Exhibit 10.5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is dated March ___, 1998, between JTM INDUSTRIES,
INC., a Texas corporation ("Purchaser"), and XXXX XXXX, an individual residing
in Bay City, Michigan ("Seller").
RECITALS:
A. Seller owns and desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the issued and outstanding shares of capital stock
of Flo Fil Co., Inc. ("Flo Fil"), Michigan Ash Sales Company ("Michigan Ash"),
and U.S. Stabilization, Inc. ("USS"), all Michigan corporations. Flo Fil,
Michigan Ash and USS are referred to herein collectively as the "Acquired
Companies" and individually as an "Acquired Company." References to an Acquired
Company or to the Acquired Companies shall include all Subsidiaries thereof,
unless the context indicates otherwise;
B. The Acquired Companies have the numbers of issued and outstanding
shares of capital stock listed below:
Flo Fil 1,000 shares of common stock, par value $1.00 per share
Michigan Ash 1,000 shares of common stock, par value $1.00 per share
USS 1,000 shares of common stock, par value $1.00 per share
All of such shares are referred to herein as the "Purchased Stock."
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C. Unless otherwise defined in this Agreement, the capitalized terms used
in this Agreement have the meanings given in Article VIII below.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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ARTICLE I
SALE OF PURCHASED STOCK; CLOSING
1.01 Purchase and Sale. At the Closing, on the terms of and subject to the
conditions set forth in this Agreement, Seller will sell to Purchaser, and
Purchaser will purchase from Seller, the Purchased Stock.
1.02 Purchase Price. The aggregate purchase price (the "Purchase Price")
for the Purchased Stock is $24,600,000 in cash. The Purchase Price shall be
allocated among the Purchased Stock of each of the Acquired Companies, as
follows:
Flo Fil$550,000
Michigan Ash$20,350,000
USS$3,700,000
The Purchase Price is payable in the manner provided in Section 1.03.
1.03 Closing. The Closing (the "Closing") of the purchase and sale of the
Purchased Stock will take place at the offices of Xxxxx Xxxxxxxx Xxxxxxxxxx
P.L.C. at Saginaw, Michigan or at such other place as Purchaser and the Seller
shall mutually agree, at 10:00 A.M. local time, on the latest to occur of the
following dates (the "Closing Date"):
(a) Five days after the receipt by Purchaser or Seller of a written
termination of the waiting period issued by the Federal Trade Commission or the
United States Department of Justice pursuant to
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the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, or the
expiration of the waiting period described therein.
(b) The satisfaction or waiver of all conditions precedent to
closing specified in Article V.
(c) Such other date as the parties shall agree upon.
Seller shall be entitled to elect not to close hereunder if all conditions
to Closing have not been met by April 30, 1998 (other than conditions to be
satisfied by Seller).
Prior to the execution of this Agreement, the Purchaser has paid to the
Seller a non-refundable xxxxxxx money deposit ("Deposit") of $50,000, which
Deposit shall be credited against the Purchase Price if the transactions
contemplated by this Agreement are consummated. Simultaneously with the
execution of this Agreement, the Purchaser and the Seller will execute an escrow
agreement (the "Escrow Agreement") in the form annexed hereto as Exhibit A and
Purchaser will, by wire transfer of immediately available funds, deposit with
the Escrow Agent (as defined in the Escrow Agreement) the sum of $250,000 (the
"Escrow Deposit"). The Escrow Deposit (including any earnings thereon) will be
credited against the Purchase Price if the transactions contemplated by this
Agreement are consummated and, together with the earnings thereon, will be
delivered to Seller at the Closing. As further provided in the Escrow Agreement,
the Escrow Deposit (including any earnings thereon) will be delivered to Seller
if the transactions contemplated by this Agreement are not consummated on or
before April 30, 1998, for any reason other than Seller's failure to satisfy the
conditions set forth in Section 5.01 below (except for subparagraphs (c), (d),
(e), (m) and (n), which, for purposes of this sentence, will be deemed to have
been satisfied) or his refusal or inability to complete the Closing, in which
event, the Escrow Deposit, together with the earnings thereon, will be delivered
to Purchaser. The retention by Seller of the Deposit and the transfer of the
Escrow Deposit, together with the
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earnings thereon, to Seller, as provided herein, will be Seller's sole remedy
for Purchaser's failure to complete the Closing. At the Closing, Purchaser will
pay the balance of the Purchase Price due at Closing to Seller by wire transfer
of immediately available funds to such account as Seller may reasonably direct
by written notice delivered to Purchaser by Seller at least three (3) Business
Days before the Closing Date. Simultaneously, the Seller will sell to Purchaser
the Purchased Stock free and clear of all Liens, by delivering to Purchaser
three stock certificates, registered in the name of Purchaser, representing the
Purchased Stock. At the Closing, there shall also be delivered the opinions,
certificates and other Contracts, documents and instruments to be delivered
pursuant to Article V.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.01 Organization and Qualification. Each of the Acquired Companies is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Michigan and has full corporate power and authority to conduct
its business as and to the extent now conducted and to own, use and lease its
Assets. Each Acquired Company is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its Assets, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for such failures
to be so qualified, licensed or admitted and in good standing
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which, individually or in the aggregate, (i) are not having and could not be
reasonably expected to have a material adverse effect on the business or
condition of the Acquired Company and (ii) could not be reasonably expected to
have a material adverse effect on the validity or enforceability of this
Agreement or any other agreement to which it is a party or on the ability of the
Acquired Company to perform its obligations hereunder or thereunder.
2.02 Capital Stock. The authorized capital stock of each Acquired Company
consists of the following number of shares of capital stock:
Flo Fil -- 50,000 shares of common stock, par value $1.00 per share
Michigan Ash -- 50,000 shares of common stock, par value $1.00 per
share
USS -- 50,000 shares of common stock, par value $1.00 per share
The only issued and outstanding shares of capital stock of the Acquired
Companies are the shares of Purchased Stock, all of which are validly issued,
fully paid and nonassessable, issued in compliance with all applicable Laws and
no additional shares of capital stock have been reserved for issuance. There are
no outstanding Options with respect to the stock of any Acquired Company or
agreements, arrangements or understandings to issue Options with respect to the
stock of any Acquired Company, nor are there any preemptive rights or
agreements, arrangements or understandings to issue preemptive rights with
respect to the issuance or sale of the capital stock of any Acquired Company.
Seller is the record and beneficial owner of the shares of Purchased Stock, free
and clear of all Liens. The delivery to Purchaser of the certificates
representing the Purchased Stock purchased hereunder will transfer to Purchaser
good and valid title to all shares of the Purchased Stock, free and clear of all
Liens and after such transfer the Purchased Stock, in the hands of Purchaser,
will have been duly authorized, validly issued, fully paid and nonassessable.
From and
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after the Closing, neither Seller nor any other Person (other than the
Purchaser) will have any rights whatsoever with respect to the Purchased Stock
or to any other securities of any of the Acquired Companies.
2.03 Authority Relative to This Agreement. The Seller has full authority
to enter into this Agreement, to perform his obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Seller and constitutes his legal,
valid and binding obligations, enforceable against the Seller in accordance with
its terms.
2.04 Subsidiaries; Company; Business. Section 2.04 of the Disclosure
Schedule lists the name of each Subsidiary of any of the Acquired Companies and
all lines of business in which such Acquired Company and each Subsidiary is
participating or engaged or has participated or engaged in the preceding three
years. Each Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation set forth
opposite its name in Section 2.04 of the Disclosure Schedule, and has full power
and authority to conduct its business as and to the extent now conducted and to
own, use and lease its Assets and Properties. Each Subsidiary is duly qualified,
licensed and admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its Assets and
Properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the business or condition of such entity and could
not be reasonably expected to have a material adverse effect on the validity or
enforceability of this Agreement or the ability of any such Subsidiary to
perform its obligations. Section 2.04 of the Disclosure Schedule lists for each
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Subsidiary the amount of its authorized and outstanding equity interests. Except
as disclosed on Section 2.04 of the Disclosure Schedule, all of the outstanding
equity interests of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned, beneficially and of
record, by an Acquired Company free and clear of all Liens. Other than as
contemplated by this Agreement, there are no outstanding Options with respect to
the capital stock of any Subsidiary or agreements, arrangements or
understandings to issue Options with respect to the capital stock of any
Subsidiary and there are no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of any Subsidiary's equity interests in favor of any Person except Seller. The
name of each director and officer of each Acquired Company and of each
Subsidiary on the date hereof, and the position with such Acquired Company and
such Subsidiary held by each, are listed in Section 2.04 of the Disclosure
Schedule. The Seller has delivered to Purchaser true and complete copies of the
certificate or articles of incorporation and by-laws (or other comparable
corporate charter documents) of each Acquired Company and each Subsidiary,
including all amendments thereto effected through the Closing Date. Except for
the Subsidiaries, the Acquired Companies hold no equity, partnership, joint
venture or other interest in any Person.
2.05 No Conflicts. The execution and delivery by the Seller of this
Agreement does not, and the performance by Seller of his obligations under this
Agreement and the consummation of the transactions contemplated hereby, do not
and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate or articles of incorporation
or by-laws (or other comparable corporate charter documents) of any of the
Acquired Companies or the Subsidiaries;
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(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices referred to in Section 2.06 below or
disclosed in Section 2.06 of the Disclosure Schedule, if any, conflict with or
result in a violation or breach of any term or provision of any law or Order
applicable to the Seller or to any Acquired Company, any of its Subsidiaries or
any of their respective Assets and Properties; or
(c) except as disclosed in Section 2.05 of the Disclosure Schedule,
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, (iii) require the
Seller, any Acquired Company, or any of the Subsidiaries to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, (iv) result in or give to any Person any right
of termination, cancellation, acceleration or modification in or with respect
to, (v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon any of the Acquired Companies,
any of the Subsidiaries or any of their respective Assets under, any Contract or
License to which the Seller, any of the Acquired Companies or any of the
Subsidiaries is a party or by which any of their respective Assets is bound,
except for such conflicts, violations, breaches, defaults, consents, approvals,
actions, filings, notices, terminations, cancellations, accelerations,
modifications, additional rights or entitlements or Liens that, individually or
in the aggregate, (A) are not having and could not be reasonably expected to
have a material adverse effect on the business or condition of any of the
Acquired Companies, and (B) could not be reasonably expected to have a material
adverse effect on the validity or enforceability of this Agreement or on the
ability of the Seller to perform his obligations hereunder.
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2.06 Governmental Approvals and Filings. Except as disclosed in Section
2.06 of the Disclosure Schedule, and in reliance on Purchaser's representations
and warranties set forth in Section 3.04 below, no consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of the Seller, any of the Acquired Companies or any of the Subsidiaries is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of transactions contemplated hereby.
2.07 Books and Records. The minute books and other similar records of the
Acquired Companies and the Subsidiaries provided to Purchaser prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all action taken by the stockholders, the boards of directors and
committees of the boards of directors (or other similar governing entities) of
the Acquired Companies and the Subsidiaries.
2.08 Financial Statements. Seller has caused each of the Acquired
Companies to furnish to Purchaser true and complete copies of (i) the audited
consolidated balance sheets of each Acquired Company and its Subsidiaries as of
December 31, 1996 and December 31, 1997 and the related consolidated statements
of operations and cash flows, accompanied by the opinions thereon of Ernst &
Young LLP, independent certified public accountants, together with the notes
thereto, of each Acquired Company and its Subsidiaries for the fiscal years then
ended (the "Audited Financial Statements"), and (ii) the unaudited consolidated
balance sheet at January 31, 1998 of each Acquired Company and its Subsidiaries
and the related consolidated statements of operations and cash flows of each
Acquired Company and its Subsidiaries for the 31 days then ended, certified on
behalf of each Acquired Company by its President (the "Unaudited Financial
Statements"). The Audited Financial Statements and the Unaudited Financial
Statements (collectively, the "Financial Statements") are in accordance with the
Books and Records of the subject Acquired Company and fairly present in all
material respects the consolidated financial position of each Acquired Company
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and its Subsidiaries as of the dates thereof and for the periods covered thereby
and the results of operations and cash flows of the Acquired Companies and their
Subsidiaries for the periods set forth therein, all in conformity with GAAP,
except as specifically noted in the notes thereto.
2.09 Absence of Changes. Since December 31, 1997, except as disclosed in
Section 2.09 of the Disclosure Schedule, there has not been any material adverse
change, or any event or development which, individually or together with other
such events, could reasonably be expected to result in a material adverse
change, in the business or condition of any of the Acquired Companies. In
addition, except as expressly contemplated hereby and except as disclosed in
Section 2.09 of the Disclosure Schedule, there has not occurred since December
31, 1997:
(a) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or other equity interests)
of any Acquired Company or any direct or indirect redemption, purchase or other
acquisition by any Acquired Company of any such capital stock (or other equity
interests) of any Acquired Company;
(b) any authorization, issuance, sale or other disposition by any of
the Acquired Companies of any shares of its capital stock (or other equity
interests), or any modification or amendment of any right of any holder of any
outstanding shares of capital stock (or other equity interests) of such Acquired
Company;
(c) (i) any increase in salary, rate of commissions or rate of
consulting fees of any employee or consultant of any Acquired Company; (ii) any
payment of consideration of any nature whatsoever (other than salary,
commissions or consulting fees paid to any employee or consultant of an Acquired
Company) to any officer, director, stockholder, employee or consultant of any
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Acquired Company; (iii) any establishment or modification of (A) targets, goals,
pools or similar provisions under any Benefit Plan, employment contract or other
employee compensation arrangement or (B) salary ranges, increase guidelines or
similar provisions in respect of any Benefit Plan, employment contract or other
employee compensation arrangement; or (iv) any adoption, entering into,
amendment, modification or termination (partial or complete) of any Benefit
Plan;
(d) (i) incurrences by an Acquired Company of Indebtedness or (ii)
any voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or waiver of
any right of an Acquired Company under, any Indebtedness of or owing to an
Acquired Company;
(e) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the Assets of an Acquired Company
in an aggregate amount exceeding $25,000;
(f) any write-off or write-down of or any determination to write off
or write down any of the Assets of an Acquired Company;
(g) any purchase of any Assets of any Person or disposition of, or
incurrence of a Lien on, any Assets of an Acquired Company, other than
acquisitions or dispositions of inventory in the ordinary course of business of
the Acquired Company consistent with past practice;
(h) any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with respect to
(i) any Contract which is required (or had it been in effect on the date hereof
would have been required) to be disclosed in the Disclosure Schedule pursuant to
Section 2.18(a), (ii) any License held by an Acquired Company, or (iii) any
intellectual property rights of such Acquired Company;
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(i) any capital expenditures or commitments for additions to
property, plant or equipment of an Acquired Company constituting capital assets
in an aggregate amount exceeding $10,000;
(j) any commencement, termination or change by an Acquired Company
of any line of business;
(k) any transaction by an Acquired Company with any officer,
director, stockholder or Affiliate of any Acquired Company, other than pursuant
to a Contract or arrangement in effect on December 31, 1997 and disclosed to
Purchaser pursuant to Section 2.18(a)(viii) or other than pursuant to any
Contract of employment and listed pursuant to Section 2.18(a)(i) of the
Disclosure Schedule;
(l) any entering into of an agreement to do or engage in any of the
foregoing, including without limitation with respect to any merger, sale of
substantially all assets or other business combination not otherwise restricted
by the foregoing paragraphs; or
(m) any change in the accounting methods or procedures of any
Acquired Company or any other transaction involving or development affecting an
Acquired Company outside the ordinary course of business, consistent with past
practice.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against
in the December 31, 1997 balance sheet included in the Audited Financial
Statements or as disclosed in Section 2.10 of the Disclosure Schedule, or as
expressly contemplated hereby, there are no Liabilities of, relating to or
affecting any Acquired Company or any of their respective Assets, other than
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Liabilities incurred in the ordinary course or business consistent with past
practice since December 31, 1997 and in accordance with the provisions of this
Agreement which in the aggregate are not material to the business or condition
of any Acquired Company and are not for tort or for breach of contract.
2.11 Taxes.
(a) Except as disclosed in Section 2.11 of the Disclosure Schedule,
all Tax Returns required to have been filed by or with respect to any of the
Acquired Companies or any affiliated, combined, consolidated, unitary or similar
group of which an Acquired Company is or was a member (a "Relevant Group") with
any Taxing Authority have been duly and timely filed, and each such Tax Return
correctly and completely reflects the income, franchise or other Tax liability
and all other information required to be reported thereon. All Taxes owed by
each Acquired Company or any member of a Relevant Group (whether or not shown on
any Tax Return) have been paid. All monies required to be withheld by any
Acquired Company from employees, independent contractors, creditors or other
third parties for Taxes have been collected or withheld, and either duly and
timely paid to the appropriate Taxing Authority or (if not yet due for payment)
set aside in accounts for such purposes. No Acquired Company has any liability
for Taxes for any Person other than such Acquired Company (i) solely as a
present or former member of a Relevant Group, (ii) as a transferee or successor,
(iii) by Contract or (iv) otherwise.
(b) The provisions for current Taxes in the Financial Statements of
each Acquired Company are sufficient for the payments of all accrued and unpaid
Taxes not yet due and payable as of their dates, whether or not disputed. As of
the Closing Date, such provisions, as adjusted for the passage of time through
the Closing Date, will be sufficient for the then-accrued and unpaid Taxes not
yet due and payable of each Acquired Company.
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(c) No Acquired Company is a party to any agreement extending, or
having the effect of extending, the time within which to file any Tax Return or
the period of assessment or collection of any Taxes. No Acquired Company has
received any written ruling of a Taxing Authority related to Taxes or entered
into any written and legally binding agreement with a Taxing Authority relating
to Taxes.
(d) No Taxing Authority is now asserting or threatening to assert
against any Relevant Group or any Acquired Company any deficiency, claim or
liability for additional Taxes or any adjustment of Taxes, and there is no
reasonable basis for any such assertion of which the Seller is or reasonably
should be aware. No issues have been raised in any examination by any Taxing
Authority with respect to any Relevant Group or any Acquired Company which, by
application of similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined. The federal income Tax
Returns of or including each Acquired Company (including Tax Returns of Relevant
Groups) disclose (in accordance with Section 6662(d)(2)(B)(ii) of the Code) all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of section 6662(d) of the Code. No claim
has ever been made by any Taxing Authority in a jurisdiction in which an
Acquired Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. Schedule 2.11 of the Disclosure Schedule lists
all federal, state, and local income Tax Returns filed by or with respect to
each Acquired Company (including Tax Returns of Relevant Groups) for all taxable
periods ended on or after December 31, 1995; indicates those Tax Returns, if
any, that have been audited, and indicates those Tax Returns that currently are
the subject of audit. Seller has delivered to Purchaser complete and correct
copies of all federal, state, local and foreign income Tax Returns filed by or
with respect to, and all Tax examination reports and statements of deficiencies
assessed against or
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agreed to by, each Acquired Company since December 31, 1995. There are no Liens
for Taxes upon the Assets or Properties of any Acquired Company.
(e) Except as disclosed in Section 2.11 of the Disclosure Schedule,
no Acquired Company (i) is a party to or is bound by any obligations under any
tax sharing, tax indemnity or similar agreement or arrangement, (ii) has made or
is subject to any election under section 341(f) of the Code, (iii) has made or
is subject to any election or deemed election under sections 338 or 336(e) of
the Code or the regulations thereunder, (iv) has agreed to or is required to
make, or reasonably expects that it might have to make, any adjustment under
section 481 of the Code (or any comparable provision of state, local or foreign
law) by reason of a change in accounting method or otherwise, (v) has ever
entered into any agreement or arrangement that could result separately or in the
aggregate in the payment of any "excess parachute payments" within the meaning
of section 280G of the Code, (vi) is, or at any time has been, a "United States
real property holding corporation" within the meaning of section 897(c)(2) of
the Code, (vii) is a party to any "safe harbor lease" that is subject to the
provisions of section 168(f)(8) of the Internal Revenue Code as in effect prior
to the Tax Reform Act of 1986 or to any "long-term contract" within the meaning
of section 460 of the Code, (viii) is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes, or (ix) has ever been a member of any affiliated, consolidated,
combined, unitary or similar group for any Tax purpose.
2.12 Legal Proceedings.
(a) Except as disclosed in Section 2.12 of the Disclosure Schedule
(with paragraph references corresponding to those set forth below):
(i) there are no actions or proceedings pending or, to the
knowledge of the Seller threatened against, relating to or affecting the
Acquired Companies, or any of their respective
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Assets which (A) could reasonably be expected to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making illegal any of
the transactions contemplated by this Agreement or otherwise result in a
material diminution of the benefits contemplated by this Agreement to Purchaser,
or (B) if determined adversely to any Acquired Company, could reasonably be
expected to result in (x) any injunction or other equitable relief against such
Acquired Company, or (y) Losses by such Acquired Company, individually or in the
aggregate with Losses in respect of other such actions or proceedings, exceeding
$10,000;
(ii) there are no facts or circumstances known to the Seller
that could reasonably be expected to give rise to any action or proceeding that
would be required to be disclosed pursuant to clause (a)(i) above;
(iii) neither the Seller nor any Acquired Company has received
notice, or is aware of any Orders outstanding against an Acquired Company; and
(iv) neither the Seller nor any Acquired Company has received
notice or is aware of any defects, dangerous or substandard conditions in the
products or materials sold, distributed, or to be sold or distributed by any
Acquired Company that could cause bodily injury, sickness, disease, death, or
damage to property, or result in loss of use of property, or any claim, suit,
demand for arbitration or notice seeking damages for bodily injury, sickness,
disease, death, or damage to property, or loss of use or property.
(b) Prior to the execution of this Agreement, the Seller and/or each
Acquired Company has delivered all responses of counsel for the Acquired
Companies to auditors' requests for information regarding actions or proceedings
pending or threatened against, relating to or
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affecting the Acquired Companies during the period commencing January 1, 1995.
Section 2.12(b) of the Disclosure Schedule sets forth all actions or proceedings
relating to or affecting any Acquired Companies and any Subsidiary or any of
their respective Assets during the period commencing January 1, 1995 prior to
the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section 2.13
of the Disclosure Schedule, none of the Seller or the Acquired Companies has
received at any time since January 1, 1995 any notice that any Acquired Company
is or has been at any time since such date, in violation of or in default under,
any Law or Order applicable to an Acquired Company or any of its respective
Assets. In furtherance and not in limitation of the foregoing, neither the
Seller nor any Acquired Company has violated any federal or state securities law
in connection with the offer, sale or purchase of any securities.
2.14 Benefit Plans; ERISA. All Benefit Plans relating to each of the
Acquired Companies and Subsidiaries are listed in Section 2.14 of the Disclosure
Schedule, and copies of all documentation relating to such Benefit Plans have
been delivered or made available to Purchaser (including copies of written
Benefit Plans, written descriptions of oral Benefit Plans, summary plan
descriptions, trust agreements, the three most recent annual returns, employee
communications, and IRS determination letters). Except as disclosed in Section
2.14 of the Disclosure Schedule:
(a) each Benefit Plan, and the administration thereof, complies, and
has at all times complied, in all material respects with the requirements of all
applicable Law, including ERISA and the Code, and each Benefit Plan intended to
qualify under section 401(a) of the Code has at all times since its adoption
been so qualified, and each trust which forms a part of any such plan has at all
times since its adoption been tax-exempt under section 501(a) of the Code;
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(b) no Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code;
(c) no direct, contingent or secondary liability has been incurred
or is expected to be incurred by any Acquired Company under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA affiliate;
(d) the "amount of unfunded benefit liabilities" within the meaning
of section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA;
(e) no "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA affiliate since the effective date of said section 4043;
(f) no Benefit Plan is a multiemployer plan within the meaning of
section 3(37) of ERISA;
(g) no Acquired Company nor any ERISA affiliate has incurred any
liability for any Tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA;
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(h) no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
(i) no Tax has been incurred under section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
(j) no Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or section 4980B of the Code or any state laws
requiring continuation of benefits coverage following termination of employment;
(k) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
or, to the knowledge of the Seller, threatened against or with respect to any
Benefit Plan and there are no facts or circumstances known to the Seller that
could reasonably be expected to give rise to any such suit, action or other
litigation; and
(l) all contributions to Benefit Plans that were required to be made
under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with GAAP, all of which accruals under unfunded Benefit Plans are
as disclosed in Section 2.14 of the Disclosure Schedule, and each of the
Acquired Companies has performed all material obligations required to be
performed under all Benefit Plans.
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2.15 Real Property.
(a) Section 2.15(a) of the Disclosure Schedule contains a true and
correct list of (i) each parcel of real property owned (the "Owned Real
Property") by each Acquired Company, (ii) each parcel of real property leased or
subleased or otherwise occupied by each Acquired Company as tenant or subtenant
(the "Leased Real Property"; together with the Owned Real Property, the "Real
Property") together with a true and correct list of all such leases, subleases
or other similar agreements and any amendments, modifications or extensions
thereto (the "Real Property Leases"), and (iii) all Liens relating to or
affecting any parcel of Real Property, in each case identifying the owner,
lessor and lessee thereof.
(b) Each Acquired Company has good and marketable title to its Owned
Real Property, free and clear of all Liens, other than as specifically listed in
Section 2.15(b) of the Disclosure Schedule.
(c) Subject to the terms of their respective leases, each Acquired
Company has a valid and subsisting leasehold estate in and the right to quiet
enjoyment to the Leased Real Property for the full term of the lease thereof.
Each Real Property Lease is a legal, valid and binding agreement, enforceable in
accordance with its terms, of each Acquired Company and of each other Person
that is a party thereto, and except as set forth in Section 2.15(c) of the
Disclosure Schedule, there is no, and Seller has no knowledge of, nor has any
Acquired Company received any notice of any, default (or any condition or event
which, after notice or lapse of time or both, would constitute a default)
thereunder. No Acquired Company has assigned, sublet, transferred, hypothecated
or otherwise disposed of its interest in any Real Property Lease. No penalties
are accrued and unpaid under any Real Property Lease.
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(d) Seller has delivered to Purchaser prior to the execution of this
Agreement true and complete copies of all (i) title policies, mortgages, deeds
of trust, deeds, leases, easements, restrictive covenants, certificates of
occupancy, and similar documents, and all amendments thereto concerning the
Owned Real Property, and (ii) Real Property Leases and, to the extent reasonably
available, all other documents referred to in clause (i) of this paragraph (f)
with respect to the Leased Real Property.
(e) Except as disclosed in Section 2.15(e) of the Disclosure
Schedule, the improvements on the Real Property are in good operating condition
and in a state of good maintenance and repair, ordinary wear and tear excepted,
are adequate and suitable for the purposes for which they are presently being
used and, to the knowledge of Seller, there are no condemnation or appropriation
proceedings pending or threatened against Real Property or the improvements
thereon.
(f) Seller has no knowledge of any claim, action or proceeding,
actual or threatened, against any Acquired Company or Subsidiary or the Real
Property by any Person which would materially adversely affect the future use,
occupancy or value of the Real Property or any part thereof.
2.16 Tangible Personal Property. Each Acquired Company is in possession of
and has good and marketable title to, or has valid leasehold interests in or
valid rights under contract to use, all tangible personal property used in the
conduct of its business, including all tangible personal property reflected on
the Financial Statements and tangible personal property acquired since January
31, 1998 other than property disposed of since such date in the ordinary course
of business consistent with past practice and the terms of this Agreement. All
such tangible personal property is free and clear of all Liens, other than Liens
disclosed in Section 2.16 of the Disclosure Schedule, and is
22
adequate and suitable for the conduct by such Acquired Company of the business
presently conducted by it, and is in good working order and condition, ordinary
wear and tear excepted, and its use complies in all material respects with all
applicable Laws.
2.17 Intellectual Property Rights. The Acquired Companies have interests
in or use only the intellectual property described in Section 2.17(a) of the
Disclosure Schedule. Such Acquired Company either has all right, title and
interest in or a valid and binding license to use such intellectual property. No
other intellectual property is used in or necessary to the conduct of the
business of any Acquired Company in any material respect. All registrations,
pending applications, registered rights and executed agreements related to
intellectual property are listed in Section 2.17(a) of the Disclosure Schedule.
Except as disclosed in Section 2.17(b) of the Disclosure Schedule, (i) the
Acquired Companies have the right to use the intellectual property disclosed
therein, (ii) all registrations, on behalf of an Acquired Company, with and
applications to Governmental or Regulatory Authorities in respect of such
intellectual property are valid and in full force and effect and are not subject
to the payment of any Taxes or maintenance fees or the taking of any other
actions by an Acquired Company to maintain their validity or effectiveness,
(iii) all copyrightable materials used by an Acquired Company are works-for-hire
and are owned by such Acquired Company, (iv) there are no restrictions on the
direct or indirect transfer of any License, or any interest therein, held by an
Acquired Company in respect of such intellectual property, (v) the Seller has
delivered, or has caused each Acquired Company to deliver, to Purchaser prior to
the execution of this Agreement documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate and complete and
sufficient in detail and content to identify and explain such invention,
process, design, computer program or other know-how or trade secret, (vi) the
Seller and each Acquired Company have taken reasonable security measures to
protect the secrecy, confidentiality
23
and value of their trade secrets, (vii) neither the Seller nor any Acquired
Company is or has received any notice that it is, in default (or with the giving
of notice or lapse of time or both, would be in default) under any License to
use such intellectual property and (viii) Seller has no knowledge that such
intellectual property is being infringed by any other Person. To the knowledge
of the Seller, no Acquired Company is infringing any intellectual property of
any Person, and no litigation is pending and no claim has been made or, to the
knowledge of the Seller, has been threatened to such effect.
2.18 Contracts.
(a) Section 2.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies, or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been delivered to Purchaser prior to the execution of
this Agreement), to which any Acquired Company is a party or by which any of
their respective Assets and Properties is bound.
(i)(A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or unspecified
term, the name, position and rate of compensation of each Person party to such a
Contract and the expiration date of each such Contract; and (B) any written or
unwritten representations, commitments, promises, communications or courses of
conduct involving an obligation of any Acquired Company to make payments (with
or without notice, passage of time or both) to any Person in connection with, or
as a consequence of, the transactions contemplated hereby or to any employee,
other than with respect to salary or incentive compensation payments in the
ordinary course of business consistent with past practice;
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(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of any Acquired Company to engage
in any business activity or compete with any Person or prohibiting or limiting
the ability of any Person to compete with any Acquired Company or prohibiting or
limiting disclosure of confidential or proprietary information;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of an Acquired
Company;
(v) all Contracts with independent contractors, distributors,
dealers, manufacturers' representatives, sales agencies or franchisees;
(vi) all guarantees of any Indebtedness or other obligations
of any Acquired Company or any third Person;
(vii) all Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or acquisitions in the
ordinary course of business consistent with past practice and the provisions of
this Agreement;
(viii) all Contracts between or among any Acquired Company and
the Seller, on the one hand, and any current or former officer, director,
stockholder or Affiliate of any Acquired Company or of any such officer,
director, stockholder or Affiliate, on the other hand, other than Contracts
disclosed pursuant to Section 2.18(a)(i);
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(ix) all collective bargaining or similar labor Contracts;
(x) all Contracts that (A) limit or contain restrictions on
the ability of any Acquired Company to declare or pay dividends on, to make any
other distribution in respect of, or to issue or purchase, redeem or otherwise
acquire its capital stock, to incur Indebtedness, to incur or suffer to exist
any Lien, to purchase or sell any Assets or to change the lines of business, (B)
require any Acquired Company to maintain specified financial ratios or levels of
net worth or other indicia of financial condition or (C) require any Acquired
Company to maintain insurance in certain amounts or with certain coverages; and
(xi) all other Contracts, including but not limited to,
Contracts with customers, that involve the payment or potential payment,
pursuant to the terms of any such Contract, by or to any Acquired Company of
more than $10,000 and all powers of attorney and comparable delegations of
authority.
(b) Each Contract required to be disclosed in Section 2.18(a) of the
Disclosure Schedule is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in Section 2.18(b) of the Disclosure Schedule,
no Acquired Company nor, to the knowledge of the Seller, any other party to such
Contract is, or has received notice that it is, in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract).
(c) Except as disclosed in Section 2.18(c) of the Disclosure
Schedule, no Acquired Company is a party to or bound by any Contract that has
been or could reasonably be expected to be, individually or in the aggregate
with any other such Contracts, materially adverse to the business or condition
of the Acquired Company.
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(d) To the extent any of the guaranties for the benefit of any
Acquired Company or any of its Assets are not integrated with Contracts
disclosed in Section 2.18(a) to the Disclosure Schedule, each such guaranty is
in full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of each party thereto; and neither the
guarantor thereunder nor, to the knowledge of the Seller or any other party to
such guaranty is, or has received notice that it is, in violation or breach of
or in default under any such guaranty (or with notice or lapse of time or both,
would be in violation or breach or default under any such guaranty).
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true and
complete list of all Licenses used in and material to the business or operations
of the Acquired Companies, setting forth the owner, the function and the
expiration and renewal date of each. Prior to the execution of this Agreement,
the Seller or the Acquired Companies have delivered to Purchaser true and
complete copies of all such Licenses. Except as disclosed in Section 2.19 of the
Disclosure Schedule:
(a) each Acquired Company owns or validly holds all Licenses that
are material to its respective business or operations;
(b) Each license listed in Section 2.19 of the Disclosure Schedule
is valid, binding and in full force and effect;
(c) neither the Seller nor any Acquired Company is, or has received
any notice that it is, in default (or with the giving of notice of lapse of time
or both, would be in default) under any such License; and
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(d) the transactions contemplated in this Agreement will not violate
any such License or give the other party thereto rights to terminate the License
or change the terms thereof.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true
and complete list (including the names of the insurers, the expiration dates
thereof, the period of time covered thereby and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of any Acquired Company
or affect or relate to the ownership, use or operation of any of the Assets of
any Acquired Company and that (i) have been issued to any Acquired Company, or
(ii) have been issued to any Person (other than an Acquired Company) for the
benefit of an Acquired Company. Each policy listed in Section 2.20 of the
Disclosure Schedule is valid and binding and in full force and effect, all
premiums due thereunder have been paid when due and none of the Sellers or
Acquired Company or the Person to whom such policy has been issued has received
any notice of cancellation or termination in respect of any such policy or is in
default thereunder, and Seller knows of no reason or state of facts that could
lead to the cancellation of such policies. The insurance policies listed in
Section 2.20 of the Disclosure Schedule (i) in light of the business, operations
and Assets of each Acquired Company are in amounts and have coverages that are
reasonable and customary for Persons engaged in such businesses and operations
and having such Assets and (ii) are in amounts and have coverages as required by
any Contract to which an Acquired Company is a party. Section 2.20 of the
Disclosure Schedule contains a list of all claims made under any insurance
policies covering an Acquired Company or Subsidiary since January 1, 1995.
Neither the Seller nor an Acquired Company has received notice that any insurer
under any policy referred to in this Section is denying liability with respect
to a claim thereunder or defending under a reservation of rights clause. Since
January 1, 1995, each Acquired Company has, in light of its business, location,
operations and Assets
28
maintained, at all times, without interruption appropriate insurance, in scope
and amount of coverages.
2.21 Affiliate Transactions.
(a) Except as disclosed in Section 2.21(a) of the Disclosure
Schedule (i) there are no Liabilities between any Acquired Company and any
current or former officer, director, stockholder, Affiliate of such Acquired
Company or any Affiliate of any such officer, director, stockholder or
Affiliate, and (ii) no Acquired Company provides or causes to be provided any
assets, services or facilities to any such current or former officer, director,
stockholder or Affiliate.
(b) Except as disclosed in Section 2.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 2.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis on competitive terms.
2.22 Employees; Labor Relations. None of the Acquired Companies, is
engaged in any unfair labor practice. There is (i) no unfair labor practice
complaint pending or, to the knowledge of the Seller, threatened against any
Acquired Company before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreements is so pending or, to the knowledge of the Seller, threatened against
any Acquired Company, (ii) no strike, labor dispute, slowdown or stoppage is
pending or, to the knowledge of the Seller, threatened against any Acquired
Company, and (iii) no union representation question exists with respect to the
employees of any Acquired Company and, to the knowledge of the Seller, no union
organization activities are taking place.
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2.23 Environmental Matters.
(a) Each Acquired Company has obtained and holds all necessary
Environmental Permits.
(b) Except as disclosed in Section 2.23(b) of the Disclosure
Schedule:
(i) Each Acquired Company is, and at all times has been, in
full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither Seller nor any Acquired Company has any
basis to expect, nor has any of them or, to the best knowledge of Seller, any
other Person for whose conduct it may be held to be responsible received, any
actual or threatened Order, notice, or other communication from (A) any
Governmental Body or private citizen acting in the public interest, or (B) the
current or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which any
Acquired Company has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by any Acquired Company and
any other Person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(ii) There are no pending or, to the knowledge of Seller,
threatened claims, encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which any Acquired Company has or had an interest.
30
(iii) Seller has no knowledge of or any basis to expect, nor
has any Acquired Company or, to the knowledge of Seller, any other Person for
whose conduct they are or may be held responsible received any citation,
directive, inquiry, notice, Order, summons, warning, or other communications
that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual,
or potential violation or failure to comply with any Environmental Law, or of
any Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other Assets in which any Acquired Company has or had an
interest, or with respect to any Facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed by
any Acquired Company, or any other Person for whose conduct it or they are or
may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(iv) No Acquired Company or any other Person for whose conduct
it may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which any Acquired
Company (or any predecessor thereof), has or had an interest, or, to the best
knowledge of Seller, at any property geologically or hydrologically adjoining
the Facilities or any such other property or assets.
(c) There are no Hazardous Materials present on or in the
Environment at the Facilities or, to the best knowledge of Seller, at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. No
31
Acquired Company or any other Person for whose conduct it may be held
responsible, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which any Acquired Company has or had an
interest except in full compliance with all applicable Environmental Laws.
(d) There has been no Release or, to the knowledge of Seller, threat
of Release of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Facilities,
or from or by any other properties and assets (whether real, personal, or mixed)
in which any Acquired Company has or had an interest, or, to the best knowledge
of Seller, any geologically or hydrologically adjoining property.
(e) Seller has delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller or any Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by any Acquired Company or any other Person for whose conduct they are or may be
held responsible, with Environmental Laws.
(f) There are no Liens arising under or pursuant to any
Environmental Law on any Owned Real Property or Leased Real Property and there
are no facts, circumstances, or conditions under any Environmental Law with
respect to the ownership, occupancy, development, use, or transferability of any
Real Property.
(g) There are no (i) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, or (iii) asbestos containing
material at any Real Property.
32
(h) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, on behalf of, or which
are in the possession of the Seller or any Acquired Company with respect to any
Asset of, or property that is adjacent to, an Asset of an Acquired Company which
have not been delivered to Purchaser prior to execution of this Agreement.
2.24 Substantial Customers and Suppliers. Section 2.24(a) of the
Disclosure Schedule lists the ten (10) largest customers of each Acquired
Company on the basis of revenues for goods sold or services provided for the
most recent fiscal year. Section 2.24(b) of the Disclosure Schedule lists the
ten (10) largest suppliers of each Acquired Company on the basis of cost of
goods or services purchased for the most recent fiscal year. Except as disclosed
in Section 2.24(c) of the Disclosure Schedule, to the knowledge of the Seller,
no such customer or supplier is insolvent or threatened with bankruptcy or
insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25(a) of the
Disclosure Schedule, the accounts and notes receivable of each Acquired Company
reflected on the balance sheets included in the Audited Financial Statements for
the period ended December 31, 1997, and all accounts and notes receivable
arising subsequent to such date, (i) arose from bona fide sales transactions in
the ordinary course of business consistent with past practice and are payable on
ordinary trade terms, (ii) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their respective terms, (iii)
are not subject to any valid set-off or counterclaim, (iv) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangements, and (v) are not
subject of any Actions or Proceedings brought by or on behalf of any Acquired
Company. Section 2.25(b) of the Disclosure Schedule sets forth (x) a description
of any security arrangements and collateral
33
securing the repayment or other satisfaction of receivables of each Acquired
Company and (y) all jurisdictions in which the records relating to accounts and
notes receivable are located.
2.26 Other Negotiations. Neither the Seller, nor any Acquired Company, nor
any of their respective Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of Seller or any Acquired Company or any such Affiliate) has entered into
any agreement or had any discussions with any third party regarding any
transaction involving any Acquired Company which could result in such Acquired
Company, Purchaser or its stockholders, or any officer, director, employee,
agent or Affiliate of any of them, being subject to any claim for liability to
said third party as a result of entering into this Agreement or consummating the
transactions contemplated hereby or thereby.
2.27. Holding Company Act and Investment Company Act Status. No Acquired
Company is a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Company Act of 1935, as amended. No Acquired
Company is an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
2.28 Bank and Brokerage Accounts. Section 2.28(a) of the Disclosure
Schedule sets forth (i) a list of the names and locations of all banks,
securities brokers and other financial institutions at which any Acquired
Company has an account or safe deposit box or maintains a banking, custodial,
trading or other similar relationship; and (ii) a true and complete list and
description of each such account, box and relationship, indicating in each case
the account number and the names of all persons having signatory power and
respect thereto.
2.29 Exemption from Registration. The offer and sale of the Purchased
Stock made pursuant to this Agreement are exempt from the registration
requirements of the Securities Act.
34
Neither the Seller nor any Acquired Company nor any Person authorized to act on
behalf of any of the foregoing has, in connection with the offering of the
Purchased Stock, engaged in (i) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 501(c) under the
Securities Act), (ii) any action involving a public offering within the meaning
of section 4(2) of the Securities Act, or (iii) any action that would require
the registration under the Securities Act of the offering and sale of the
Purchased Stock pursuant to this Agreement or that would violate applicable
state securities or "blue sky" laws.
2.30 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings furnished to Purchaser pursuant to any
provision of this Agreement (including the Financial Statements), when taken
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements herein and
therein, in the light of the circumstances under which they were made, not
misleading.
2.31 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Purchaser may investigate the affairs of each Acquired Company
and confirm the accuracy of the representations and warranties of Seller, the
Purchaser, nonetheless, shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Seller contained in
this Agreement. All such representations, warranties, covenants and agreements
will survive the Closing.
35
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
3.01 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Purchaser is duly qualified, licensed or admitted to do business and is
in good standing in each jurisdiction in which the ownership, use or leasing of
its Assets, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, could not be reasonably expected to have a material adverse effect on
the validity or enforceability of this Agreement or on the ability of Purchaser
to perform its obligations hereunder or thereunder.
3.02 Authority Relative to this Agreement. Purchaser has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby and have been duly and validly
approved by its board of directors and no other corporate proceedings on the
part of Purchaser or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
36
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the performance by Purchaser of its obligations under this
Agreement and the consummation of the transactions contemplated hereby, do not
and will not:
(a) conflict or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Purchaser;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices referred to in Section 3.04 below or
disclosed in Section 3.04 of the Disclosure Schedule, if any, conflict with or
result in a violation or breach of any term or provision of any Law or Order
applicable to Purchaser or its Assets and Properties; or
(c) except as disclosed in Section 3.03 of the Disclosure Schedule,
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, or (iii) require
Purchaser to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of any Contract or
License to which Purchaser is a party, or by which it is bound.
3.04 Governmental Approvals and Filings. Except as disclosed in Section
3.04 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Purchaser
is required in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, other
than filings with the Federal Trade Commission and the United States Department
of Justice under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
37
3.05 Legal Proceedings. There are no Actions or Proceedings pending or, to
the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.06 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.07 Purchase for Investment. The Purchased Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
3.08 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Seller may investigate the affairs of the Purchaser and confirm
the accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Seller, nonetheless, shall have the right to rely fully upon
the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
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ARTICLE IV
COVENANTS BY SELLER
4.01 Noncompetition; Non Solicitation.
(a) For a period of five (5) years from the Closing Date, the
Seller, alone or in conjunction with any other Person, or directly or indirectly
through his present or future Affiliates, will not directly or indirectly, own,
manage, operate, join, have a financial interest in, control or participate in
the ownership, management, operation or control of, or use or permit his name to
be used in connection with, or be otherwise connected in any manner with (i) any
business or enterprise conducting business in the Territory engaged in the
design, development, manufacture, distribution or sale of any products, or the
provision of any services, which any Acquired Company was designing, developing,
manufacturing, distributing, selling or providing at any time up to and
including the Closing Date or (ii) any business conducting business in the
Territory which is similar to the business of disposing or selling coal
combustion by-products or competitive with the business carried on or planned by
any Acquired Company at any time up to and including the Closing Date, provided
that the foregoing restriction shall not be construed to prohibit the ownership,
in the aggregate, of not more than five percent (5%) of any class of securities
of any corporation which is engaged in any of the businesses or enterprises
described in clauses (i) and (ii) above, having a class of securities registered
pursuant to the Securities Exchange Act of 1934, as amended, which securities
are publicly owned and regularly traded on any national exchange or in the
over-the-counter market.
39
(b) For a period of five (5) years from the Closing Date, the Seller
shall not, directly or indirectly, by himself or through an Affiliate, (i)
influence any individual who was an employee or consultant of any Acquired
Company at any time during the time the Seller was an indirect or direct owner
of securities of such Acquired Company, to terminate his or her employment or
consulting relationship with such Acquired Company, (ii) interfere in any other
way with the employment, or other relationship, of any employee or consultant of
an Acquired Company or (iii) cause or attempt to cause or participate in any way
in any discussion or negotiation concerning (x) any client, customer or supplier
of an Acquired Company or (y) any prospective client, customer or supplier of an
Acquired Company from engaging in business with such Acquired Company.
(c) Seller agrees that Purchaser's remedies at law for any breach or
threat of breach by him of any of the provisions of this Section 4.01 will be
inadequate, and that, in addition to any other remedy to which Purchaser may be
entitled at law or in equity, Purchaser shall be entitled to a temporary or
permanent injunction or injunctions or temporary restraining order or orders to
prevent breaches of the provisions of this Section 4.01 and to enforce
specifically the terms and provisions hereof, in each case without the need to
post any security or bond. Nothing herein contained shall be construed as
prohibiting Purchaser from pursuing, in addition, any other remedies available
to an Acquired Company for such breach or threatened breach. A waiver by the
Purchaser of any breach of any provision hereof shall not operate or be
construed as a waiver of a breach of any other provisions of this Agreement or
of any subsequent breach thereof.
(d) The parties hereto consider the restrictions contained in this
Section 4.01 hereof to be reasonable for the purpose of preserving the goodwill,
proprietary rights and going concern value of the Acquired Companies, but if a
final judicial determination is made by a court having jurisdiction that the
time or territory or any other restriction contained in this Section 4.01 is an
unenforceable restriction on the Seller's activities, the provisions of this
Section 4.01 shall not be
40
rendered void but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such court may judicially determine or
indicate to be reasonable. Alternatively, if the court referred to above finds
that any restriction contained in this Section 4.01 or any remedy provided
herein is unenforceable, and such restriction or remedy cannot be amended so as
to make it enforceable, such finding shall not affect the enforceability of any
of the other restrictions contained therein or the availability of any other
remedy. The provisions of this Section 4.01 shall in no respect limit or
otherwise affect the Seller's obligations under other agreements with any
Acquired Company.
4.02 Regulatory and Other Approvals. The Seller shall, and shall cause
each Acquired Company to, (a) take all necessary or desirable steps and proceed
diligently and in good faith and use its best efforts, as promptly as
practicable, to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to, Governmental or Regulatory Authorities
or any other Person required of each Acquired Company to consummate the
transactions contemplated hereby and those described in Sections 2.05 and 2.06
of the Disclosure Schedule, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as Purchaser or such Governmental or Regulatory Authorities or other Persons may
reasonably request and (c) cooperate with Purchaser as promptly as practicable
in obtaining all consents, approvals or actions of, making all filings with and
giving all notices to, Governmental or Regulatory Authorities or other Persons
required of Purchaser to consummate the transactions contemplated hereby. Seller
will provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or
41
Regulatory Authority or other Person regarding any of the transactions
contemplated by this Agreement.
4.03 Investigation by Purchaser. From the date hereof until the Closing
and thereafter for so long as Purchaser owns any equity interest in any Acquired
Company or Subsidiary, the Seller shall: (a) provide Purchaser and its
representatives with full access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents and accountants of each
Acquired Company and its Assets and Books and Records and to officers,
employees, agents and accountants, and (b) furnish Purchaser and such
representatives with all such information and data (including copies of
Contracts, Benefit Plans and other Books and Records) concerning the business
and operations of each Acquired Company, as Purchaser or any of such other
representatives reasonably may request in connection with such investigation.
ARTICLE V
CLOSING CONDITIONS
5.01 Condition to the Obligations of the Purchaser. The obligations of
Purchaser hereunder to purchase the Purchased Stock are subject to the
fulfillment, at or prior to the Closing, of the following conditions precedent
(any or all of which may be waived in whole or in part by Purchaser in its sole
discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on and as of the Closing
Date as though each such representation and warranty was made on and as of the
Closing Date.
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(b) Performance. The Seller shall have performed and complied with
each agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Seller at or before the Closing.
(c) Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to Purchaser, and there shall not be pending or threatened on the
Closing Date any Action or Proceeding (i) which could reasonably be expected to
result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Purchaser, any of the Acquired Companies, the Seller or
the transactions contemplated by this Agreement of any such Law; or (ii) wherein
an unfavorable judgment, decree or Order would prevent the carrying out of this
Agreement or any of the transactions or events contemplated hereby or declare
unlawful any of the transactions or events contemplated by this Agreement or
present a risk of damages to the Purchaser.
(d) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Seller to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby (i) shall have
been duly obtained, made or given, (ii) shall be in form and substance
reasonably satisfactory to Purchaser, (iii) shall not impose any limitations or
restrictions on Purchaser, (iv) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived, and (v) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation for the
transactions contemplated by this Agreement shall have occurred.
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(e) Third Party Consents. The consents (or waivers) identified in
Sections 2.05 of the Disclosure Schedule, and all other consents (or waivers) to
the performance by the Purchaser of its obligations under this Agreement, or to
the consummation of the transactions contemplated hereby as are required under
any Contract or License to which the Purchaser is a party or by which any of its
Assets are bound and where the failure to obtain any such consent (or in lieu
thereof waiver) could reasonably be expected, individually or in the aggregate
with other such failures, to materially adversely affect the Purchaser or the
business or condition of an Acquired Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement to
the Purchaser in its sole discretion, (i) shall have been obtained, (ii) shall
be in form and substance satisfactory to the Purchaser in its sole discretion,
(iii) shall not be subject to the satisfaction of any condition that has not
been satisfied or waived and (iv) shall be in full force and effect.
(f) Seller's Certificates. Seller shall have delivered to Purchaser
(i) certificates, dated the Closing Date and executed by an executive officer of
each Acquired Company, substantially in the form and to the effect of Exhibit B
hereto and (ii) certificates, dated the Closing Date and executed by the chief
financial officer of each Acquired Company, substantially in the form of Exhibit
C hereto.
(g) Resignations of Officers and Directors. Purchaser shall have
received the resignations of all current officers and directors of each Acquired
Company, effective as of the Closing Date;
(h) Opinion of Counsel. Purchaser shall have received the opinion of
Xxxxx Xxxxxxxx Xxxxxxxxxx, P.L.C., counsel to Seller, in connection with this
Agreement, dated the Closing Date,
44
substantially in the form and to the effect of Exhibit D hereto, and to such
further effect as Purchaser may reasonably request;
(i) Disclosure Schedule. Purchaser shall have received a copy of the
Disclosure Schedule, updated and current through the Closing Date;
(j) Good Standing Certificates. The Seller shall have delivered to
Purchaser (i) copies of the certificate or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto of
each Acquired Company and Subsidiary certified by the applicable Secretary of
State or other appropriate governmental official, (ii) certificates from the
applicable Secretary of State or other appropriate governmental official to the
effect that each Acquired Company and Subsidiary is in good standing in such
jurisdiction, listing all charter documents of each Acquired Company and
Subsidiary on file and attesting to its payment of all franchise or similar
Taxes, and (iii) certificates from the Secretary of State or other appropriate
official in each jurisdiction in which an Acquired Company or Subsidiary are
qualified or admitted to do business to the effect that such Acquired Company
and Subsidiary is duly qualified or admitted in good standing in such
jurisdiction.
(k) Receipt of Purchased Stock. Certificates representing the
Purchased Stock shall have been transferred to Purchaser in accordance with the
terms of this Agreement.
(l) Payment of Indebtedness. Delivery of evidence satisfactory to
Purchaser that, except as disclosed in Section 5.01(l) of the Disclosure
Schedule, (i) all indebtedness owed by each Acquired Company or Subsidiary, on
the one hand, to the Seller or to any Affiliate of the Seller or any of the
Acquired Companies or Subsidiaries, on the other hand, has been cancelled or
otherwise
45
paid in full, and is of no further force and effect, (ii) all other indebtedness
owing by an Acquired Company or Subsidiary has been retired, released or repaid,
and (iii) each Acquired Company and Subsidiary has been unconditionally released
from all obligations any of them may have in respect of (i) and (ii) above.
(m) No Adverse Change. There shall have occurred no material adverse
change in the business or condition of any Acquired Company since December 31,
1997.
(n) Employment Agreement. Purchaser shall have received an
Employment Agreement satisfactory to Purchaser, between Purchaser and Xxxxxxx
Xxxxx that has been executed by Xx. Xxxxx.
(o) Rolling Stock. Seller shall have caused Xxxx Transport Co. to
execute and deliver to Purchaser a Xxxx of Sale in the form of Exhibit E hereto,
transferring the Rolling Stock identified on such Exhibit to Purchaser or its
designee.
5.02 Conditions to the Obligations of the Seller. The obligations of the
Seller hereunder to sell the Purchased Stock to the Purchaser are subject to the
fulfillment, at or prior to the Closing, of the following conditions precedent
(any or all of which may be waived in whole or in part by the Seller in his sole
discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on and as of the Closing
Date as though each such representation and warranty was made on and as of the
Closing Date.
46
(b) Performance. Purchaser shall have performed and complied with
each agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Purchaser at or before the Closing.
(c) Orders and Laws. There shall not be in effect on the Closing
Date any Orders or Laws restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding or any other action (i) which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Purchaser, an Acquired Company, the Seller or the
transactions contemplated by this Agreement of any such Law; or (ii) wherein an
unfavorable judgment, decree or Order would prevent the carrying out of this
Agreement or any of the transactions or events contemplated hereby or declare
unlawful any of the transactions or events contemplated by this Agreement or
present a risk of damages to the Seller.
(d) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Seller to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby (i) shall have
been duly obtained, made or given, (ii) shall be in form and substance
reasonably satisfactory to Seller, (iii) shall not be subject to the
satisfaction or any condition that has not been satisfied or waived, and (iv)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement shall
have occurred.
47
(e) Officers' Certificates. Purchaser shall have delivered to Seller
a certificate, dated the Closing Date and executed by the chairman, president or
a vice president of Purchaser, substantially in the form of Exhibit F hereto.
(f) Opinion of Counsel. The Seller shall have received the opinion
of Xxxxxxx Xxxxx & Xxxxxxx, counsel of the Purchaser in connection with this
Agreement, dated the Closing Date, substantially in the form and to the effect
of Exhibit G hereto.
(g) Good Standing Certificates. Purchaser shall have delivered to
Seller (a) copies of the certificate of incorporation, including all amendments
thereto of Purchaser certified by the Secretary of State of the State of Texas,
and (b) certificates from the Secretary of State of the State of Texas to the
effect that Purchaser is in good standing in such jurisdiction.
ARTICLE VI
TERMINATION
6.01 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Purchaser or by Seller if a material breach of any
provision of this Agreement has been committed by the other party and such
breach has not been waived;
(b) (i) by Purchaser if any of the conditions in Section 5.01 has
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Purchaser to comply
with its obligations under this Agreement) and Purchaser has not waived such
condition on or before the Closing Date, or (ii) by Seller, if any of
48
the conditions in Section 5.02 has not been satisfied as of the Closing Date or
if satisfaction of such a condition is or becomes impossible (other than through
the failure of a Seller to comply with his or her obligations under this
Agreement) and Seller has not waived such condition on or before the Closing
Date;
(c) by mutual consent of Purchaser and Seller; or
(d) by either Purchaser or by Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before April
30, 1998, or such later date as the parties may agree upon.
(e) by Purchaser if it shall have discovered, as a result of its
investigation and review pursuant to Section 4.03 hereof, any condition
(financial or otherwise) relating in any way to any Acquired Company, its
Assets, business or prospects, that convinces Purchaser, in its sole discretion,
that it is not advisable to complete the Closing. If Purchaser terminates the
Agreement pursuant to this subparagraph (e), then Seller, in addition to the
non-refundable Deposit, shall be entitled to receive the Escrow Deposit,
together with the earnings thereon.
6.02 Termination by Purchaser. Purchaser's right of termination under
Section 6.01 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated by Purchaser pursuant to Section
6.01, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 9.03, 9.04, 9.13 and Article
X will survive; provided, however, that if this Agreement is terminated by
Purchaser because of a breach of the
49
Agreement by Seller or because one or more of the conditions to Purchaser's
obligations under this Agreement is not satisfied as a result of Seller's
failure to comply with its obligations under this Agreement, Purchaser's right
to pursue all legal remedies (including specific performance) will survive such
termination unimpaired.
6.03 Termination by Seller. If this Agreement is terminated by Seller
pursuant to Section 6.01, then Seller's sole remedy will be as provided in
Section 1.03.
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ARTICLE VII
INDEMNIFICATION; TAX MATTERS
7.01 Indemnification.
(a) Seller will indemnify each Acquired Company, the Purchaser and
their respective stockholders (other than the Seller) and the officers,
directors, employees, agents and Affiliates of each of them (other than the
Seller) in respect of, and hold each of them harmless from and against, any and
all Losses suffered, incurred or sustained by any of them or to which any of
them becomes subject, resulting from, arising out of relating to any
misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Seller contained in this
Agreement (including, without limitation, any certificate delivered in
connection herewith or therewith).
(b) Purchaser will indemnify the Seller in respect of, and hold him
harmless from and against, any and all Losses suffered, incurred or sustained by
him or to which he becomes subject, resulting from, arising out of or relating
to any misrepresentation or breach of warranty or nonfulfillment of or failure
to perform any covenant or agreement on the part of Purchaser contained in this
Agreement (including, without limitation, any certificate delivered in
connection herewith or therewith).
7.02 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.01 will be asserted and resolved as follows:
51
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.01 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party, including a Claim relating to the Environment (a
"Third Party Claim"), the Indemnified Party must deliver a Claim Notice to the
Indemnifying Party promptly after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, that failure to give such Claim
Notice shall not affect the indemnification provided hereunder except to the
extent the Indemnifying Party shall have been actually prejudiced as a result of
such failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof, but shall continue to pay for any
expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party
shall not assume the defense of a Third Party claim with counsel satisfactory to
the Indemnified Party within five Business Days of any Claim Notice, or (ii)
legal counsel for the Indemnified Party notifies the Indemnifying Party that
there are or may be legal defenses available to the Indemnifying Party or to
other Indemnified Parties which are different from or additional to those
available to the Indemnified Party, which, if the Indemnified Party and the
Indemnifying Party were to be represented by the same counsel, would constitute
a conflict of interest for such counsel or prejudice prosecution of the defenses
available to such Indemnified Party, or (iii) if the Indemnifying Party shall
assume the defense of a Third Party Claim
52
and fail to diligently prosecute such defense, then in each such case the
Indemnified Party, by notice to the Indemnifying Party, may employ its own
counsel and control the defense of the Third Party Claim and the Indemnifying
Party shall be liable for the reasonable fees, charges and disbursements of
counsel employed by the Indemnified Party, and the Indemnified Party shall be
promptly reimbursed for any such fees, charges and disbursements, as and when
incurred. Whether the Indemnifying Party or the Indemnified Party control the
defense of any Third Party Claim, the parties hereto shall cooperate in the
defense thereof. Such cooperation shall include the retention and provision to
the counsel of the controlling party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation or
any material provided hereunder. The Indemnifying Party shall have the right to
settle, compromise or discharge a Third Party Claim (other than any such Third
Party Claim in which criminal conduct is alleged) without the Indemnified
Party's consent if such settlement, compromise or discharge (i) constitutes a
complete and unconditional discharge and release of the Indemnified Party, and
(ii) provides for no relief other than the payment of monetary damage and such
monetary damages are paid in full by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under
Section 7.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
an Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss in the amount
53
specified in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 7.01 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within thirty (30) days, such dispute shall be resolved as provided in Article X
hereof.
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7.03 Limitations on Indemnities.
(a) Except with respect to (i) representations of title, (ii)
intentional breaches of a representation, warranty or covenant, and (iii) the
obligations of Seller regarding tax matters in Sections 7.04(b) and 7.05, all
indemnities contained in this Article VII are subject to limitation in
accordance with this Section 7.03.
(b) No party shall make any claim for indemnification under Section
7.01(a) until it shall have accumulated such claims equal in the aggregate to
$75,000 (the "Basket") and then only for the amount by which such claims exceed
the Basket. Neither party shall make any claim for an amount that is less than
$5,000 for a single claim, nor shall any claim for an amount that is less than
$5,000 count towards the Basket.
(c) The obligations to indemnify and hold harmless a party hereto
shall terminate on the third anniversary of the Closing Date, except that claims
with respect to Sections 2.23, 7.04(b) and 7.05, shall terminate on the
expiration of the applicable statute of limitations with respect to the matter
giving right to the Claim, such as the statute of limitations regarding the
collection of taxes (including any extension thereof). An obligation to
indemnify and hold harmless shall not terminate with respect to any item as to
which an Indemnified Party shall have, before the expiration of the three year
period commencing on the Closing Date, previously submitted a Claim Notice
pursuant to Section 7.02.
7.04 Allocation of Tax Liability.
(a) In the case of Taxes for the Acquired Companies with respect to
a period that
55
includes but does not end on the Closing Date, the allocation of such Taxes
between the Pre-Closing Period and the Post-Closing Period shall be made on the
basis of an interim closing of the books as of the close of business on the
Closing Date. In the case of (i) franchise Taxes based on capitalization, debt
or shares of stock authorized, issued or outstanding and (ii) ad valorem Taxes,
in either case attributable to any taxable period that includes but does not end
on the Closing Date, the portion of such Taxes attributable to the Pre-Closing
Period shall be the amount of such Taxes for the entire taxable period,
multiplied by a fraction the numerator of which is the number of days in such
taxable period ending on and including the Closing Date and the denominator of
which is the entire number of days in such taxable period; provided, that if any
Asset of an Acquired Company is sold or otherwise transferred prior to the
Closing Date, then ad valorem Taxes pertaining to such property, asset or other
right shall be attributed entirely to the Pre-Closing Period.
(b) Except to the extent a reserve for Taxes is reflected on the
Financial Statements, the Seller shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Acquired Companies with respect to
(i) any and all Taxes imposed on any of the Acquired Companies, or for which an
Acquired Company is liable with respect to any periods ending on or before the
Closing Date; provided, that in the case of any adjustment to any item of loss
or expense for any such years, which gives rise to corresponding and offsetting
items of loss or expense in subsequent years the benefit of which is or will be
actually realized by one of the Acquired Companies (other than upon liquidation
of such Acquired Company) including by reason of any increase in a net operating
loss, Seller's obligations shall be limited to the amount of interest (computed
at the appropriate statutory rates) and penalties actually paid to the
appropriate taxing authorities by such Acquired Company as a result of such
timing differences in the case of audit adjustments, or at a rate of eight
percent (8%) per annum in the case of other adjustments, (ii) without
duplication (subject to the same proviso), all Taxes arising out of a breach of
the representations, warranties or covenants contained herein, (iii) any Tax
liability resulting from any
56
ongoing state audits that exceed, in the aggregate, any reserve therefore set
forth on the Financial Statements, and (iv) any reasonable out-of-pocket costs
or expenses with respect to Taxes indemnified hereunder.
(c) From and after the Closing Date, Purchaser shall cause the
Acquired Companies to prepare, or cause to be prepared, and shall file, or cause
to be file, all reports and returns of the Acquired Companies required to be
filed. Purchaser shall cause the Acquired Companies to pay the appropriate
taxing authorities the Taxes shown to be due and payable on all Tax Returns of
the Acquired Companies filed after the Closing Date, concurrent with the filing
of such Tax Returns. Tax Returns of the Acquired Companies for periods ending on
or before the Closing Date shall be prepared on a basis consistent with the Tax
Returns filed by the Acquired Companies for previous taxable periods, subject to
the requirements of applicable law.
7.05 Tax Contests.
(a) If any Taxing Authority or other Person asserts a Tax Claim,
then the party hereto first receiving notice of such Tax Claim shall promptly
provide written notice thereof to the other party or parties hereto. Such notice
shall specify in reasonable detail the basis for such Tax Claim and shall
include a copy of any relevant correspondence received from the Taxing Authority
or other Person.
(b) If, within 30 calendar days after Seller receives or delivers,
as the case may be, notice of a Tax Claim, and if, within such time period,
Seller provides to the Purchaser an Election Notice, then subject to the
provisions of this Section 7.05, Seller shall have the right to defend or
prosecute, at its sole cost, expense and risk, such Tax Claim by all appropriate
proceedings, which
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proceedings shall be defended or prosecuted diligently by Seller to a Final
Determination; provided, that Seller shall not, without the prior written
consent of the Acquired Company, enter into any compromise or settlement of such
Tax Claim that would result in any Tax detriment to any Acquired Company. So
long as Seller is defending or prosecuting a Tax Claim with respect to an
Acquired Company, such Acquired Company shall provide or cause to be provided to
Seller any information reasonably requested by Seller relating to such Tax
Claim, and shall otherwise cooperate with Seller and its representatives in good
faith in order to contest effectively such Tax Claim, including, but not limited
to, causing the execution and filing with any Taxing Authority of any and all
consents extending the applicable statute of limitations to permit the continued
prosecution of any such Tax Claim to a Final Determination. Seller shall inform
the Acquired Company of all developments and events relating to such Tax Claim
(including, without limitation, providing to the Acquired Company copies of all
written materials relating to such Tax Claim) and the Acquired Company or its
authorized representatives shall be entitled, at the expense of the Acquired
Company, to attend, but not participate in or control, all conferences, meetings
and proceedings relating to such Tax Claim.
(c) If, with respect to any Tax Claim, Seller fails to deliver an
Election Notice to an Acquired Company within the period provided in Section
7.05(b) or, after delivery of such Election Notice to that Acquired Company,
Seller fails diligently to defend or prosecute such Tax Claim to a Final
Determination, then the Acquired Company shall at any time thereafter have the
right (but not the obligation) to defend or prosecute, at the sole cost, expense
and risk of Seller, such Tax Claim. Such Acquired Company shall have full
control of such defense or prosecution and such proceedings, including any
settlement or compromise thereof. If requested by the Acquired Company, the
Seller shall cooperate in good faith with the Acquired Company and its
authorized representatives in order to contest effectively such Tax Claim.
Seller may attend, but not participate in or control, any defense, prosecution,
settlement or compromise of any Tax Claim controlled by the Acquired Company
pursuant to this Section 7.05(c), and shall bear its own costs and expenses
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with respect thereto. In the case of any Tax Claim that is defended or
prosecuted by the Acquired Company pursuant to this Section 7.05(c), the
Acquired Company shall, from time to time, be entitled to receive current
payments from Seller with respect to costs and expenses incurred by the Acquired
Company in connection with such defense or prosecution (including, without
limitation, reasonable attorneys', accountants' and experts' fees and
disbursements, settlement costs, court costs and any other costs or expenses for
investigating, defending or prosecuting such Tax Claim, and any Taxes imposed on
an Acquired Company as a result of receiving a payment from Seller pursuant to
this Section 7.05) (collectively, "Associated Costs").
(d) In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by Seller pursuant to this Section 7.05, Seller shall pay to
the appropriate Tax Indemnitees, in immediately available funds, the full amount
of any Tax arising or resulting from such Tax Claim within five Business Days
after such Final Determination. In the case of any Tax Claim that is defended or
prosecuted to a Final Determination by the Acquired Company pursuant to the
terms of this Section 7.05, Seller shall pay to the appropriate Tax Indemnitee,
in immediately available funds, the full amount of any Tax arising or resulting
from such Tax Claim, together with any Associated Costs that have not
theretofore been paid by Seller to the Acquired Company, within five Business
Days after such Final Determination. In the case of any Tax Claim not covered by
the two preceding sentences, Seller shall pay to the appropriate Acquired
Company, in immediately available funds, the full amount of any Tax arising or
resulting from such Tax Claim (calculated after taking into account any actual
reduction in the current liability for Taxes of such Tax Indemnitee for Tax
arising out of or resulting from such payment or such Tax Claim), together with
any Associated Costs that have not theretofore been paid by Seller to such
Acquired Company, at least five Business Days before the date payment of such
Tax is due from any Tax Indemnitee.
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(e) Notwithstanding anything contained in this Article VII to the
contrary, the rights of Seller under this Section 7.05 to defend or prosecute,
or to control the defense or prosecution of, any Tax Claim shall be no greater
than those rights that the Acquired Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
7.06 Cooperation Regarding Tax Matters. Each party hereto shall, and shall
cause its subsidiaries and Affiliates to, provide to the other party hereto and
the Acquired Companies such cooperation and information as any of them
reasonably may request related to the filing of any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules and relevant workpapers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Tax
Returns pursuant to this Article VII shall bear all costs of filing such Tax
Returns.
7.07 Payment of Transfer Taxes and Fees. Seller shall pay all sales, use,
transfer, stamp, documentary or similar Taxes imposed upon or arising out of or
in connection with the transactions effected pursuant to this Agreement, and
shall indemnify, defend, and hold harmless the Purchaser, the Acquired Companies
and their Subsidiaries and Affiliates with respect to such Taxes. Seller shall
file all necessary documentation and Tax Returns with respect to such Taxes and
provide to Purchaser copies of all such Tax Returns.
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7.08 Other Tax Covenants.
(a) Without the prior written consent of Purchaser, neither the
Seller nor any Affiliate of the Seller shall, to the extent it may affect or
relate to any Acquired Company, make or change any tax election, change any
annual tax accounting period, adopt or change any method of tax accounting, file
any amended Tax Return, enter into any method of tax accounting, enter into any
closing agreement, settle any Tax Claim, assessment or proposed assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitation period applicable to any Tax Claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing any post-closing Tax Liability of the Purchaser, of any Acquired
Company or any Affiliate of Purchaser.
(b) Without the prior written consent of the Seller, neither the
Purchaser nor the Acquired Companies shall, to the extent it may affect or
relate to an Acquired Company, make or change any tax election, file any amended
Tax Return, enter into any closing Agreement, settle any Tax claim, assessment
or proposed assessment, surrender any right to claim a Tax refund, consent to
any extension or waiver of the limitation period applicable to any Tax claim or
assessment or take or omit to take any other action, if any such action or
omission would affect a Pre-Closing Tax Period, unless required by applicable
law.
(c) So long as any books, records and files retained by the Seller
and his Affiliates relating to the business of an Acquired Company or the books,
records and files delivered to the control of the Purchaser pursuant to this
Agreement to the extent they relate to the operations of an Acquired Company
prior to the Closing Date, remain in existence and available, each party (at its
own expense) shall have the right upon prior notice to inspect and to make
copies of the same at any
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time during business hours for any proper purpose. The Purchaser and the Seller
and their respective Affiliates shall use reasonable efforts not to destroy or
allow the destruction of any such books, records and files without first
providing 60 days' written notice of intention to destroy to the other, and
allowing such other party to take possession of such records.
7.09 Conflict. In the event of a conflict between the provisions of
Sections 7.04 through 7.08 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
DEFINITIONS
8.01 Definitions.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"Acquired Companies" and "Acquired Company" have the meanings
ascribed to them in the forepart of this Agreement (and, unless the context
otherwise requires, shall include any predecessor of an Acquired Company).
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns
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or controls 5% or more of any class of equity securities (including any equity
securities issuable upon the exercise of any option or convertible security) of
that Person or any of its Affiliates, or (c) any director, partner, officer,
agent, employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities, by contract or otherwise.
"Agreement" means this Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Assets" of any Person means all assets and properties of every
kind, nature, character and description, including goodwill and other
intangibles operated, owned or leased by such Person, including cash and cash
equivalents, investments, accounts and notes receivable, chattel paper,
documents, instruments, real estate, equipment, inventory, goods and
intellectual property.
"Associated Costs" has the meaning ascribed to it in Section
7.04(c).
"Audited Financial Statements" has the meaning ascribed to it in
Section 2.08.
"Benefit Plan" means any Plan, existing at the Closing Date or prior
thereto, established or to which contributions have at any time been made by any
Acquired Company, or its predecessor, or under which any employee, former
employee or director of an Acquired Company or any beneficiary thereof is
covered, is eligible for coverage or has benefit rights.
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"Books and Records" means all files, documents, instruments, papers,
books and records relating to an Acquired Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts,
Licenses, customer lists, computer files and programs, retrieval programs,
operating data and plans and environmental studies and plans.
"Business Day" means a day on which commercial banks are open for
the transaction of business in Saginaw, Michigan.
"Claim" or "Claim Notice" means written notification pursuant to
Section 7.02(a) of a Third Party Claim as to which indemnity under Section 7.01
is sought by an Indemnified Party.
"Closing" has the meaning ascribed to it in Section 1.03.
"Closing Date" has the meaning ascribed to it in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Contract" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Disclosure Schedule" means the schedules delivered to Purchaser by
or on behalf of any of the Acquired Companies and Seller, and the schedules
delivered by or on behalf of Purchaser, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
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"Election Notice" means a written notice provided by Seller in
respect of a Tax Claim to the effect that (i) Seller acknowledges its indemnity
obligation under this Agreement with respect to such Tax Claim and (ii) Seller
elects to contest, and to control the defense or prosecution of, such Tax Claim
at the sole risk and sole cost and expense of Seller.
"Environment" means all air, surface water, groundwater, drinking
water supply, stream sediments, or land, including soil, land surface or
subsurface strata, all fish, wildlife, biota and all other environmental medium
or natural resources.
"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law and consisting
of or relating to (i) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products); (ii) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and
Health Law; (iii) financial responsibility under Environmental Law or
Occupational Safety and Health Law for clean-up costs or corrective action,
including any investigation, clean-up, removal, containment, or other
remediation or response actions required by Environmental Law or Occupational
Safety and Health Law (whether or not such clean-up has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or (iv) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law. The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States
65
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended (CERCLA).
"Environmental Law" means all federal, state and local
environmental, health and safety laws, common law orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the Environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid,
toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state or local permits,
licenses, approvals, consent or authorizations required by any Governmental or
Regulatory Authority under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued or
entered into by a Governmental or Regulatory Authority under any applicable
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by any Acquired
Company.
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"Final Determination" means (i) a decision, judgment, decree or
other Order by any court of competent jurisdiction, which decision, judgment,
decree or other Order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"Financial Statements" means the Audited Financial Statements and
the Unaudited Financial Statements.
"GAAP" means generally accepted accounting principles of the United
States, consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
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danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"Hazardous Material" means (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(ii) any chemicals, materials, substances or wastes which are defined as or
included in the definition of "hazardous substances, "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar import,
under any Environmental Law; and (iii) any other chemical, material, substance
or waste, exposure to which is prohibited, limited or regulated by any
Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to Section
7.02(c) of a claim for indemnity under Article VII by an Indemnified Party,
specifying the nature of and basis for such
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claim, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States or any state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.
"Leased Real Property" has the meaning ascribed to it in Section
2.15.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees
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and expenses to include all fees and expenses, such as fees and expenses of
attorneys, incurred in connection with (i) the investigation or defense of any
Third Party Claims or (ii) asserting or disputing any rights under this
Agreement against any party hereto or otherwise).
"Occupational Safety and Health Law" means any Law designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation, any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Owned Real Property" has the meaning ascribed to it in Section
2.15.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
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"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the taxable
period that begins on the day following the Closing Date shall constitute a
Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion thereof
that is not a Post-Closing Period.
"Purchase Price" has the meaning ascribed to it in Section 1.02.
"Purchased Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Real Property" has the meaning ascribed to it in Section 2.15.
"Real Property Leases" has the meaning ascribed to it in Section
2.15.
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"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section 2.11.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Seller" has the meaning ascribed to it in the forepart of this
Agreement.
"Subsidiary" means any Person in which another Person, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least fifty
percent (50%) of either the equity interest in, or the voting control of, such
Person, whether or not existing on the date hereof.
"Tax" or "Taxes" means all federal, state or local net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, alternative or
add-on minimum, environmental or other taxes, assessments, duties, fees, levies
or other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Tax Claim" means any written claim with respect to Taxes
attributable to a Pre-Closing Period made by any Taxing Authority or any Person
that, if pursued successfully, could serve as the basis for a claim for
indemnification, under this Agreement, of Purchaser, an Acquired Company and
other Indemnified Parties specified in Section 7.01 of this Agreement.
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"Tax Indemnitee" means an Acquired Company, the Purchaser and their
respective shareholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Seller).
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction having or purporting to exercise jurisdiction with respect to any
Tax.
"Territory" means Michigan, Illinois, Indiana and Ohio.
"Third Party Claim" has the meaning ascribed to it in Section 7.02.
"Unaudited Financial Statements" has the meaning ascribed to it in
Section 2.08(b).
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Acquired Company. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
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(c) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person or any similar phrase, means (i) with
respect to any Person who is an individual, the actual knowledge of such Person,
provided, the Seller shall be assumed to have actual knowledge of matters that
are known by the directors, officers, managers, and other Persons having similar
powers and duties with respect to the Acquired Companies, (ii) with respect to
any other Person, the actual knowledge of the directors, officers, managers and
other Persons having similar powers and duties, and (iii) in the case of each of
(i) and (ii), the knowledge of facts that such individuals should have after
reasonable inquiry.
ARTICLE IX
MISCELLANEOUS
9.01 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission or mailed by
prepaid first class certified mail, return receipt requested, or mailed by
overnight courier prepaid, to the parties at the following addresses or
facsimile numbers:
(a) If to Purchaser, to:
JTM Industries, Inc.
000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Xxxxx X. Xxxxxxx, Esq.
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxx
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000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: J. Xxxxxx Xxxxxx
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(b) If to Seller, to:
Xxxx Xxxx
Xxxx Transport Co.
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxx Xxxxxxxxxx P.L.C.
000 X. Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Facsimile No: (000) 000-0000
Attn: Xxxxx X. Xxxxxx
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt and (iv) if delivered by overnight courier
to the address as provided for in this Section, be deemed given on the earlier
of the first Business Day following the date sent by such overnight courier or
upon receipt. Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
9.02 Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
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9.03 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII), each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; provided, Seller will pay all
expenses relating hereto and thereto of the Acquired Companies incurred in
respect of the period prior to the Closing.
9.04 Confidentiality. Purchaser and Seller will hold in strict confidence
from any Person (other than its Affiliates or representatives) all documents and
information concerning the other party hereto or any of its Affiliates furnished
to it by or on behalf of the other party in connection with this Agreement or
the transactions contemplated hereby, except to the extent the disclosing party
can demonstrate that such documents or information was (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential. Such covenant of confidentiality will
remain in effect unless a party is compelled to disclose by judicial or
administrative process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law.
9.05 Set-Off. If from time to time and at any time any party shall be
entitled (as either agreed upon by the parties or finally adjudicated in a court
of competent jurisdiction) to be paid any amount under the provisions of Section
7.01(a), such party shall be entitled, if it so elects, to set off such amount
against any amounts owing to the other party.
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9.06 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, Seller shall execute and deliver to Purchaser
such other documents and instruments, provide such materials and information and
take such other actions as Purchaser may reasonably request to consummate the
transactions contemplated by this Agreement and otherwise to cause Seller to
fulfill each of his obligations under this Agreement.
9.07 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.08 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of the parties
hereto.
9.09 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VII.
9.10 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either of the parties without the prior written consent of the
other party and any attempt to do so will be void, except that Purchaser may
assign any or all of its rights, interests and obligations under this Agreement
to any
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of its Affiliates, provided, however, that any such assignment by Purchaser
shall not relieve Purchaser of its obligations under this Agreement. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
9.11 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.12 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.13 Limited Recourse. Regardless of anything in this Agreement to the
contrary, (i) obligations and liabilities of Purchaser hereunder shall be
without recourse to any stockholder of Purchaser or any of such stockholder's
Affiliates, directors, employees, officers or agents and shall be limited to the
assets of such party and (ii) the stockholders of Purchaser have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement or any other
operative agreement.
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9.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
ARTICLE X
REMEDIES, JURISDICTION
AND SERVICE OF PROCESS
The provisions of this Article X shall be the sole and exclusive remedy
for any default under or breach by any party of any term or provision of this
Agreement, and no claim may be brought under this Agreement except in accordance
with and pursuant to these terms.
10.01 Mediation. In the event there is a dispute under this Agreement, the
disagreeing parties shall meet with one another and diligently attempt to
resolve their disagreements. If they are unable to do so, then upon request of
either party to the dispute made within twenty (20) days of the failure of
negotiations, they will mediate the dispute, utilizing an impartial mediator
pursuant to the rules of the American Arbitration Association ("AAA") or any
other reputable organization that sponsors mediation. If, after thirty (30) days
the mediation is not successful, or if no mediation has been elected, then any
party to the dispute may file a legal action to resolve the dispute as
contemplated by Section 10.02 below.
10.02 Jurisdiction and Governing Law, etc. If a dispute is not resolved
pursuant to Section 10.01, then the state or federal courts located within the
Counties of Bay or Salt Lake, States of Michigan or Utah, shall have
jurisdiction to resolve such dispute, depending on whether Purchaser or Seller,
respectively, institutes the proceeding, and each party irrevocably agrees that
all actions
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or proceedings relating to this Agreement may be litigated in such courts. Each
party hereto accepts for itself and himself and in connection with its and his
respective properties, generally and unconditionally, the jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Each party further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by the
delivery of copies thereof in the manner provided in this Agreement for giving
notices, such service to become effective twenty (20) days after such delivery.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the state in which the matter is litigated, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any other jurisdiction. Nothing herein
shall in any way be deemed to limit the ability of any party hereto to serve any
such legal process, summons, notices and documents in any other manner permitted
by applicable law.
PURCHASER:
JTM INDUSTRIES, INC.
By:_________________________________
Name:
Title:
SELLER:
By:_________________________________
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Xxxx Xxxx
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