Inc. will be applied to sales to them
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over the next twenty-four months.
4.25 Investment Representations.
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4.25.1 The Transferor is an "accredited investor" as defined by the
Rule 1(a) of Regulation D promulgated under the Securities Act, and has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to AIII so that he is
capable of evaluating the merits and risks of his investment in AIII and
has the capacity to protect his own interests.
4.25.2 The Transferor is acquiring the Exchange Securities for
investment for his own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. Each
Transferor understands that the Exchange Securities have not been, and will
not be, registered under the Securities Act or the securities laws of any
state by reason of a specific exemption from the registration provisions of
the Securities Act and the applicable state securities laws, the
availability of which depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of his representations as
expressed in this Agreement. Each Transferor is acquiring the Exchange
Securities without expectation, desire, or need for resale and not with the
view toward distribution, resale, subdivision, or fractionalization of the
Exchange Securities.
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4.25.3 During the course of the negotiation of this Agreement, each
Transferor has had an opportunity to discuss AIII's business, management
and financial affairs with AIII's management and the opportunity to review
AIII's financial statements, books and records, facilities and business
plan. Each Transferor has also had an opportunity to ask questions of the
officers of AIII, which questions were answered to his satisfaction.
4.25.4 The Transferor understands that the Exchange Securities
cannot be resold in a transaction to which the Securities Act and state
securities laws apply unless (i) subsequently registered under the
Securities Act and applicable state securities laws or (ii) exemptions from
such registrations are available. Each Transferor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private transaction subject to the
satisfaction of certain conditions.
4.25.5 Each Transferor understands that the certificates for the
Exchange Shares will bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES STATUTES. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF WITHOUT THE PRIOR
WRITTEN CONSENT OF THE CORPORATION UNLESS THE SALE OR OTHER
DISPOSITION (1) IS PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT AND ALL RELEVANT STATE SECURITIES
ACTS GOVERNING SUCH SALE OR OTHER DISPOSITION; OR (2) IS ONE WITH
RESPECT TO WHICH THE CORPORATION SHALL HAVE BEEN ADVISED BY ITS
COUNSEL THAT REGISTRATION UNDER THE 1933 ACT AND RELEVANT STATE
SECURITIES ACTS IS NOT REQUIRED."
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AIII'S REPRESENTATIONS AND WARRANTIES
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AIII represents and warrants to the Transferors that:
5.0 Organization and Corporate Status of AIII. AIII is a corporation duly
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organized, validly existing, and in good standing under the laws of the State of
Nevada, and is duly licensed, qualified to do business, and in good standing in
each jurisdiction in which such qualification is necessary, and has all
corporate power and authority and has satisfied all Legal Requirements necessary
to own and operate its properties and to carry on its business as presently
conducted.
5.1 Power and Authority of AIII. The execution, delivery, and performance
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by AIII of this Agreement are within the requisite corporate power and authority
of AIII and have been duly
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authorized and approved by all necessary parties, including, without limitation,
the Board of Directors of AIII.
5.2 Enforceability. This Agreement, when duly executed and delivered in
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accordance with its terms, will constitute the legal, valid, and binding
obligation of AIII in accordance with its terms, except as may be limited by
bankruptcy, insolvency, and other similar laws affecting creditors' rights
generally and by general equitable principles.
5.3 Brokers and Finders. No person has acted on behalf of AIII in
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connection with any negotiations relative to this Agreement and the transactions
contemplated by it, and such negotiations have been carried on by AIII without
the intervention of any person acting on behalf of AIII in such a manner as to
give rise to any valid claim for a brokerage commission, finder's fee, or other
like payment.
5.4 Investment Representations. The Marald Shares to be received by AIII
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will be acquired for investment, for AIII's own account, not as a nominee or
agent, and not with a view to sale or distribution of any of them, and AIII has
no present intention of selling, granting participation in, or otherwise
distributing the Marald Shares. AIII understands that the Marald Shares have not
been registered under the Securities Act or any state securities laws, that the
sale of the Marald Shares pursuant to this Agreement is exempt from registration
under the Securities Act pursuant to section 4(2) of the Securities Act, and
that the Transferors are relying upon AIII's representations with respect to the
availability of the exemption from registration. AIII further understands that
the following paragraph may be stamped or typed on any certificate evidencing
the Marald Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES STATUTES. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF WITHOUT THE PRIOR
WRITTEN CONSENT OF THE CORPORATION UNLESS THE SALE OR OTHER
DISPOSITION (1) IS PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT AND ALL RELEVANT STATE SECURITIES
ACTS GOVERNING SUCH SALE OR OTHER DISPOSITION; OR (2) IS ONE WITH
RESPECT TO WHICH THE CORPORATION SHALL HAVE BEEN ADVISED BY ITS
COUNSEL THAT REGISTRATION UNDER THE 1933 ACT AND RELEVANT STATE
SECURITIES ACTS IS NOT REQUIRED."
5.5 No Violation of Law. The execution, delivery, and performance of this
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Agreement by AIII do not materially: (i) conflict with, violate, or constitute a
breach of or a default under, (ii) result in the creation or imposition of any
lien, claim, or encumbrance of any kind upon any of the Exchange Securities
pursuant to the terms of, (iii) require any authorization, consent, approval,
exemption, or other action by or notice to or filing with any governmental
authority under any provision of, or (iv) accelerate or permit the acceleration
of the performance required by: (x) the Articles of Incorporation or Bylaws of
AIII, (y) any applicable Legal Requirement, or (z) any
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credit or loan agreement, mortgage, indenture, promissory note, or any other
agreement or instrument to which AIII is a party or by which the Exchange
Securities may be bound or affected.
5.6 Compliance with Laws. AIII is conducting its business and operations
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in compliance with all Legal Requirements applicable to its business and
operations, and has no knowledge or reason to believe that it is in violation or
default under any Legal Requirement applicable to it or any of its properties
which violation or default resulted in or could result in a material adverse
effect.
5.7 Books and Records. The financial books and records of AIII accurately
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reflect the transactions to which it is or was a party or by which its
properties are or were bound, and such books and records are and have been
properly kept and maintained in accordance with generally accepted accounting
principles applied on a consistent basis. All of the corporate records of AIII
have been made available to representatives of the Transferors and are complete,
accurate, and current.
5.8 The Exchange Securities. The Exchange Shares have been duly authorized
-----------------------
and reserved for issuance and, when issued in accordance with this Agreement or
the Exchange Options, as the case may be, will be validly issued, fully paid,
non-assessable and free of preemptive rights. Upon the Closing, the Transferors
shall acquire from AIII legal and beneficial ownership of, good and valid title
to, and all right to vote the Exchange Shares, free from any charge, lien,
encumbrance or adverse claim of any kind whatsoever. The issuance and delivery
of the Exchange Securities will not violate the Securities Act, the Securities
Exchange Act of 1934, as amended, or any rule or regulation promulgated by any
state securities law or regulation.
5.9 Disclosure. Neither this Agreement nor any of the annexes, exhibits,
----------
schedules, attachments, statements, documents, certificates, or other items
prepared or supplied to the Transferor by or on behalf of AIII with respect to
the transactions contemplated by this Agreement knowingly contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading. No responsible officer or
director of AIII has intentionally concealed any fact known by such person to
have a material adverse effect upon AIII's existing or expected financial
condition, operating results, assets, customer relations, employee relations, or
business prospects taken as a whole.
6
CONDUCT OF THE COMPANIES' BUSINESS PENDING THE CLOSING
------------------------------------------------------
6.0 In General. Pending the Closing, each Company shall conduct its
----------
business in the ordinary course. Without limiting the generality of the
foregoing, the Company shall comply with the subsequent sections of this
Article.
6.1 Regular Course of Business. Each Company will operate its business
--------------------------
diligently and in good faith, consistent with past management practices, keep
available the services of its present officers and employees (other than planned
retirements) and preserve its present relationships with
12
persons having business dealings with it (in each case without incurring any
additional obligations not disclosed in this Agreement).
6.2 Books of Account. Each Company shall keep its books of account and
----------------
records in the usual, regular and ordinary manner, in accordance with generally
accepted accounting principles, practices and standards applied on a consistent
basis, and shall make no changes in accounting methods and policies.
6.3 Notice to AIII. The Transferor shall give prompt notice to AIII of:
--------------
(i) any notice of, or order or communication relating to, any default or event
which, with notice or lapse of time or both would become a default, received by
either Company subsequent to the Effective Date and on or before the Closing
under any indenture, instrument, lease or agreement to which the Company is a
party or to which any of its property is bound or subject; and (ii) any notice
or other communication from any third party alleging that the consent of such
third party may be required in connection with the transactions contemplated by
this Agreement. Further, the Transferors will promptly advise AIII of (a) any
event occurring subsequent to the Effective Date which would render any
representation or warranty contained in this Agreement, if made on or as of the
date of the event or the Effective Date, untrue in any material respect and (b)
any material change in the business or operations of either Company.
6.4 Full Access. The Company shall afford to AIII and to its counsel,
-----------
accountants and other authorized representatives, full access to its plant,
properties, books and records in order that AIII may have the full opportunity
to make such investigations as AIII shall desire to make of the affairs of the
Company; and the Company will cause its officers and employees to furnish such
additional financial and operating data and other information as AIII may from
time to time reasonably request.
6.5 Consents. The Transferor will obtain, before the Closing, all consents
--------
necessary for the consummation of the transactions contemplated by this
Agreement. All such consents will be in writing and executed counterparts of the
consents will be delivered to AIII no later than immediately before to the
Closing.
6.6 Exclusivity. During the period beginning on the Effective Date and
-----------
ending on the Closing or the termination of this Agreement, whichever first
occurs, neither the Transferor nor the Company will solicit or furnish
information to any prospective buyer, commence, or conduct negotiations with any
other party or enter into any agreement, contract or letter of intent with any
other party concerning the sale of any or all of the Marald Shares or any or all
of the assets of the Company. The Transferor will immediately advise AIII of the
receipt of any acquisition proposal.
7
CONDUCT OF AIII'S BUSINESS PENDING THE CLOSING
----------------------------------------------
13
7.0 In General. Pending the Closing, AIII shall conduct its business in
----------
the ordinary course. Without limiting the generality of the foregoing AIII shall
comply with the subsequent sections of this Article 8.
7.1 Regular Course of Business. AIII will operate its business diligently
--------------------------
and in good faith, consistent with past management practices, keep available the
services of its present officers and employees (other than planned retirements)
and preserve its present relationships with persons having business dealings
with it (in each case without incurring any additional obligations not disclosed
in this Agreement).
7.2 Books of Account. AIII shall keep its books of account and records in
----------------
the usual, regular and ordinary manner, in accordance with generally accepted
accounting principles, practices and standards applied on a consistent basis,
and shall make no changes in accounting methods and policies.
7.3 Notice to the Transferor. AIII shall give prompt notice to the
------------------------
Transferor of: (i) any notice of, or order or communication relating to, any
default or event which, with notice or lapse of time or both would become a
default, received by AIII subsequent to the Effective Date and on or before the
Closing under any indenture, instrument, lease or agreement to which AIII is a
party or to which any of its property is bound or subject; and (ii) any notice
or other communication from any third party alleging that the consent of such
third party may be required in connection with the transactions contemplated by
this Agreement. Further, AIII will promptly advise the Transferor of (a) any
event occurring subsequent to the Effective Date which would render any
representation or warranty contained in this Agreement, if made on or as of the
date of the event or the Effective Date, untrue in any material respect and (b)
any material change in the business or operations of AIII.
7.4 Full Access. AIII shall afford the Transferor and his respective
-----------
counsel, accountants and other authorized representatives, full access to its
plant, properties, books and records in order that they may have the full
opportunity to make such investigations as they shall desire to make of the
affairs of AIII; and AIII will cause its officers and employees to furnish such
additional financial and operating data and other information as the Transferors
may from time to time reasonably request.
7.5 Consents. AIII will obtain, before the Closing, all consents necessary
--------
for its consummation of the transactions contemplated by this Agreement. All
such consents will be in writing and executed counterparts of the consents will
be delivered to CRC the Transferors no later than immediately before to the
Closing.
8
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF AIII
-----------------------------------------------
8.0 Each and every obligation of AIII under this Agreement to be performed
on or before the Closing shall be subject to the satisfaction, on or before the
Closing, of each of the conditions contained in this Article 9.
14
8.1 No Governmental or Other Proceedings. No action, suit, proceeding or
------------------------------------
investigation by or before any court or governmental, administrative or
regulatory authority shall have been commenced or threatened against any
Company, AIII or the Transferors seeking to restrain, prevent or change the
transactions contemplated by this Agreement or questioning the validity or
legality of the transactions or seeking damages in connection with the
transactions.
8.2 Representations and Warranties; Performance. Each of the
-------------------------------------------
representations and warranties of the Transferor contained in this Agreement and
the Exhibits shall be true and correct in all material respects on the Closing
with the same effect as though made on that date. The Transferor and the Company
shall each have duly performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with before or
at the Closing.
8.3 No Material Adverse Change. There shall have been no material adverse
--------------------------
change since the Effective Date in the business, condition (financial or
otherwise), assets, liabilities (absolute, accrued, contingent or otherwise),
prospects or operations of either Company.
8.4 Absence of Certain Changes or Events. In the period from the Effective
------------------------------------
Date to the Closing, neither Companies shall have:
8.4.1 undergone or otherwise experienced any change in its condition
(financial or otherwise), properties, assets, liabilities, business, or
operations, other than changes in the ordinary course of business which in
the aggregate would not have a material adverse effect;
8.4.2 declared, set aside, made, or paid any dividend or other
distribution in respect of its capital stock or purchased or redeemed,
directly or indirectly, any shares of its capital stock;
8.4.3 granted, issued, or sold any shares of its capital stock or any
option, warrant, conversion, or other right to purchase any such shares or
any securities convertible into or exchangeable for such shares;
8.4.4 incurred, except in the normal course of business or pursuant
to credit arrangements in effect or being negotiated on or before the
Effective Date, any indebtedness for borrowed money or issued or sold any
note or any debt securities;
8.4.5 subjected, except in the normal course of business or pursuant
to credit arrangements in effect or being negotiated on or before the
Effective Date, any of its properties or assets, tangible or intangible, to
any mortgage, pledge, lien, charge, or encumbrance of any kind except
Permitted Liens;
8.4.6 acquired or disposed of any Equipment of material value other
than in the ordinary course of business;
15
8.4.7 suffered any extraordinary loss or forgiven or canceled any
material debt or claim, or waived any right of material value, whether or
not in the ordinary course of business;
8.4.8 entered into any other transaction other than in the ordinary
course of business, or entered into any material transaction, whether or
not in the ordinary course of business;
8.4.9 granted to any officer or salaried employee or any class of
other employee any increase in compensation in any form in excess of the
amount thereof in effect as of the Effective Date (other than ordinary
merit increases consistent with past practice) or any severance or
termination pay (other than in minor amounts consistent with past
practice), prepaid principal on any note to any such person, consummated or
obligated itself to consummate any transaction with any such person, or
entered into any employment agreement or arrangement with any person;
8.4.10 entered into, adopted or amended in any respect any collective
bargaining agreement or adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
insurance, or other similar plan, agreement, trust, or fund for the benefit
of employees;
8.4.11 suffered any material damage, destruction, or casualty loss
(whether or not covered by insurance);
8.4.12 suffered any strike or other labor trouble;
8.4.13 suffered any change in its relationship with, or loss of,
employees or customers which resulted in or could result in a material
adverse effect;
8.4.14 incurred any material liability or obligation (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business;
8.4.15 discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current
liabilities paid in the ordinary course of business which were reflected in
or shown on the Marald Financial Statements or which were incurred in the
ordinary course of business since the Effective Date;
8.4.16 other than in the ordinary course of business, made or
permitted any amendment or termination of any contract, agreement, or
license to which it is a party or by which either it or any of its assets
or properties are subject;
8.4.17 sold, assigned, or transferred any patents, trademarks, trade
names, copyrights, trade secrets, licenses or other intangible assets, or
disclosed any proprietary confidential information;
16
8.4.18 made any capital expenditure or commitment not in the ordinary
course of business which aggregates in excess of $5,000;
8.4.19 made any loan or advance (other than reasonable travel
advances) to, guaranties for the benefit of, or investments in, any person;
8.4.20 been cited for any violation of any Legal Requirement;
8.4.21 conducted its business in other than the usual and ordinary
manner; or
8.4.22 agreed to do any of the foregoing.
8.5 Legal Matters. All legal matters in connection with this Agreement and
-------------
the transactions it contemplates and the form and substance of all papers,
instruments and documents used or delivered under this Agreement or incidental
to this Agreement shall be reasonably satisfactory to AIII.
9
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE TRANSFERORS
----------------------------------------------------------
9.0 Each and every obligation of the Transferors under this Agreement to
be performed on or before the Closing shall be subject to the satisfaction, on
or before the Closing, of each of the conditions contained in of this Article
10.
9.1 Representations and Warranties. Each of the representations and
------------------------------
warranties of AIII set forth in this Agreement shall be true and correct, both
on the Effective Date and on the Closing as if made at that time.
9.2 Agreements and Obligations. AIII shall have performed and complied
--------------------------
with all agreements, undertakings, and obligations which are required to be
performed or complied with by it at or before the Closing.
9.3 Legal Matters. All legal matters in connection with this Agreement and
-------------
the transactions it contemplates, and the form and substance of all papers,
instruments, and documents used or delivered under this Agreement or incidental
to this Agreement, shall be reasonably satisfactory to the Transferors.
9.4 No Governmental or Other Proceedings. No action, suit, proceeding or
------------------------------------
investigation by or before any court or governmental, administrative or
regulatory authority shall have been commenced or threatened against any
Company, AIII or the Transferors seeking to restrain, prevent or change the
transactions contemplated by this Agreement or questioning the validity or
legality of the transactions or seeking damages in connection with the
transactions.
17
9.5 No Material Adverse Change. There shall have been no material adverse
--------------------------
change since the Effective Date in the business, condition (financial or
otherwise), assets, liabilities (absolute, accrued, contingent or otherwise),
prospects or operations of AIII.
10
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
-----------------------------------------------------
10.0 Nature of Statements. All statements contained in this Agreement, in
--------------------
any annex, exhibit, or any certificate or other instrument delivered by or on
behalf of the Transferor or AIII pursuant to this Agreement, or in connection
with the transactions it contemplates, shall be considered the representations
and warranties of the Transferor or AIII, as the case may be. No investigation
by any party nor failure by any party, to make any investigation, shall
constitute a waiver of any representation, warranty, covenant, or agreement of
any party, nor relieve the other party of any obligation with respect to the
accuracy or fulfillment thereof.
10.1 Survival of Representations and Warranties. Regardless of any
------------------------------------------
investigation at any time made by or on behalf of any party or of any
information any party may have in respect of this Agreement, all covenants,
agreements, representations, and warranties made in this Agreement or pursuant
to this Agreement or in connection with the transactions it contemplates shall
survive the Closing and shall continue in effect until June 30, 2000.
11
INDEMNIFICATION
---------------
11.0 Indemnification by the Transferor. Transferor individually hereby
---------------------------------
indemnifies and holds harmless AIII and its respective successors and assigns
from and against any taxes, claims, liabilities, damages, losses, costs, and
expenses, including, without limitation, reasonable legal fees, accountants'
fees, costs of investigation, and other expenses of defending any action or
claim, amounts of judgment and amounts paid in settlement, together with
interest thereon at the rate of ten percent per year, compounded annually from
the date incurred until paid, caused by or arising out of: (i) any breach or
default in the performance by him of any covenant or agreement of such
Transferor contained in this Agreement, or (ii) any breach of warranty or
inaccurate or erroneous representation made by him in this Agreement, in any
annex, exhibit, or any other document delivered by or on behalf of the
Transferor pursuant to this Agreement.
11.1 Indemnification by AIII. AIII hereby indemnifies and holds harmless
-----------------------
each of the Transferors and his respective successors and assigns from and
against any taxes, claims, liabilities, damages, losses, costs, and expenses,
including, without limitation, reasonable legal fees, accountants' fees, costs
of investigation, and other expenses of defending any action or claim, amounts
of judgment and amounts paid in settlement, together with interest thereon at
the rate of ten percent per year, compounded annually from the date incurred
until paid, caused by or arising out of: (i) any breach or default in the
performance by AIII of any covenant or agreement of AIII contained in this
Agreement, or (ii) any breach of warranty or inaccurate or erroneous
18
representation made by AIII in this Agreement, in any annex, exhibit, or any
other document delivered by or on behalf of AIII or pursuant to this Agreement.
11.2 Conditions of Indemnification. With respect to any actual or potential
-----------------------------
claim, any demand, the commencement of any action, or the occurrence of any
other event which involves any matter or related series of matters (a "Claim")
against which a party (the "Indemnified Party") is indemnified by another party
(the "Indemnifying Party") under section 12.1 or 12.2:
11.2.1 Notice. Promptly after the Indemnified Party first receives
------
documents pertaining to the Claim, or if such Claim does not involve a
third party Claim, promptly after the Indemnified Party first has actual
knowledge of the Claim, the Indemnified Party shall give notice to the
Indemnifying Party of the Claim in reasonable detail and stating the amount
involved, if known, together with copies of any such documents.
11.2.2 Failure to Give Notice. The Indemnifying Party shall have no
----------------------
obligation to indemnify the Indemnified Party with respect to any Claim if
(i) the Indemnified Party fails to give the notice of the Claim in
accordance with section 12.3.1 or (ii) the notice of the Claim is not given
on or before the first anniversary of the Closing; however, such limitation
shall not apply to any Claim based upon or arising out of willful
concealment or willful misconduct.
11.2.3 Litigation, Settlement, Resolution of Claim. If the Claim
-------------------------------------------
involves a third party, then the Indemnifying Party may, at its sole cost,
expense and ultimate liability regardless of the outcome, and through
counsel of its choice, litigate, defend, settle or otherwise attempt to
resolve the Claim, except that the Indemnified Party may elect, at any time
and at the Indemnified Party's sole cost, expense and ultimate liability,
regardless of the outcome, and through counsel of its choice, litigate,
defend, settle or otherwise attempt to resolve the Claim. If the
Indemnified Party so elects (for reasons other than the Indemnifying
Party's failure or refusal to provide a defense to the Claim), then the
Indemnifying Party shall have no obligation to indemnify the Indemnified
Party with respect to the Claim, but such disposition will be without
prejudice to any other right the Indemnified Party may have to
indemnification, regardless of the outcome of the Claim. In any event, AIII
and the Transferors shall fully cooperate with each other and their
respective counsel at their own expense in connection with any such
litigation, defense, settlement or other attempted resolution.
12
MISCELLANEOUS
12.0 Construction. The section headings contained in this Agreement are for
------------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever required by the context, any gender
shall include any other gender, the singular shall include the plural, and the
plural shall include the singular.
19
12.1 Costs, Expenses, and Legal Fees. Each party shall bear its own costs
-------------------------------
and expenses pertaining to the negotiation, preparation and execution of this
Agreement and the consummation of the transactions it contemplates.
12.2 Announcements, Press Releases, and Disclosure. Any press release or
---------------------------------------------
other public announcement concerning this Agreement or the transactions it
contemplates shall be approved by both the Transferor and AIII. In addition, no
party shall disclose the existence of this Agreement or the transactions it
contemplates before the Closing, except as may be necessary to comply with any
Legal Requirement.
12.3 Notice. Any notice required or permitted under this Agreement shall be
------
in writing and shall be considered to be delivered three business days after
deposit in the United States mail, postage prepaid, certified or registered
mail, return receipt requested, addressed as follows:
12.3.1 If to AIII, to it at 000 Xxxxxx Xxxx, Xxxxx, Xxxxxxx, Xxxxx
00000-0000, Attention: Xx. Xxxxxx Xxxx, Xx.; or
12.3.2 If to the Transferor: 00000 Xxx Xxxx Xx. #000, Xxxxxxx, Xxxxx
---------------------------------------
77043
-----
12.3.3 Notice given in any other manner shall be effective when
received by the addressee. The address for notice may be changed by notice
given in accordance with this section 14.4.
12.4 Entire Agreement, Amendment. This Agreement and its annexes and
---------------------------
exhibits constitute the entire agreement between the parties and may not be
amended, supplemented, waived, or terminated except by an instrument executed by
all of the parties. Any previous agreements or understandings among the parties
regarding the subject matter of this Agreement are merged into and superseded by
this Agreement.
12.5 Waiver. No waiver of any provision of this Agreement shall constitute
------
a waiver of any other provision of this Agreement, nor shall such waiver
constitute a waiver of any subsequent breach of the provision.
12.6 Assignment. This Agreement shall not be assignable. Any attempted
----------
assignment shall be null and void.
12.7 Choice of Law. The validity, construction and enforcement of this
-------------
Agreement shall be governed by the laws of the State of Texas.
12.8 Arbitration. If any dispute, difference, or disagreement shall arise
-----------
upon or in respect of the Agreement, and its meaning and construction, every
such dispute, difference, and disagreement shall be referred to a single arbiter
sitting in Houston, Texas, agreed upon by the parties, or if no single arbiter
can be agreed upon, an arbiter or arbiters shall be selected in accordance with
the rules of the American Arbitration Association and such dispute, difference,
or disagreement shall be settled by arbitration in accordance with the then
prevailing commercial rules of the American Arbitration Association, and
judgment upon the award rendered by the arbiter may be entered in any court
having
20
jurisdiction. In the event of such arbitration, the prevailing party shall be
entitled to reasonable legal fees to be fixed by the arbitrator.
12.9 Severability. If any provision of this Agreement is declared
------------
unenforceable by a court of competent jurisdiction, such provision shall be
enforced to the greatest extent permitted by law, and such declaration shall not
affect the validity of any other provision of this Agreement.
12.10 Time for Performance. If the time for performance of any obligation
--------------------
set forth in this Agreement falls on a Saturday, Sunday or legal holiday,
compliance with the obligation on the next business day following such Saturday,
Sunday, or legal holiday shall be considered acceptable.
12.11 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be considered an original, but all of which
shall be considered one instrument.
12.12 Confidentiality. Each party to this Agreement shall keep all
---------------
information obtained from the other parties as a result of its due diligence
investigation confidential. No party shall release such confidential information
without the consent of the other.
IN WITNESS WHEREOF, this Agreement has been executed as of the Effective
Date.
AMERICAN INTERNATIONAL INDUSTRIES, INC.
______________________________
By: Xxxx X. Xxxxx, III
Its: Chief Financial Officer
______________________________
Xxxx Xxxxxx Xxxxxxxx
21
