MERGER AGREEMENT
DATED AS OF FEBRUARY 20, 1997
AMONG
CSN, INC.,
LONE STAR GROWERS, L.P.,
THE PARTNERS OF
LONE STAR GROWERS CO.
AND
LONE STAR GROWERS CO.
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TABLE OF CONTENTS
Page
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SECTION 1. DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 FILING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 EFFECTIVENESS OF THE MERGER . . . . . . . . . . . . . . . . . . . . . 4
2.4 CERTIFICATES, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 EFFECTS OF MERGER.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 PAYOFF OF DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS. . . . . . . . . . . . . 5
3.1 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 NO VIOLATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 OWNERSHIP OF INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 INTERIM CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.8 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.12 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . 9
3.14 LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.15 ENVIRONMENTAL AND SAFETY MATTERS . . . . . . . . . . . . . . . . . . 9
3.16 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.17 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . .11
3.18 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.19 AFFILIATE INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . .12
3.20 INVESTMENT INTENT. . . . . . . . . . . . . . . . . . . . . . . . . .12
3.21 WATER RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.22 FEES, COMMISSIONS AND EXPENSES . . . . . . . . . . . . . . . . . . .13
3.23 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT . . . . . . . .13
4.1 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . .13
4.3 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
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4.4 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . .14
4.5 NO VIOLATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.6 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.7 INVESTMENT INTENT . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.8 FEES, COMMISSIONS AND EXPENSES. . . . . . . . . . . . . . . . . . . .14
SECTION 5. COVENANTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . .14
5.1 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . .14
5.2 ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .15
5.3 EFFORTS TO CONSUMMATE TRANSACTION . . . . . . . . . . . . . . . . . .16
5.4 NO SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . . . . .16
5.5 AMENDMENT OF DISCLOSURE SCHEDULES . . . . . . . . . . . . . . . . . .16
5.6 CHANGE OF NAME; LONE STAR DE MEXICO S.A. DE C.V.. . . . . . . . . . .16
5.7 COOPERATION ON TAX MATTERS. . . . . . . . . . . . . . . . . . . . . .16
5.8 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.9 RELEASE OF LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . .17
5.10 NONCOMPETE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.11 TRANSFER OF VEHICLES; DISTRIBUTIONS OF RIGHTS TO ADVANCEMENTS. . . .17
5.12 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . .17
5.13 WARN ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.14 TERMINATION OF INSURANCE . . . . . . . . . . . . . . . . . . . . . .18
5.15 NOTICE TO EMPLOYEES, CUSTOMERS, ETC. . . . . . . . . . . . . . . . .18
5.16 RIGHT OF ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 6. CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . .18
6.1 OBLIGATION OF BUYER TO CLOSE. . . . . . . . . . . . . . . . . . . . .18
6.2 OBLIGATION OF SELLERS TO CLOSE. . . . . . . . . . . . . . . . . . . .19
SECTION 7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . .20
7.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . .20
7.2 LIMITATIONS OF INDEMNITY. . . . . . . . . . . . . . . . . . . . . . .20
7.3 PROCEDURE FOR INDEMNIFICATION CLAIMS. . . . . . . . . . . . . . . . .21
7.4 OUTSTANDING LITIGATION. . . . . . . . . . . . . . . . . . . . . . . .21
7.5 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . .22
7.6 EXCLUSIVE REMEDY. . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . .22
8.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
8.2 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
8.3 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .22
8.4 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
8.5 WAIVERS AND AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . .23
8.6 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.7 GOVERNING LAW; SEVERABILITY . . . . . . . . . . . . . . . . . . . . .23
8.8 DISPUTE RESOLUTION; ENFORCEMENT OF VENUE; SERVICE OF PROCESS. . . . .24
8.9 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
8.10 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
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SCHEDULES
Schedule 3.1 -- Ownership Interests
Schedule 3.3 -- Consents and Approvals
Schedule 3.4 -- Violations
Schedule 3.5 -- Ownership of Company Interests
Schedule 3.6 -- Historical Financials
Schedule 3.7 -- Interim Changes
Schedule 3.8 -- Real Property
Schedule 3.9 -- Personal Property
Schedule 3.10 -- Intellectual Property
Schedule 3.11 -- Contracts
Schedule 3.12 -- Litigation
Schedule 3.13 -- Governmental Permits
Schedule 3.14 -- Labor Matters
Schedule 3.15 -- Environmental Matters
Schedule 3.16 -- Tax Matters
Schedule 3.17 -- Employee Benefit Matters
Schedule 3.18 -- Insurance
Schedule 3.19 -- Affiliate Interests
Schedule 3.21 -- Water Rights
Schedule 6.2(e) -- Option Recipients
Schedule 7.5 -- Environmental Indemnity
EXHIBITS
Exhibit A -- Form of Employment Agreement
Exhibit B -- Form of Plan of Merger
Exhibit C -- Certificate of Merger
Exhibit D -- Form of Notice to Creditors
Exhibit E -- Form of Opinion
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MERGER AGREEMENT
MERGER AGREEMENT dated as of February 20, 1997 among LONE STAR
GROWERS, L.P., a Delaware limited partnership ("BUYER"), CSN, INC., a Delaware
corporation ("Parent"), LONE STAR GROWERS CO., a Texas general partnership (the
"Company"), XXXXXX X. XXXXXXXXX ("Xxxxxxxxx") and TETCO, INC., a Texas
corporation ("Tetco") (Tetco and Xxxxxxxxx individually, a "SELLER" and,
collectively, the "SELLERS").
Sellers own 100% of the outstanding partnership interests of the
Company, which is engaged in the production and wholesale, sale and distribution
of bedding plant, ground cover, ornamental and other live garden products in the
State of Texas (the "BUSINESS"). Sellers desire to cause the Company to merge
with Buyer, and Buyer desires to merge with the Company, on the terms and
conditions set forth herein.
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
when used with respect to any specified person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AGREEMENT" means this Agreement and includes all of the schedules and
exhibits annexed hereto.
"BUSINESS" has the meaning set forth in the introduction to this
Agreement.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
statutory holiday in the State of Texas.
"CLOSING" means the closing of the purchase and sale of the Company
Interests contemplated by this Agreement.
"CLOSING DATE" means the date hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY INTERESTS" means all of the outstanding partnership interests
of the Company.
"COMPETING TRANSACTION" means any business combination or
recapitalization involving the Company or any acquisition or purchase of all or
a significant portion of the assets of, or any material equity interest in, the
Company or any other similar transaction with respect to the Company involving
any person or entity other than Buyer or its Affiliates.
"CONTRACT" means any contract, lease, license, purchase order, sales
order or other agreement or binding commitment, whether or not in written form.
"COMPANY" has the meaning set forth in the introduction to this
Agreement.
"EMPLOYEE PLANS" means all employee benefit plans (as defined in
Section 3(3) of ERISA) to which the Company is a party or is bound, with respect
to which payments or contributions are required to be made by the Company, or in
respect of which the Company may otherwise have any liability.
"EMPLOYMENT AGREEMENT" means agreement between the Company and Xxxxxx
Xxxxxxxxx in substantially the form of Exhibit A hereto.
"ENCUMBRANCE" means any lien, charge, claim, security interest or
other encumbrance of any kind.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal, state and
municipal statutes, regulations, common law and similar provisions having force
or effect of law, all orders, permits, licenses and approvals with respect to
environmental, public health and safety, occupational health and safety, product
liability and transportation including without limitation all such standards of
conduct or bases of obligations relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labelling, testing, processing, discharge, release, control or
cleanup of any contaminant, waste, hazardous materials, substances, chemical
substances or mixtures, pesticides, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FUNDED DEBT" means all long-term indebtedness (including accrued
interest) and long-term capital lease obligations of the Company, including in
each case the current portion thereof as of the date of determination, other
than borrowings under the Line of Credit.
"FURNITURE BUSINESS" means the furniture business operated by WR
Dallas Furniture Shops, Inc.
"GAAP" means generally accepted accounting principles in effect in the
United States.
"GOVERNMENTAL PERMIT" means any franchise, consent, license, marketing
right, permit, authorization, approval or other operating authority issued by
any governmental or regulatory body.
"HISTORICAL FINANCIALS" means the audited balance sheets and unaudited
statements of income of the Company as of and for the fiscal year ended June 30,
1996 (including the footnotes thereto) and the unaudited balance sheet and
statements of income for the fiscal quarter ended September 30, 1996 attached
hereto as Schedule 3.6.
"HSR ACT" has the meaning set forth in Section 3.3.
"INDEMNIFIED PARTY" means a party entitled to indemnification pursuant
to Section 7.
"INDEMNIFYING PARTY" means a party liable for indemnification pursuant
to Section 7.
"LATEST BALANCE SHEET" means the unaudited balance sheet of the
Company as of
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September 30, 1996 included in the Historical Financials.
"LINE OF CREDIT" means the $5 million line of credit under the Amended
and Restated Loan Agreement dated as of October 29, 1996 between the Company and
The Frost National Bank.
"LOSSES" means any and all out-of-pocket damages, costs, liabilities,
losses (including consequential losses), judgments, penalties, fines, expenses
or other costs, including reasonable attorney's fees, incurred by an Indemnified
Party.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on either
(i) the assets, operations, financial condition or prospects of the Business, or
(ii) Sellers' or Buyer's (as applicable) ability to consummate the transactions
contemplated hereby.
"MERGER" has the meaning set forth in Section 2.1.
"MEXICAN OPERATIONS" means the nursery and turf grass farms in Mexico
producing nursery stock and turf for import into the United States operated by
or through Lone Star de Mexico S.A. de C.V. and Pastes y Xxxxxxxx Xxxxxxxx de
Mexico, S.A. de C.V. which are corporations organized in Mexico of which LSG
International L.L.C. owns a 50% and 33 1/3% ownership interest, respectively.
"MUSHROOM BUSINESS" means the operation of Organotech, Inc. and
Vitasol, Inc. with respect to the selling of Xxxxx mushroom products.
"PARENT STOCK" means the common stock of Parent, $.01 par value.
"PERMITTED LIENS" means (i) Encumbrances and other exceptions to title
that are disclosed on Schedule 3.8 or Schedule 3.9; (ii) liens for Taxes, fees,
levies, duties or other governmental charges of any kind which are not yet
delinquent or are being contested in good faith by appropriate proceedings which
suspend the collection thereof and for which appropriate reserves have been
established in accordance with GAAP; (iii) liens for mechanics, material,
laborers, employees, suppliers or similar liens arising by operation of law for
sums which are not yet delinquent or which are being contested in good faith by
appropriate proceedings or with respect to which arrangements for payment and/or
release have been made and for which appropriate reserves have been established
in accordance with GAAP; and (iv) with respect to real property, easements,
servitudes, leases, reservations or rights vested in public authorities or
public or private utility companies for rights-of-way, streets, roads, bridges,
pipes, pipelines, railroads, electric transmission and distribution lines,
telegraph and telephone lines, sewage and drainage rights and other similar
purposes, provided that such Encumbrances do not in the aggregate materially
affect the marketability of title to the property subject thereto for the
purposes for which it is currently held and do not in the aggregate materially
interfere with the conduct of the Business.
"PERSON" means any individual, partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization or
governmental entity (or any department, agency or political subdivision
thereof).
"PROPRIETARY RIGHTS" means all patents, trademarks, service marks,
copyrights, trade names and all registrations and applications and renewals for
any of the foregoing and all goodwill associated therewith.
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"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of
December 31, 1996 among Parent and the stockholders signatory thereto.
"TAX" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (pursuant to Section 59A of the Code or
otherwise), custom duties, capital stock, franchise, employee's income
withholding, foreign withholding, social security (or its equivalent),
unemployment, disability, real property, personal property, sales, use,
transfer, value added, registration, alternative or add-on minimum, estimated or
other tax, including any interest, penalties or additions to tax in respect of
the foregoing, whether disputed or not, and any obligation to indemnify, assume
or succeed to the liability of any other person in respect of the foregoing, and
the term "TAX LIABILITY" shall mean any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated, and whether
due or to become due) with respect to Taxes.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" means a claim or demand made by any person,
corporation, governmental authority or other third party against an Indemnified
Party.
SECTION 2. MERGER
2.1 GENERAL. Upon the terms and conditions contained herein and in
accordance with the Delaware Revised Uniform Limited Partnership Act (the
"DRULPA") and the Texas Revised Partnership Act ("TRPA"), on the date hereof,
the Company shall be merged with and into Buyer (the "Merger") and thereupon the
separate corporate existence of the Company shall cease, and Buyer, as the
surviving entity (the "Surviving Entity"), shall continue to exist under and be
governed by the DRULPA.
2.2 FILING. On the date hereof, the Company and Buyer will (i)
execute the Plan of Merger in the form of Exhibit B hereto and (ii) cause a
certificate of merger in the form of Exhibit C hereto (the "Certificate of
Merger") to be executed and filed pursuant to the applicable provisions of the
DRULPA.
2.3 EFFECTIVENESS OF THE MERGER. The Merger shall become effective
(the "Effective Time") immediately upon the filing and acceptance of the
Certificate of Merger with the Secretary of State of Delaware.
2.4 CERTIFICATES, ETC. . Upon the Effective Time, the certificate of
limited partnership and the partnership agreement of Buyer in effect immediately
prior to the Effective Time shall become the certificate of limited partnership
and the partnership agreement of the Surviving Entity. The general partner of
the Surviving Entity shall be Lone Star, Inc., a Delaware corporation. The
registered office and registered agent of the Surviving Entity shall be The
Corporation Trust Company, Corporation Trust Center, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxx of Xxx Xxxxxx, Xxxxxxxx 00000. The principal office of the
Surviving Entity shall be 0000 Xxxxxx Xxxx, Xxx Xxxxxxx, Xxxxx 00000.
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2.5 EFFECTS OF MERGER. The Merger shall have the effects set forth
in the DRULPA and TRPA. Without limiting the foregoing, on and after the
Effective Time, the Surviving Entity shall possess all the assets and interests
of every description, wherever located, and all rights, privileges, immunities,
powers, franchises and authority, of a public as well as of a private nature, of
each of the Company and Buyer, all of which shall be vested in the Surviving
Entity without further act or deed and without any transfer or assignment having
occurred. The Surviving Entity shall be liable for all the obligations of the
Company and Buyer, and any claims existing, or action or proceeding pending, by
or against the Company or the Buyer may be prosecuted to judgment, with right of
appeal, as if the Merger had not taken place, or the Surviving Entity may be
substituted in its place, and all the rights of creditors of each of the Company
and Buyer shall be preserved unimpaired.
2.6 CONSIDERATION. At the Closing, Buyer shall deliver to Sellers
aggregate Merger consideration as follows: (a) 404,010 shares of Parent Stock
issued in the name of Xxxxxx Xxxxxxxxx and (b) cash in the amount of
$36,000,000, less sum of (i) the aggregate amount of Funded Debt as of the
Closing Date and (ii) the amount of all advances (less any writedowns or
reserves with respect thereto) by the Company outstanding as of the Closing with
respect to the Furniture Business, the Mexican Operations and the Mushroom
Business, payable by wire transfer of immediately available funds. All payments
of cash pursuant to this Section 2.2 shall be made to Sellers on a pro rata
basis in accordance with their respective ownership percentages of the Company
Interests; provided, however, that Buyer shall be entitled to withhold from such
payments to a Seller, any amounts owed to the Company by such Sellers or its
Affiliates on the Closing Date.
2.7 CLOSING. The Closing shall take place on the Closing Date at the
offices of Xxx & Xxxxx Incorporated, 000 Xxxx Xxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxx, at 10:00 A.M. local time, or at such other place or at such other time as
Buyer and Sellers shall agree.
2.8 PAYOFF OF DEBT. Simultaneously with the Closing, Buyer agrees to
payoff the Funded Debt and Line of Credit.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer as
follows:
3.1 ORGANIZATION. The Company is a general partnership duly
organized and existing in good standing under the laws of the State of Texas
with full corporate power and authority to own its properties and to carry on
the Business. The Company is qualified to do business in all jurisdictions
where failure to so qualify would, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth on Schedule 3.1, the Company has
no subsidiaries and has no equity or other ownership interest in any other
entity or business enterprise.
3.2 POWER AND AUTHORITY. Each of Sellers and the Company have all
requisite power and authority to enter into this Agreement and to assume and
perform fully their obligations hereunder. This Agreement is a valid and
binding obligation of each Seller and the Company enforceable against such
Seller and the Company in accordance with its terms.
3.3 CONSENTS AND APPROVALS. Except as set forth on Schedule 3.3, and
with respect to filing under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
0000 (xxx "XXX Xxx"), no filings with, notices to, or approvals of any
governmental or regulatory body are required to be obtained or made by Sellers
or the Company in connection with the consummation of the transactions
contemplated hereby.
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3.4 NO VIOLATIONS. The execution and delivery of this Agreement and
the performance by Sellers of their obligations hereunder (i) do not and will
not conflict with or violate any provision of the certificate of general
partnership or the partnership agreement (or similar organizational documents)
of the Company or either Seller and (ii) except as set forth on Schedule 3.4 or
except for such of the following as, individually or in the aggregate, would not
have a Material Adverse Effect, do not and will not (a) conflict with or result
in a breach of the terms, conditions or provisions of, (b) constitute a default
under, (c) result in the creation of any Encumbrance upon the capital stock or
assets of the Company pursuant to, (d) give any third party the right to modify,
terminate or accelerate any obligation under, (e) result in a violation of, or
(f) require any authorization, consent, approval, exemption or other action by
or notice to any court or administrative or governmental body or other third
party pursuant to, any law, statute, rule or regulation or any agreement,
instrument, order, judgment or decree to which the Company is subject or by
which any of its assets are bound.
3.5 OWNERSHIP OF INTERESTS. The Company Interests consist of a 100%
general partnership interest in the Company, 60% of which is owned (beneficially
and of record) by Tetco and 40% of which is owned (beneficially and of record)
by Xxxxxxxxx in each case free and clear of all Encumbrances. Other than the
Company Interests, the Company has no outstanding interests and there are no
outstanding options, warrants or similar rights to acquire, or any securities
convertible into or exchangeable for, any interests of the Company. As a result
of the Merger, Buyer will own the entire ownership interest in the Company.
3.6 FINANCIAL STATEMENTS. The Historical Financials have been
prepared in accordance with GAAP consistently applied and fairly present the
financial position of the Company as of the dates specified and the results of
operations in all material respects of the Company for the periods covered
thereby, and the Company has no liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) that are not either (i) reflected
or fully reserved against on the Latest Balance Sheet or incurred in the
ordinary course of the Business subsequent to the date of the Latest Balance
Sheet or (ii) set forth on the disclosure schedules hereto.
3.7 INTERIM CHANGES. Except as set forth on Schedule 3.7 or
otherwise expressly contemplated herein, since the date of the Latest Balance
Sheet there have not been:
(a) any changes in the financial condition, assets,
liabilities, personnel or operations of the Business or in the Company's
relationships with suppliers, distributors, or others with whom it has business
dealings, other than changes which individually or in the aggregate do not have
a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Company or the Business;
(c) any increase in the compensation or benefits paid or to
become payable to any officers of the Company or any increase in the
compensation or benefits payable to non-officer employees of the Company or the
Subsidiary other than in the ordinary course of business;
(d) any transfer, lease, license or other disposition of
assets of the Company other than sales of inventory in the ordinary course of
business;
- 6 -
(e) any incurrence of indebtedness for borrowed money or any
Encumbrances placed on any of the assets of the Company;
(f) any new contract (or amendment to any existing contract)
obligating the Company to purchase goods or services for a period of 90 days or
more, any amendment or termination of any material lease, contract, license or
other agreement relating to the Business or any waiver of material claims or
rights of the Company against third parties;
(g) any material change in the collection, payment or credit
experience or practices of the Business or in the accounting practices,
procedures or methods of the Company;
(h) any material agreement, arrangement or transaction between
the Company and Sellers or any Affiliate of Sellers;
(i) any other transaction not in the ordinary course of
business and consistent with past practices of the Business that, individually
or in the aggregate, could have a Material Adverse Effect; or
(j) any commitment with respect to any of the foregoing.
3.8 REAL PROPERTY.
(a) Schedule 3.8 sets forth a complete and correct list of (i)
all real properties or premises that are owned in whole or in part by the
Company, and (ii) all real properties or premises that are leased in whole or in
part by the Company. The properties listed on Schedule 3.8 constitute all the
real properties utilized in connection with the Business. As to each leased
property, Schedule 3.8 sets forth the (i) lease term, (ii) annual rent and (iii)
renewal option, if any. Complete and correct copies of all mortgages, deeds of
trust, leases, guarantees of lease and other documents concerning such real
property have been made available to Buyer.
(b) The Company possesses good and indefeasible title in fee
simple (except with respect to leased real property) to all real property
reflected as owned in fee simple on Schedule 3.8, free and clear of all
Encumbrances other than Permitted Liens and those matters reflected on Schedule
3.8. Each lease of premises utilized by the Company in connection with the
Business is legal, valid and binding in all material respects, as between the
Company and the other party or parties thereto, and the Company is a tenant or
possessor in good standing thereunder, free of any material default or breach on
the part of the Company and to the knowledge of Sellers free of any material
default or breach on the part of the lessors thereunder, and quietly enjoys the
premises provided for therein.
(c) Except as set forth on Schedule 3.8 (i) the Company has
all required legal or governmental approvals necessary to use in the manner
currently used, for each of the properties and premises owned, leased, used or
occupied by it, other than any such approvals the absence of which, individually
or in the aggregate, would not have a Material Adverse Effect; (ii) the Company
has good and indefeasible title and owns outright, free and clear (except for
rights of landlords with respect to fixtures and leasehold improvements, if any,
with respect to leased premises) of all Encumbrances (other than Permitted Liens
and those matters reflected on Schedule 3.8), each improvement, fixture or
material item of equipment purported to be owned by it that is located in or on
any of the properties and premises owned, leased or occupied by it and used in
connection with the Business; (iii) no improvement, fixture or equipment on any
such premises is in violation of any law,
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including without limitation any zoning, building, safety, health or other law
which, individually or in the aggregate, would have a Material Adverse Effect;
(iv) each of such premises and properties is zoned for the purposes for which
such premises or properties are currently being used and, except as set forth on
Schedule 3.8, has access to and from public road; and (v) no material portion of
such premises or properties has been condemned or otherwise taken by any public
authority, and, to Seller's knowledge, no such condemnation or taking is
threatened or contemplated by any public authority.
3.9 PERSONAL PROPERTY. Except as set forth on Schedule 3.9, the
Company has good and marketable title to its assets (other than real property,
which is covered in Section 3.8) free and clear of all Encumbrances other than
Permitted Liens. The Company's machinery, equipment and other tangible assets
have been maintained in good working condition (normal wear and tear excepted)
and are sufficient for the conduct of the Business as presently conducted. The
Company's accounts receivable represent bona fide obligations arising in the
ordinary course of the Business and are fully collectible by the Company, net of
reserves for doubtful accounts reflected on the Latest Balance Sheet. Except as
set forth on Schedule 3.9, the Company's inventory is of marketable quality, is
not obsolete, damaged or slow-moving, and has been prepared in compliance in all
material respects with all applicable legal requirements. The assets reflected
on the Latest Balance Sheet constitute all of the assets, properties and other
rights used in the conduct of the Business except for those assets acquired or
disposed of in the ordinary course of business subsequent to the date of the
Latest Balance Sheet and as contemplated by Section 5.11.
3.10 INTELLECTUAL PROPERTY. Schedule 3.10 sets forth a complete and
correct list of all material Proprietary Rights owned or used by the Company in
connection with the Business. Except as set forth on Schedule 3.10, (a) the
Company owns and possesses all right, title and interest in and to, or has a
written and enforceable license to use, all of the Proprietary Rights set forth
on Schedule 3.10, free and clear of all Encumbrances (other than Permitted
Liens); (b) the Company has received no notice of any claim by any third party
contesting the validity, enforceability, use or ownership of any Proprietary
Rights used in connection with the Business nor to Sellers' best knowledge is
any such claim threatened; (c) the Company has not infringed, misappropriated or
otherwise conflicted in any material respect with any Proprietary Rights of any
third party; (d) all Proprietary Rights set forth on Schedule 3.10 will be owned
by or available for use by the Company on identical terms and conditions
immediately subsequent to Closing; and (e) the Company has made the necessary
filings and recordations and have paid all required fees to record and maintain
its ownership of all registered Proprietary Rights.
3.11 CONTRACTS. Schedule 3.11 sets forth a complete and correct list
of all Contracts (other than real property leases) relating to the Business to
which the Company is a party or to which its respective assets are subject
(excluding customary inventory purchase orders in the ordinary course of
business) (i) which involve consideration with a value of $25,000 or more,
(ii) which will require the Company to purchase or provide goods or services for
a period of more than 90 days after the Closing Date, (iii) which evidence or
provide for any indebtedness for borrowed money for which the Company will be
liable following the Closing or any Encumbrance on any of its assets, (iv) which
guarantee the performance, liabilities or obligations of any other entity,
(v) which restrict in any material respect the ability of the Company to conduct
any business activities, (vi) which involve any related party, including Sellers
or any Affiliate of Sellers, (vii) which are not in the ordinary course of
business, (viii) which are subject to termination or modification by any third
party as a result of the transactions contemplated by this Agreement, or
(ix) which are otherwise material to the Business. The Company is not in
material breach of any of agreement set forth on Schedule 3.11, nor to Sellers'
best knowledge is any third party in material breach of any such agreement.
True and complete copies of all agreements set forth on Schedule 3.11 have
previously been delivered to Buyer.
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3.12 LITIGATION. Except as set forth on Schedule 3.12, there are no
pending or, to Seller's knowledge, threatened claims, actions, suits or
proceedings against the Company which, if adversely determined, individually or
in the aggregate, would have a Material Adverse Effect. Neither the Company nor
any Seller is presently subject to any injunction, order or other decree of any
court of competent jurisdiction.
3.13 COMPLIANCE WITH LAWS. The Business has been conducted in
compliance with all applicable laws and regulations of governmental authorities,
except for such violations that have been cured or that, individually or in the
aggregate, may not reasonably be expected to have a Material Adverse Effect.
The Company possesses, and is in compliance in all material respects with, all
Governmental Permits necessary to the conduct of the Business, except as set
forth in Schedule 3.13, and such Governmental Permits will be in full force and
effect for the benefit of the Company following immediately the Closing Date.
3.14 LABOR MATTERS. Except as set forth on Schedule 3.14, the Company
is not a party to any collective bargaining agreement or any employment,
consulting or similar agreement or any agreement, plan or arrangement providing
for severance payments to any employee upon termination of employment or which
provide benefits upon a change in control. Except as set forth on Schedule 3.14,
there is no labor strike, work stoppage, unfair labor practice charge, grievance
or other labor dispute pending or, to Sellers' best knowledge, threatened
against or with respect to the Company. Except as set forth on Schedule 3.14,
there is no existing representation question respecting any employees of the
Company, nor to Sellers' best knowledge are there any organizational efforts
with respect to any employees of the Company. The Company has complied in all
respects with immigration and naturalization laws in connection with the
employment of its work force.
3.15 ENVIRONMENTAL AND SAFETY MATTERS.
(a) Except as set forth on Schedule 3.15 and except for such
of the following as, individually or in the aggregate, do not and will not have
a Material Adverse Effect:
(i) The Company is and has been in compliance at all
times with all applicable Environmental and Safety Requirements, and the
Company has received no notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), or any corrective, investigatory or remedial obligations,
arising under Environmental and Safety Requirements with respect to the
past or present operations or properties of the Business.
(ii) The Company has obtained, and is and has been in
compliance at all times with all terms and conditions of, all permits,
licenses and other authorizations required pursuant to Environmental and
Safety Requirements for the occupation of the properties of the Business
and the conduct of its operations.
(iii) To Seller's knowledge, none of the following
exists at any property owned or occupied by the Company: asbestos-
containing material in any form or condition; polychlorinated biphenyl-
containing materials or equipment; or underground storage tanks.
- 9 -
(iv) The transactions contemplated by this Agreement
do not impose any obligations under Environmental and Safety
Requirements for site investigation or cleanup or notification to or
consent of any government agencies or third parties.
(v) No facts, events or conditions relating to the
past or present properties or operations of the Business or, to Sellers'
knowledge, properties contiguous thereto will (x) prevent, hinder or limit
continued compliance, to Seller's knowledge, by the Company with
Environmental and Safety Requirements, (y) give rise to any corrective,
investigatory or remedial obligations on the part of the Company pursuant
to Environmental and Safety Requirements, or (z) give rise to any
liabilities on the part of the Company (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including without limitation those liabilities relating to on
site or off site hazardous substance releases, personal injury, property
damage or natural resources damage.
(vi) The Company has not assumed any liabilities or
obligations of any third party under Environmental and Safety Requirements.
(b) Sellers have delivered or made available to Buyer true,
complete and correct copies of all environmental reports, analyses, tests or
monitoring in the possession of Sellers or the Company pertaining to any
property owned or operated in connection with the Business and a true, complete
and correct list identifying all third party facilities at which contaminants
generated in connection with the Business (whether by the Company or any prior
owner or occupant) have been transported, treated, stored, handled or disposed
within the past five years.
3.16 TAX MATTERS.
(i) Except as set forth in Schedule 3.16, the Company
or Sellers with respect to the Company have timely filed all Tax Returns
required to be filed through the date hereof, and all such Tax Returns are true
and complete in all material respects. The Company or Sellers with respect to
the Company have timely paid all Taxes that are due, or claimed or asserted by
any taxing authority to be due, from or with respect to the Company for all
periods prior to the date hereof, whether or not shown on any Tax Return. With
respect to any period for which Tax Returns have not yet been filed, or for
which Taxes are not yet due or owing, the Company has no liability for Taxes
other than that set forth on the Latest Balance Sheet or incurred subsequent to
the date of the Latest Balance Sheet in the ordinary course of business. The
Company has made all required current estimated Tax payments sufficient to avoid
any underpayment penalties.
(ii) Except as set forth in Schedule 3.16, no Tax
Return of the Company or Sellers with respect to the Company have been audited
or examined by the Internal Revenue Service or any other taxing authority.
There are no outstanding agreements, waivers or arrangements extending the time
within which the Company may file any Tax Return or the statutory period of
limitation applicable to any claim for, or the period for the collection or
assessment of, any Taxes due from or with respect to the Company for any taxable
period. Sellers have previously delivered to Buyer true and complete copies of
all federal, state, local or foreign income or franchise Tax Returns filed by
the Company. No closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local, or foreign
law has been entered into by or with respect to the Company for any Tax period.
(iii) Except as set forth on Schedule 3.16, no audit or
other proceeding by any court or other governmental or regulatory authority is
pending or, to the best
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knowledge of Sellers, threatened with respect to any Taxes due from or with
respect to the Company or any Tax Return filed by or with respect to the
Company, and there is no pending dispute or claim concerning any Tax Liability
of the Company.
(iv) The Company has not made and is not obligated to
make any payment, nor is the Company bound by any contract or other agreement,
plan or arrangement covering any Person that, individually or collectively,
could give rise to any payment, that would not be deductible under Section 280G
or 162(m) of the Code.
(v) Schedule 3.16 contains a list of all jurisdictions
(whether foreign or domestic) in which the Company presently files Tax Returns.
No claim has ever been made by an authority in a jurisdiction where the Company
or Sellers with respect to the Company do not file Tax Returns that it is or
they are or may be subject to taxation by that jurisdiction.
3.17 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.17 contains an accurate and complete list of
all Employee Plans and all stock option, bonus or other incentive plans,
vacation policies, and other material employee benefit arrangements of the
Company, copies of which have been delivered to Buyer.
(b) Except as set forth on Schedule 3.17 and except for
contributions not yet due and payable, the Company has no liability or potential
liability (including, but not limited to, actual or potential withdrawal
liability) with respect to (x) any multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA, or (y) any Employee Plan of the type described in
Section 4063 and 4064 of ERISA or in Section 413(c) of the Code (and regulations
promulgated thereunder).
(c) No Employee Plan provides any health, life or other
welfare benefits to retired or former employees of the Company, other than as
required by Section 4980B of the Code. No Employee Plan is a defined benefit
plan (as defined in Section 3(35) of ERISA), and the Company has no actual or
potential liability with respect to any defined benefit plan. With respect to
each of the Employee Plans, all contributions attributable to plan years ending
on or prior to the Closing Date and all employer and salary reduction employee
contributions for all months ending on or prior to the Closing Date have been
made.
(d) Each Employee Plan and all related trusts, insurance
contracts and funds (as applicable) have been maintained, funded and
administered in compliance in all material respects with all applicable laws and
regulations, including but not limited to ERISA and the Code. Neither the
Company or any Affiliate of the Company nor, to Sellers' best knowledge, any
trustee or administrator of any Employee Plan or any other person, has engaged
in any transaction with respect to any Employee Plan which could reasonably be
expected to subject the Company or any trustee or administrator of such Employee
Plan to any material liability, tax or penalty (civil or otherwise) imposed by
ERISA or the Code. No actions, suits, investigations or claims with respect to
the Employee Plans or with respect to any fiduciary or other person dealing with
any Employee Plan are pending or to Sellers' best knowledge threatened, and
Sellers have no knowledge of any facts which could reasonably be expected to
give rise to any such actions, suits, investigations or claims. The Company has
complied in all material respects with the requirements of Section 4980B of the
Code.
- 11 -
(e) No Employee Plan has been terminated within the last three
calendar years. No Employee Plan has incurred any accumulated funding
deficiency, whether or not waived, and none of the assets of the Company are
subject to any lien arising under 302(f) of ERISA or 412(n) of the Code.
(f) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code, and each trust forming a part thereof, has received
a favorable determination letter from the Internal Revenue Service as to the
qualification under the Code of such Employee Plan and the tax exempt status of
such related trust, and nothing has occurred since the date of such
determination letter that could reasonably be expected to adversely affect the
qualification of such Employee Plan or the tax exempt status of such related
trust.
(g) With respect to each Employee Plan, the Company has
provided Buyer with true, complete and correct copies, to the extent applicable,
of (i) all documents (including summary plan descriptions and other material
employee communications) pursuant to which such Employee Plan is maintained,
funded and administered, (ii) the most recent annual report (Form 5500 series)
filed with the Internal Revenue Service (with attachments), (iii) the most
recent financial statements, and (iv) all governmental rulings, determinations
and opinions (and pending requests for governmental rulings, determinations and
opinions) and correspondence with respect thereto.
3.18 INSURANCE. Schedule 3.18 contains a complete listing of all
policies of insurance carried by the Company, including the type and amount of
coverage, deductible levels and expiration dates. All premiums due with respect
to such policies have been paid and such policies are in full force and effect
and will remain in full force and effect until the Closing Date.
3.19 AFFILIATE INTERESTS. Except as disclosed in Schedule 3.19, the
Company is not a party to any transaction with (a) any Seller, (b) any employee,
officer or director of the Company, (c) any relative of any Seller or of any
such employee, officer or director, or (d) any entity, corporation or
partnership that, directly or indirectly, is controlled by or under common
control with any Seller or with any such employee, officer, director or
relative, including without limitation any contract, agreement or other
arrangement (i) providing for the furnishing of services by such person, (ii)
providing for the rental of real or personal property from or to such person,
(iii) providing for the guaranty of any obligation of such person, (iv)
requiring any payment to such person which will continue beyond the Closing
Date, or (v) establishing any right or interest of such person in any of the
assets or rights of the Company.
3.20 INVESTMENT INTENT. Sellers are acquiring the Parent Stock solely
for purposes of investment and not with a view to any distribution thereof in
violation of applicable securities laws.
3.21 WATER RIGHTS. The water rights set forth in SCHEDULE 3.21 (the
"Water Rights") represent all water rights, well permits, applications and water
diversion, storage, and conveyance facilities held by Sellers or the Company and
used in connection with the conduct of the Business. Except as set forth on
Schedule 3.21:
(i) The Water Rights are sufficient to produce a legal and physical supply
of water which is adequate for the conduct of the Business under existing
hydrologic conditions.
(ii) The Sellers have good and valid title to the Water Rights and no party
has asserted a claim of title to them.
- 12 -
(iii) No express written consent to the use, diversion or adjudication of
the Water Rights has been granted to any third party by the Sellers or their
predecessors.
(iv) Based on the laws of the State of Texas in effect on the date
hereof, the Water Rights are represented by validly entered permits (to the
extent such permits are available), based on timely applications, and any
filings required to be made to preserve, restore or continue the validity of the
Water Rights have been made.
Notwithstanding any of the foregoing, in no event shall the Sellers be
deemed to have made any representation or warranty herein with respect to any
actions taken from or after the date hereof by any governmental agency or
federal or state court having or asserting jurisdiction over the withdrawal of
water from the Xxxxxxx Aquifer.
3.22 FEES, COMMISSIONS AND EXPENSES. Neither Sellers nor the Company
has paid or is obligated to pay any brokerage commissions, finders' fees or
similar compensation (including any payments to employees of the Company) in
connection with the transactions contemplated by this Agreement.
3.23 DISCLOSURE. No information supplied by Sellers or the Company in
this Agreement or the Schedules or Exhibits hereto, or in the financial
statements, certificates or other writings furnished by Sellers or the Company
to Buyer or any of its representatives prior to the date hereof, contains any
untrue statement of material fact or omits or shall omit to state any material
fact necessary in order to make the statements herein or therein, in the light
of circumstances under which they were made, not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and Parent, jointly and severally, represent and warrant to
Sellers as follows:
4.1 ORGANIZATION. (a) Buyer is a limited partnership duly organized
and existing in good standing under the laws of the State of Delaware with the
requisite partnership power and authority to own its properties and to carry on
its business. Buyer is a newly-formed entity with no assets or liabilities
other than as contemplated by this Agreement. As of Closing, Buyer will have
applied for qualification to do business in the State of Texas.
(b) Parent is a corporation duly organized and existing in
good standing under the laws of the State of Delaware with the requisite
corporate power and authority to own its properties and to carry on its
business.
4.2 POWER AND AUTHORITY. Each of Buyer and Parent has the requisite
power and authority to enter into this Agreement and to assume and perform fully
its respective obligations hereunder. The execution and delivery of this
Agreement and the performance by each of Buyer and Parent of its respective
obligations hereunder have been duly and validly authorized by all necessary
action on the part of Buyer and Parent. This Agreement is the valid and binding
obligation of Buyer and Parent enforceable in accordance with its respective
terms.
4.3 CAPITALIZATION. The authorized capital stock of Parent consists
of 20,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of which ____ shares are issued and outstanding, and 1,000,000 shares
of preferred stock, par value $.01 per share (the "Preferred Stock"). All of
the issued and outstanding shares of Parent are held of record as of the date
- 13 -
hereof as set forth on Schedule 4.3. None of the authorized shares of Preferred
Stock are issued and outstanding. All of the Parent Stock, when delivered
pursuant to the provisions of this Agreement, will be validly issued, fully paid
and non-assessable, free and clear of all Encumbrances and will not be issued in
violation of any preemptive rights.
4.4 CONSENTS AND APPROVALS. Except with respect for filings under
the HSR Act, no filings with, notices to, or approvals of any governmental or
regulatory body are required to be obtained or made by Buyer or Parent for the
consummation by Buyer or Parent of the transactions contemplated hereby.
4.5 NO VIOLATIONS. The execution, delivery and performance of this
Agreement by Buyer and Parent and the performance by each of Buyer and Parent of
its obligations hereunder (i) do not and will not conflict with or violate any
provision of the organizational documents of Buyer or Parent; and (ii) do not
and will not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in the creation of any
lien, security interest, charge or encumbrance upon its assets pursuant to,
(d) give any third party the right to modify, terminate or accelerate any
obligation under, (e) result in a violation of, or (f) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body or any third party pursuant to, any
law, statute, rule or regulation or any agreement, instrument, order, judgment
or decree to which Buyer and Parent are subject.
4.6 LITIGATION. There are no claims, actions, suits or proceedings
pending against Buyer or, to Buyer's best knowledge, threatened against Buyer,
or an Affiliate of Buyer, before or by any court or governmental agency which,
if adversely determined, individually or in the aggregate, would have a Material
Adverse Effect. Buyer is not presently subject to any injunction, order or
other decree of any court of competent jurisdiction.
4.7 INVESTMENT INTENT. Buyer is acquiring the Company Interests
solely for purposes of investment and not with a view to any distribution
thereof in violation of applicable securities laws.
4.8 FEES, COMMISSIONS AND EXPENSES. No agent, broker, person or firm
acting on behalf of Buyer or Parent, or engaged by Buyer or Parent, is, or will
be, entitled to any brokerage commissions, finders' fees or similar compensation
from Sellers in connection with the transactions contemplated by this Agreement.
SECTION 5. COVENANTS OF THE PARTIES
5.1 CONDUCT OF BUSINESS. From the date hereof to the Closing, except
as expressly contemplated by this Agreement or otherwise consented to by Buyer
in writing, Sellers shall use their reasonable efforts to cause the Company to,
and the Company shall:
(a) conduct the Business only in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and
maintain working capital and levels of Funded Debt and borrowings under the Line
of Credit at current levels subject to normal fluctuation consistent with past
experience;
(b) maintain in all material respects all of the structures,
equipment and other tangible personal property of the Business in its present
condition, except for ordinary wear and tear and damage by unavoidable casualty;
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(c) preserve and maintain all Proprietary Rights used in the
Business substantially in accordance with current business practices;
(d) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried with respect to the
Business;
(e) perform in all material respects all obligations under
leases, agreements, contracts and instruments relating to or affecting the
Business;
(f) maintain the books of account and records of the Business
in the usual, regular and ordinary manner;
(g) comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the conduct of the Business;
(h) not enter any employment agreement or commitment to
employees of the Business or effect any increase in the compensation or benefits
payable or to become payable to any officer, director or employee of the
Business other than increases in non-officer employee compensation effected in
the ordinary course of business;
(i) create or permit to exist any Encumbrance on the assets of
the Company other than non-consensual Permitted Liens arising by operation of
law;
(j) not enter into or modify any agreement for indebtedness or
any contract obligating the Company to purchase goods or services for a period
of 90 days or more, or sell, lease, license or otherwise dispose of any asset of
the Business (other than dispositions of obsolete assets and inventory in the
ordinary course of business) or acquire any substantial assets other than
replacement assets, inventory and supplies to be used in the Business; and
(k) not authorize or enter into any commitment with respect to
any of the matters described in (h), (i) or (j) above.
5.2 ACCESS TO INFORMATION.
(a) BUYER'S INVESTIGATION. Between the date of this Agreement
and the Closing Date, Sellers will (i) give Buyer and its authorized
representatives (including lenders, legal counsel and accountants) reasonable
access to all employees, plants, offices, warehouses and other facilities and
property of the Business and to its books and records, (ii) permit Buyer and its
authorized representatives to make such inspections thereof as Buyer may
reasonably require, and (iii) furnish Buyer and its representatives and advisers
with such financial and operating data and other information with respect to the
business and properties of the Business as Buyer may from time to time
reasonably request; provided, however, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the Business.
(b) CONFIDENTIALITY. If the transactions contemplated by this
Agreement are not consummated (and in any event prior to the Closing Date),
Buyer will maintain the confidentiality of all information and materials
obtained from Sellers and will not use or permit others to use such information
for any other purpose, except to the extent disclosure of any such information
is authorized by Sellers or required by law, and upon termination of this
Agreement Buyer and its representatives
- 15 -
will return to Sellers all materials obtained from Sellers in connection with
the transactions contemplated by this Agreement and all copies thereof. The
provisions of this Section 5.2(b) will not apply to any information, documents
or material which are in the public domain other than by reason of a breach of
this Section 5.2(b).
5.3 EFFORTS TO CONSUMMATE TRANSACTION. The parties shall use their
best efforts to take or cause to be taken all such actions required to
consummate the transactions contemplated hereby including, without limitation,
such actions as may be necessary to obtain, prior to the Closing, all necessary
governmental or other third-party approvals and consents required to be obtained
by Sellers in connection with the consummation of the transactions contemplated
by this Agreement.
5.4 NO SOLICITATION. Unless and until this Agreement shall have been
terminated pursuant to Section 8.1, Sellers shall not, and shall not permit the
Company to directly or indirectly through any officer, director, employee,
agent, affiliate or otherwise, enter into any agreement, agreement in principle
or other commitment (whether or not legally binding) relating to a Competing
Transaction or solicit, initiate or encourage the submission of any proposal or
offer from any person or entity (including any of the Company's officers,
directors, employees and agents) relating to any Competing Transaction, nor
participate in any discussions or negotiations regarding, or furnish to any
other person or entity any information with respect to, or otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person or entity to effect a Competing
Transaction. Sellers and the Company shall immediately cease any and all
contacts, discussions and negotiations with third parties regarding any
Competing Transaction. Sellers shall, and shall cause the Company to notify
Buyer if any proposal regarding a Competing Transaction (or any inquiry or
contact with any person or entity with respect thereto) is made and shall advise
Buyer of the contents thereof (and, if in written form, provide Buyer with
copies thereof).
5.5 AMENDMENT OF DISCLOSURE SCHEDULES. From time to time prior to
the Closing Date, Sellers will supplement or amend the schedules hereto with
respect to any matter known to them which, if existing or occurring at or prior
to the date of this Agreement, would have been required to be set forth or
described in the schedules hereto or which is necessary to correct any
information in such schedules or in any representation or warranty of Sellers
which has been rendered inaccurate thereby. Such supplemented or updated
disclosures shall not be deemed a modification of Sellers' representations and
warranties and shall not affect Buyer's rights under Sections 6 and 7 hereof.
5.6 CHANGE OF NAME; LONE STAR DE MEXICO S.A. DE C.V. Simultaneously
with Closing, Sellers shall change the name of Lone Star Growers, Inc. to a name
which is reasonably acceptable to Buyer and which is not confusingly similar
therewith. Xxxxxxxxx shall not permit Lone Star de Mexico S.A. de C.V. to do
business in the United States under a name using the words "Lone Star" or any
name confusingly similar therewith unless otherwise consented to by Buyer.
5.7 COOPERATION ON TAX MATTERS. Buyer agrees (i) to retain and
provide Sellers with access to all books and records with respect to tax matters
pertinent to the Company relating to any tax period ending on or prior to the
Closing Date, (ii) to give Sellers reasonable written notice prior to destroying
or discarding any such books and records and, if Sellers so request, Buyer shall
allow Sellers to take possession of such books and records and (iii) permit
Sellers to prepare and file the final federal Tax Return of the Company for the
tax period ending on or before the Closing Date; provided that Buyer shall have
the right to review such returns and to the extent applicable, make an election
under Section 754 of the Code.
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5.8 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each party will promptly notify the other in writing if such party becomes
aware of any fact or condition that causes or constitutes a breach of any of
Sellers' or Buyer's representations and warranties as of the date of this
Agreement, or if either party becomes aware of the occurrence after the date of
this agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period, each party will promptly notify the other of the occurrence of any event
or discovery of any fact that may make the satisfaction of the conditions in
Sections 6 and 7 impossible or unlikely.
5.9 RELEASE OF LIABILITIES. Buyer shall use reasonable efforts to
cause Sellers to be released at or prior to Closing from all of the obligations
set forth on Schedule 5.9 hereto.
5.10 NONCOMPETE. During the five year period commencing as of the
Closing Date (the "Noncompete Period"), each of the Sellers agrees to not,
directly or indirectly, own, manage, control, or in any manner engage in the
production, sale or distribution of bedding plant, ground cover, ornamental or
any other live garden products in the State of Texas other than, in the case of
Xxxxxxxxx in his capacity as and employee of the Company after the Closing Date
and in connection with (x) his ownership interests in Xxxxxxxxx Landscaping &
Nurseries but only to the extent such company is engaged in the landscaping and
retail nursery business and (y) the Mexican Operations. It is agreed that
"beneficial ownership" by either of Sellers, either individually or as a member
of a "group," as such terms are used in Rule 13d of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, of not more
than one percent (1%) of the voting stock of any publicly held corporation shall
not, in and of itself, constitute a violation of this Section 5.10. During the
Noncompete Period, neither Seller shall, directly or indirectly, (i) induce or
attempt to induce any employee of the Company or Buyer to leave the employ of
the Company or Buyer, or in any way interfere with the relationship between
Buyer, the Company and any employee thereof, or (ii) induce or attempt to induce
any customer of the Company or Buyer to cease doing business with the Company or
Buyer, in each case other than through general media solicitations not targeted
at any particular person.
5.11 TRANSFER OF VEHICLES; DISTRIBUTIONS OF RIGHTS TO ADVANCEMENTS.
Prior to or at the Closing, the Company shall (i) transfer title of the three
vehicles set forth on Schedule 5.11 to Xxxxxxxxx as a distribution from the
Company, and (ii) distribute to Sellers the right to receive all payments from
Organotech, Inc., Vitasol, Inc. or W.R. Dallas Furniture Shops, Inc. with
respect to advances made by the Company to LSG International, L.L.C.,
Organotech, Inc., Vitasol, Inc. or W.R. Dallas Furniture Shops, Inc. with
respect to the Mexican Operations, the Mushroom Business and the Furniture
Business, in each case in a manner satisfactory to Buyer.
5.12 EMPLOYEE BENEFIT PLANS. (a) Effective as of the Closing, all
employees of the Company shall cease to participate in all employee welfare and
pension benefit plans of Tetco, except as may otherwise be required by law, and
shall, at the employee's election, commence participation in employee welfare
and pension benefit plans of Buyer, or an affiliate of Buyer, provided that with
respect to participation in health and dental insurance plans of Buyer, or an
affiliate of Buyer, such participation shall be commenced on a basis whereby all
waiting period and pre-existing condition requirements shall have been waived or
shall otherwise be inapplicable to such employees (and covered dependents).
Sellers shall take, and shall cause the Company to take, all action necessary or
required so to terminate the participation of the employees of the Company in
any such employee welfare and pension benefit plans of Tetco as of the Closing
Date. Any such health or dental insurance plan maintained by Buyer, or an
affiliate of Buyer, shall only cover (to the extent provided in such plan)
- 17 -
claims relating to health care and dental services rendered after the Closing
Date. The health insurance plans maintained by the Company, through Tetco,
shall cover (to the extent provided in such plans) all claims relating to health
care services rendered to such employees (and covered dependents) on or prior to
the Closing Date. Nothing contained herein shall obligate Buyer or any
affiliate of Buyer to maintain any particular type or level of benefit plans.
(b) With respect to the Tetco, Incorporated Employees' Profit
Sharing Plan and Trust (the "Plan"), the Company shall and does hereby revoke
its participation in such plans as of the Closing Date. All funds held in the
Plan as of the Closing Date shall continue to be maintained by the Trustee of
the Plan for the benefit of the employees of the Company participating in the
Plan until distributed as may be permitted by the Plan. Any amounts owing under
the Plan to any such employees shall be paid by the Plan.
5.13 WARN ACT. Buyer agrees not to take any action following Closing
Date which would impose liability on Sellers under the Worker Adjustment and
Retraining Notification Act.
5.14 TERMINATION OF INSURANCE. Buyer acknowledges that the insurance
policies set forth on Schedule 3.18 shall be terminated as of the Closing Date.
5.15 NOTICE TO EMPLOYEES, CUSTOMERS, ETC. Buyer hereby consents to
Sellers distributing the notice attached as Exhibit D to the current and former
employees, customers, suppliers, vendors and other creditors of the Company.
5.16 RIGHT OF ACCESS. With respect to the approximately 48.284 acre
tract of land owed by the Company (which is separated from the larger tract of
land by Cagnon Road), the Company has no right of access from Cagnon Road or
otherwise. Sellers agree to take such actions as may be necessary to secure
right of access from Cagnon Road onto such tract of land within 90 days from the
date hereof.
SECTION 6. CLOSING CONDITIONS
6.1 OBLIGATION OF BUYER TO CLOSE. The obligation of Buyer to close
the transactions contemplated hereby shall be subject to the fulfillment and
satisfaction, prior to or at the Closing, of the following conditions, or the
written waiver thereof by Buyer:
(a) REPRESENTATIONS AND COVENANTS. The representations and
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date. Sellers shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by
Sellers on or prior to the Closing Date.
(b) HSR ACT. Buyer and Sellers shall have received early
termination under the HSR Act or the applicable waiting periods thereunder shall
have expired.
(c) NO INJUNCTION. No injunction or restraining order shall
be in effect which forbids or enjoins the consummation of the transactions
contemplated by this Agreement, no proceedings for such purpose shall be
pending, and no federal, state, local or foreign statute, rule or regulation
shall have been enacted which prohibits, restricts or delays the consummation of
the transactions contemplated hereby.
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(d) APPROVALS. All material governmental and third party
approvals, consents, permits or waivers necessary for consummation of the
transactions contemplated by this Agreement shall have been obtained in form and
substance satisfactory to Buyer.
(e) TITLE INSURANCE. Buyer shall have received (i) binders
for ALTA title insurance policies or other evidence of title insurance
reasonably acceptable to Buyer with respect to each parcel of real property
owned by the Company showing fee title vested in the Company (subject only to
Permitted Liens) and containing such endorsements and affirmative coverages as
Buyer may reasonably require (including access, zoning, contiguity, survey and
extended coverage), and (ii) surveys of such properties conforming to ALTA
Minimum Detail Requirements for Land Title Surveys.
(f) LEGAL OPINION. Buyer shall have received the legal
opinion of Xxx & Xxxxx Incorporated, counsel to Sellers in the form of Exhibit E
hereto.
(g) RELATED PARTY PAYMENTS. Buyer shall have received
evidence satisfactory to it of the receipt by the Company of all monies owed to
the Company by Sellers or any Affiliate or relative of any Seller.
(h) FINANCING. Buyer shall have obtained all necessary third-
party financing required in order to consummate the transactions contemplated
hereby and to meet the ongoing working capital requirements of the Business.
(i) EQUITY ARRANGEMENTS. Xxxxxxxxx shall have agreed to be
bound by the Stockholders Agreement in a manner satisfactory to Buyer.
(j) FUNDED DEBT. The amount of the Company's Funded Debt
shall not be less than $8,559,663.58 and the amount outstanding under the Line
of Credit shall not be greater than $5,021,770.84. All Funded Debt and the Line
of Credit shall have been repaid and the Encumbrances associated therewith
released.
6.2 OBLIGATION OF SELLERS TO CLOSE. The obligation of Sellers to
close the transactions contemplated hereby shall be subject to the fulfillment
and satisfaction, prior to or at the Closing, of the following conditions, or
the written waiver thereof by Sellers:
(a) REPRESENTATIONS AND COVENANTS. The representations and
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. Buyer and Parent
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by
Buyer or Parent on or prior to the Closing Date.
(b) HSR ACT. Buyer and Sellers shall have received early
termination under the HSR Act or the applicable waiting periods thereunder shall
have expired.
(c) NO INJUNCTION. No injunction or restraining order shall
be in effect which forbids or enjoins the consummation of the transactions
contemplated by this Agreement, no proceedings for such purpose shall be
pending, and no federal, state, local or foreign statute, rule or regulation
shall have been enacted which prohibits, restricts or delays such consummation.
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(d) EMPLOYMENT AGREEMENT. Buyer shall have executed and
delivered the Employment Agreement.
(e) PARENT STOCK. Parent shall have issued options to
purchase 202,005 shares of Parent Stock as set forth on Schedule 6.2(e) pursuant
to Parent's Special Stock Option Plan.
(f) RELEASES. Sellers shall have been released from all
liabilities and obligations with respect to the obligations set forth on
Schedule 5.9.
SECTION 7. INDEMNIFICATION
7.1 INDEMNIFICATION.
(a) BY SELLERS. Sellers shall, jointly and severally,
indemnify and hold harmless Buyer, the Company and their respective directors,
officers, employees, Affiliates and agents, at all times from and after the
Closing Date, against and in respect of Losses arising from or this Agreement
to: (i) any breach of any of the representations or warranties made by Sellers
in this Agreement (without regard to any materiality qualification contained in
any such representation or warranty); (ii) any breach of the covenants and
agreements made by Sellers in this Agreement or any Exhibit hereto delivered by
Sellers in connection with the Closing, (iii) the Furniture Business, the
Mexican Operations and the Mushroom Business; (iv) the Plan other than
contributions owing under the Plan for fiscal 1996 for employees of the Company
up to a maximum contribution of $105,000; (v) any matter set forth on Schedule
3.12 in excess of $171,000 in the aggregate; and (vi) the remediation of the
environmental matters set forth on Schedule 7.5. Notwithstanding the foregoing,
Sellers' indemnification obligations with respect to breaches of covenants and
agreements to be performed under Section 5 after the Closing shall be several,
and not joint and several.
(b) BY BUYER. Buyer shall indemnify and hold harmless Sellers
at all times from and after the Closing Date against and in respect of Losses
arising from or relating to: (i) any breach of any of the representations or
warranties made by Buyer in this Agreement (without regard to any materiality
qualification contained in any such representation or warranty); (ii) any breach
of the covenants and agreements made by Buyer in this Agreement or any Exhibit
hereto delivered by Buyer in connection with the Closing and (iii) any
liabilities or obligations of the Company not performed or satisfied by Buyer
after the Closing (except to the extent Buyer is entitled to indemnification
with respect thereto pursuant to Section 7.1(a)).
7.2 LIMITATIONS OF INDEMNITY. Notwithstanding the foregoing, (i) no
amounts shall be payable by Sellers under Section 7(a)(i) unless and until the
aggregate amount otherwise payable by Sellers in the absence of this clause
exceeds $250,000, in which event such amounts in excess of such amount (but only
such amounts in excess) shall be due; (ii) the maximum liability of Sellers
under this Section 7 shall be $5,000,000 and (iii) no claim for indemnification
under this Section 7.1(a)(i) shall first be asserted after the 18 month
anniversary of the date hereof; provided, however, that a claim for
indemnification under Sections 3.15 and 3.17 may be asserted until the third
anniversary of the date hereof and a claim for indemnification under
Sections 3.5 and 3.8(b) may be asserted at any time, and provided further, that
a claim for indemnification under Section 3.16 may be asserted at any time prior
to the expiration of the statute of limitations applicable thereto, including
any extension thereof. In case any event shall occur which would otherwise
entitle any party to assert a claim for indemnification hereunder, no claim,
loss, liability, cost or expense shall be deemed to have been sustained by such
party to the extent of any proceeds received by such party from any insurance
policies with respect thereto. With respect to any claim which may be covered
by insurance, Buyer agrees to pursue such
- 20 -
claim in good faith or assign such claim to Sellers.
7.3 PROCEDURE FOR INDEMNIFICATION CLAIMS.
(a) Any Indemnified Party asserting a right of indemnification
provided for under this Agreement in respect of a Third Party Claim shall notify
the Indemnifying Party in writing of the Third Party Claim within ten business
days after receipt by such Indemnified Party of written notice of the Third
Party Claim. As part of such notice, the Indemnified Party shall furnish the
Indemnifying Party with copies of any pleadings, correspondence or other
documents relating thereto that are in the Indemnified Party's possession. The
Indemnified Party's failure to notify the Indemnifying Party of any such matter
within the time frame specified above shall not release the Indemnifying Party,
in whole or in part, from its obligations under this Section 7 except to the
extent that the Indemnifying Party's ability to defend against such claim is
actually prejudiced thereby. The Indemnifying Party agrees (and, at such time
as the Indemnifying Party acknowledges its liability under this Section 7 with
respect to such Third Party Claim, the Indemnifying Party shall have the sole
and exclusive right) to defend against, settle or compromise such Third Party
Claim at the expense of such Indemnifying Party; provided, however, such
acknowledgement shall not effect or be deemed a waiver of the limitation on
liability set forth in Section 7.2. The Indemnified Party shall have the right
(but not the obligation) to participate in the defense of such claim through
counsel selected by it, which counsel shall be at the Indemnified Party's
expense to the extent that the Indemnifying Party has assumed the defense of
such claim unless counsel for the Indemnifying Party could not adequately
represent the interests of the Indemnified Party due to an actual or potential
conflict of interest, in which case such counsel shall be at the Indemnifying
Party's expense. The Indemnified Party shall cooperate with the Indemnifying
Party and provide such assistance at the Indemnifying Party's expense as the
Indemnifying Party may reasonably request in connection with the defense of such
claim, including but not limited to providing the Indemnifying Party access to
and use of all relevant corporate records and making available its officers and
employees for depositions, other pre-trial discovery and as witnesses at trial,
if required. If the Indemnified Party asserts a right of indemnification under
this Agreement for a Third Party Claim and the Indemnifying Party has not yet
acknowledged its liability under this Section 7 with respect to such Third Party
Claim, then the Indemnifying Party and the Indemnified Party shall cooperate in
defending against such Third Party Claim at the Indemnifying Party's expense,
and neither party shall have the right, without the other's consent, to settle
or compromise any such Third Party Claim.
(b) In the event of any claim for indemnification hereunder
that is not a Third Party Claim, the Indemnified Party shall give reasonable
notice thereof to the Indemnifying Party and shall afford the Indemnifying Party
access to all relevant corporate records and other information in its possession
relating thereto.
(c) If any party becomes obligated to indemnify another party
with respect to any claim for indemnification hereunder and the amount of
liability with respect thereto shall have been finally determined, the
Indemnifying Party shall pay such amount to the Indemnified Party in immediately
available funds within ten days following written demand by the Indemnified
Party.
7.4 OUTSTANDING LITIGATION. Notwithstanding anything contained in
this Agreement to the contrary, Sellers shall have the right to defend the
matters set forth on Schedule 3.12. Buyer shall have the right to participate
in such defense, at its expense. Sellers shall provide to Buyer copies of any
pleadings, correspondence or other documents produced in connection with such
matters. Sellers shall not settle any such matter without the prior written
consent of Buyer, which consent shall not be unreasonably withheld.
- 21 -
7.5 ENVIRONMENTAL MATTERS. Within the 90 day period following the
Closing Date, Sellers shall take the actions set forth on Schedule 7.5 with
respect to the environmental conditions described on such schedule.
7.6 EXCLUSIVE REMEDY. The provisions for indemnification set forth
in this Section 7 are the exclusive remedies of Buyer and Sellers arising out of
or in connection with this Agreement, and shall be in lieu of any rights under
contract, tort, equity or otherwise (other than claims based on actual fraud or
intentional breach of this Agreement).
SECTION 8. MISCELLANEOUS
8.1 TERMINATION. Anything herein to the contrary notwithstanding,
this Agreement may be terminated at any time prior to the Closing Date: (i) by
mutual written consent of Buyer and Sellers; (ii) by either Buyer or Sellers if
for any reason the Closing shall not have occurred on or before February 20,
1997 (or such other date as may be mutually agreed by the parties); or (iii) by
either Buyer or Sellers in the event that a condition to the terminating party's
obligations to close the transactions contemplated by this Agreement shall
become incapable of satisfaction; provided, however, that no party shall be
entitled to terminate this Agreement in the event that the failure of the
Closing to occur or any condition to Closing to be satisfied shall be
attributable to such party's breach of this Agreement.
8.2 PUBLICITY. No press release or other public announcement
concerning this Agreement or the transactions contemplated hereby shall be made
without advance approval thereof by Sellers and Buyer, except as required by
law.
8.3 ENTIRE AGREEMENT. This Agreement and the exhibits delivered in
connection herewith constitute the entire agreement of the parties with respect
to the subject matter hereof. The representations, warranties, covenants and
agreements set forth in this Agreement and in any schedules or exhibits
delivered pursuant hereto constitute all the representations, warranties,
covenants and agreements of the parties hereto and upon which the parties have
relied, and except as specifically provided herein, no change, modification,
amendment, addition or termination of this Agreement or any part thereof shall
be valid unless in writing and signed by or on behalf of the party to be charged
therewith.
8.4 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made for
all purposes if (i) hand delivered, (ii) sent by a nationally recognized
overnight courier or (iii) sent by telephone facsimile transmission (with prompt
oral confirmation of receipt) as follows:
If to Buyer, at:
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
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With copies to:
Kohlberg & Company
000 Xxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
Brownstein, Hyatt, Xxxxxx & Xxxxxxxxxx, P.C.
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx XX 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to either Seller;
0000 Xxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
Telecopy No.: (000) 000-0000
and:
Tetco, Inc.
0000 X.X. Xxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopy No. (000) 000-0000
With a copy to:
Xxx & Xxxxx Incorporated
000 X. Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxx X. Xxxxxxx, III
Telecopy No.: (000) 000-0000
or at such other address as any party may specify by notice given to the other
party in accordance with this Section 8.4. The date of giving of any such
notice shall be the date of hand delivery, the date sent by telephone facsimile,
and the day after delivery to the overnight courier service.
8.5 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended and the terms hereof may be waived
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance.
8.6 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
- 23 -
8.7 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE DELAWARE WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER
OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
SHOULD ANY CLAUSE, SECTION OR PART OF THIS AGREEMENT BE HELD OR DECLARED TO BE
VOID OR ILLEGAL FOR ANY REASON, ALL OTHER CLAUSES, SECTIONS OR PARTS OF THIS
AGREEMENT SHALL NEVERTHELESS CONTINUE IN FULL FORCE AND EFFECT.
8.8 DISPUTE RESOLUTION; ENFORCEMENT OF VENUE; SERVICE OF PROCESS.
(a) If any controversy, claim or dispute arises out of or relating to this
Agreement or the transactions contemplated hereby, the disputing parties shall
attempt to resolve in good faith such controversy, claim or dispute among
themselves and, if they cannot, such controversy, claim or dispute shall be
submitted to nonbinding mediation to be held for a maximum of one day
administered by the American Arbitration Association ("AAA") in accordance with
its Commercial Mediation Rules then in effect. If such controversy, claim or
dispute is not resolved through such mediation, it shall be resolved by
arbitration before a panel of three arbitrators in accordance with the
Commercial Arbitration Rules then in effect of the AAA, and any judgment on the
award rendered by the arbitrators shall be final and binding on the parties and
may be entered in any court having jurisdiction thereof. The parties agree that
exclusive venue for all mediation and arbitration hearings pursuant to this
section shall be held in Denver, Colorado. In any arbitration proceeding, the
arbitrators shall apply the law of Delaware.
(b) In the event either party shall seek enforcement of any covenant,
warranty or other terms or provision of this Agreement or seek to recover
damages for the breach thereof, the party which prevails in such proceedings
shall be entitled to recover reasonable attorneys' fees and expenses actually
incurred by it in connection therewith. Without limiting Section 8.8(a), the
parties hereto agree that this Agreement is performable in Denver, Colorado and
that the sole and exclusive venue for any proceeding involving any claim arising
under or relating to this Agreement shall be in Denver, Colorado. The parties
hereto agree that the service of process or any other papers upon them or any of
them in accordance with Section 8.5 shall be deemed good, proper, and effective
service upon them.
8.9 ASSIGNMENT. This Agreement shall be binding upon, and inure to
the benefit of, the parties and their respective successors and permitted
assigns. Neither this Agreement nor any rights or obligations hereunder shall
be assignable by either party; provided that Buyer may assign its rights (i) a
security to any lender providing financing for the transactions contemplated
hereby (and any replacement thereof) and (ii) in connection with a sale of all
or substantially all of the Business. Buyer agrees not to assign or
substantially all of its assets until such time as the material expenses and
payables of the Company reflected on the Latest Balance Sheet or incurred in the
ordinary course of Business subsequent to the date of the Latest Balance Sheet
and prior to the date hereof have been discharged unless such expenses are
assumed by the purchaser in any such transaction.
8.10 EXPENSES. Each of Buyer and Sellers shall bear all of their own
expenses in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, including without limitation
all fees and expenses of its agents, representatives, counsel and accountants.
Any amount owing to any governmental authority as a result of the transactions
contemplated hereby (such as transfer Taxes) shall be borne equally by Buyer, on
the one hand, and Sellers, on the other hand. Notwithstanding the foregoing,
Sellers shall not be responsible for the payment of any expenses with respect to
title insurance policies, surveys or environmental tests and studies performed
at the request of Buyer.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed on the date and year first above written.
LONE STAR GROWERS, L.P.
By: Lone Star, Inc., its general partner
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------
Xxxxxxx Xxxxxxxx
Chief Executive Officer
CSN, INC.
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------
Xxxxxxx Xxxxxxxx
Chief Executive Officer
/s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxx
TETCO, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
Vice President
LONE STAR GROWERS CO.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxxx
General Partner
- 25 -
